First Time Adoption of a Financial Reporting Framework

The following provides guidance from an assurance (audit or review engagement) point of view when adopting a new financial reporting framework.  For guidance specific to first time adoption of Accounting Standards for Private Enterprises.

Accepting the Engagement

Prior to accepting an engagement to audit or review the first statements prepared in accordance to ASPE, practitioners should consider the following:

• What is the purpose of the review or audit engagement?
• Who are the users?
• Is your firm appropriately licensed to perform assurance work?
• Are you familiar with the work required to be performed for first-time adoption?
• Have you considered the additional time requirement for first-time adoption?

The above considerations relate to first-time adoption only, and do not include the specific client acceptance procedures required under the CPA Canada Handbook - Assurance. 

Reporting Considerations

When assurance clients transitioned from Part V GAAP to ASPE back in 2011, practitioners didn’t necessarily have to perform a great deal of additional work on the opening balances as they had already reviewed or audited the comparatives. This will continue to be the case should you now have an assurance client transitioning from IFRS or US GAAP to ASPE. However, a compilation client adopting ASPE now will likely require additional work effort in order for practitioners to express assurance on the opening balances. This is due to the likely scenario that practitioners wouldn’t have performed sufficient audit or review procedures around revenue, cost of sales, inventory, accounts receivable, accounts payable, and other major financial statement items during the prior year’s compilation engagement to provide the level of assurance needed now.

When drafting your review engagement or independent auditor’s report, there are many considerations to take into account for first-time ASPE financial statements. One of the key considerations is whether you will be expressing assurance on the current figures only or the comparative figures as well. Keep in mind that in order to obtain sufficient audit evidence, or provide negative assurance, for the current year figures, practitioners will need to perform and document work done on the opening balances. While practitioners might choose not to express any assurance on the comparatives, you cannot knowingly associate with false or misleading information.

CPA Canada has an excellent resource entitled Reporting Implications of New Auditing and Accounting Standards to guide you through the reporting requirements for audit and review engagements in the year of transition.