Auditing Considerations in the Current Economic Environment



    TORONTO, Jan. 19 /CNW/ - Staff of the Auditing and Assurance Standards
Board (AASB) has issued a Risk Alert regarding the major economic downturn and
its implications for auditors.
    The standards have not changed, but based on the economic downturn,
auditors may need to make significant changes to many aspects of their
financial statement audits and focus their attention on different parts of the
relevant standards. Auditors should be aware that financial statements audited
during this coming year will be affected to various degrees by the economic
downturn and this should be taken into account.
    "In times of economic uncertainty, increased attention will be paid to a
company's financial statements," said Greg Shields, Director, Auditing and
Assurance Standards. "Management's ability to prepare complete and accurate
statements will be tested, particularly in making the estimates that underlie
many of the numbers in those statements. Auditors, in turn, will find it more
difficult than normal to assess whether management has done a good job in
preparing its statements."
    "The Auditing and Assurance Standards Board believes that Canadian
generally accepted auditing standards, as set out in the CICA Handbook -
Assurance will serve auditors well in performing effective audits in the
current environment. We are pleased with the materials that CICA staff have
created to support auditors." said Ken Krauss, Chair of the AASB.

    The degree to which a particular entity, and its financial statements,
will be affected will depend on numerous factors. These include:

    
    -  The industry in which the entity operates and the likely severity of
       the economic downturn on the demand for its products or services
       (auto, retail, resource).

    -  An entity's financing or credit arrangements, including its ability to
       continue to obtain financing from financial institutions and other
       creditors (including suppliers).

    -  The extent to which an entity has invested in financial instruments,
       the market for which has been hit hard by the credit crisis or other
       aspects of the severe economic downturn.
    

    Matters that auditors need to consider range from issues such as overall
decisions regarding client continuance, staffing, and the extent of
supervision to detailed decisions on the nature, timing and extent of specific
audit procedures appropriate in the circumstances.

    To read the AASB's Risk Alert issued in January 2009, visit www.aasb.ca.


    BACKGROUND

    The Canadian Institute of Chartered Accountants (CICA), together with the
provincial, territorial and Bermuda Institutes/Ordre of Chartered Accountants,
represents a membership of approximately 74,000 CAs and 10,000 students in
Canada and Bermuda. The CICA conducts research into current business issues
and supports the setting of accounting, auditing and assurance standards for
business, not-for-profit organizations and government. It issues guidance on
control and governance, publishes professional literature, develops continuing
education programs and represents the CA profession nationally and
internationally. CICA is a founding member of the International Federation of
Accountants (IFAC) and the Global Accounting Alliance (GAA).

    The Auditing and Assurance Standards Board (AASB) is an independent body
with the authority to set generally accepted auditing standards (GAAS) for
financial statement audits. The AASB is responsible for providing high-quality
assurance standards that enable the profession to serve the public interest
and ensure public confidence. The AASB actively contributes to the development
of internationally accepted assurance standards. www.aasb.ca.




For further information:

For further information: Lisa Pretty, Standards Communications Manager,
(416) 204-3482, lisa.pretty@cica.ca

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Auditing and Assurance Standards Board (AASB)

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