20 minute read 22 Jan 2020

What Canadian audit committees need to know at the end of 2019

By

EY Canada

Multidisciplinary professional services organization

20 minute read 22 Jan 2020
Related topics Assurance Audit Digital

We summarize key developments for audit committees to consider in our 2019 review of issues affecting audit committees.

The audit committee role grows more demanding and complex amid fast-paced change, and this report will assist audit committees as they proactively address recent and upcoming developments in risk management, financial reporting, tax, environmental and social governance and regulatory developments.

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Chapter

Risk management

Questions for audit committees to consider

1. Has the audit committee reviewed the effectiveness of management’s risk management programs in relation to identifying both risks and opportunities?

2. How effective is the organization in adjusting its risk appetite in response to changes in the risk landscape?

3. How is the organization deploying new tools and technologies to identify patterns and correlations in company data to identify potential warning areas?

4. Does the organization have the necessary skill sets, talent and culture to effectively manage the organization’s significant risks? If not, what are the gaps, and how will management address them?

5. Has the audit committee considered the company’s total risk exposure for a cyberattack, including the financial, legal and reputational impacts? Have escalation and response plans been developed and simulations conducted?

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Chapter

Financial reporting

Questions for audit committees to consider

1. Has the audit committee played a role in understanding how management may be using non-GAAP financial measures to supplement GAAP financial statements and the appropriateness of disclosure controls? Why does management believe the non-GAAP measures provide meaningful and useful information to investors?

2. What internal controls has management designed around both its implementation process for new accounting standards and ongoing processes for accounting under the new standards? 

3. Has the company’s management sufficiently challenged the adequacy of its disclosures required under new accounting standards, particularly in areas that require significant judgment or estimates?

4. How is technology changing the company’s finance function, and what sort of assurance is the audit committee getting that financial information integrity is preserved during and after any transition?

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Chapter

Tax

Questions for audit committees to consider

1. What additional investment and/or tax planning has the organization undertaken in response to legislative changes?

2. What changes to internal controls have been designed and what key actions has management taken to address the tax legislation?

3. What additional compliance procedures have been performed because of new legislation, and have any additional audit risks been identified? If so, how have they been addressed?

4. Has the company engaged in modelling and scenario planning to weigh the potential impacts of tariffs and other trade policy developments?

5. Has the company considered proactive engagement with the OECD or individual countries on digital tax issues?

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Chapter

Environmental and social governance

Questions for audit committees to consider

1. Does the company understand what industry-specific environmental, social and governance (ESG) matters are most important to investors and ensure that they are providing clear, transparent data, consistent with the most widely accepted disclosure frameworks available?

2. Has the board undertaken a process to fully understand the effects of potential climate change and society’s response, and how the businessstrategy would adapt in these scenarios?

3 . Is the board provided with appropriate orientation and information to help members understand sector-specific climate change-related issues?

4. Is the board comfortable with the methodology used by management to capture the nature of climate change-related risks and assess the materiality of such risks?

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Chapter

Regulatory developments

Questions for audit committees to consider

1. What discussions has the audit committee had with its independent auditor regarding audit quality matters, especially the Canadian Public Accountability Board’s Big Four audit firms’ public inspection report?

2. Has the audit committee had discussions with their auditor to understand how KAMs will be determined by the auditor and related processes that will be followed to meet disclosure requirements? 

3. To what extent has the audit committee engaged in dialogue with their auditor on AQIs to help evaluate audit quality and enhance the audit oversight by audit committees?

4. What process does the audit committee have in place for regular regulatory updates, and is the committee sufficiently engaged in dialogue providing views and input as needed on regulatory consultations?

Summary

We summarize key developments for audit committees to consider in this 2019 edition of our annual review of issues affecting audit committees during the year-end audit cycle.

About this article

By

EY Canada

Multidisciplinary professional services organization

Related topics Assurance Audit Digital