Auditor's Consent to the Use of the Auditor's Report by LeesRadford

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									                                                                                    exposure draft
                  Auditing And AssurAnce stAndArds BOArd
                  PrOPOsed cAnAdiAn Auditing stAndArd




                 Auditor’s Consent to the
                Use of the Auditor’s Report
                    in Connection with
                  Designated Documents
                                                     May 2009




                                            Comments must Be ReCeived By
                                                   june 30, 2009



This Exposure Draft of proposed assurance standards is issued    supported by specific reasoning. All comments received will
by the Auditing and Assurance Standards Board. The Board is      be available on the web site at www.aasb.ca 10 days after the
composed of persons drawn from public accounting and legis-      comment deadline, unless confidentiality is requested.
lative auditing and includes those who represent other groups,
such as industry, commerce and finance, and post-secondary       To be considered, comments must be received by
education, from all parts of the country. All members serve      June 30, 2008, addressed to:
as individuals and not as representatives of their employers
or organizations.                                                Greg Shields, CA
                                                                 Director, Auditing and Assurance Standards
Individuals and organizations are invited to comment on the      The Canadian Institute of Chartered Accountants
Exposure Draft material. Comments are requested from those       277 Wellington Street West
who agree with the Exposure Draft as well as from those          Toronto, Ontario M5V 3H2
who do not.
                                                                 For ease of handling, we prefer comments to be sent by
Comments are most helpful if they are related to a specific      e-mail (in Word format), to:
paragraph or group of paragraphs, and, when expressing disa-     ed.assurancestds@cica.ca
greement with the Exposure Draft, they clearly explain the
problem, and include a suggestion for alternative wording
Highlights
The Auditing and Assurance Standards Board (AASB) proposes, subject to
comments received following exposure, to replace Section 7500, AUDITOR
ASSOCIATION WITH ANNUAL REPORTS, INTERIM REPORTS AND OTHER PUBLIC
DOCUMENTS, with a proposed Section titled AUDITOR’S CONSENT TO THE USE OF
THE AUDITOR’S REPORT IN CONNECTION WITH DESIGNATED DOCUMENTS, (proposed
Section 7500) in the CICA Handbook – Assurance (Handbook)

Background

At its June 2008 meeting, the AASB agreed to adopt ISA 720 without amendments
as CAS 720, “The Auditor’s Responsibilities Relating to Other Information in
Documents Containing Audited Financial Statements.” When approving CAS 720,
the AASB noted that respondents to the Exposure Draft for CAS 720 suggested
that the material in extant Section 7500 should be retained in some form in the
Handbook. The AASB’s position is that certain material in extant Section 7500
should be retained but an auditor should not have to refer to Section 7500 to
complete an audit in accordance with the CASs. Further, the AASB concluded
that changes should be made to the purpose and scope of Section 7500 to clearly
distinguish that Section from CAS 720 and that Section 7500 should incorporate key
aspects of the guidance currently contained in ASSURANCE AND RELATED SERVICES
GUIDELINE, AuG-44, “The Auditor’s Written Consent to the Use of the Audit Report
in a Continuous Disclosure Document.”

Proposed Section 7500 has been redrafted to reflect the changes noted above but
no other changes are being proposed now. Further changes are likely to be made
to Section 7500 at a future date as part of a project to update those Sections of the
Handbook dealing with specialized areas (that is, the Sections in the 7000 series). For
example, the AASB may consider expanding the scope of Section 7500 to include
more types of designated documents such as executive compensation disclosures.

main features of the exposure draft

Change in purpose and scope
Proposed Section 7500 would focus on the auditor’s responsibilities after the
completion of the audit of the entity’s financial statements, when the auditor agrees
to consent to the use of the auditor’s report in connection with designated documents.
Designated documents are defined in paragraph 1 of the proposed Section as:
•	 continuous disclosure documents filed with the securities regulatory authority
   (for example, the entity’s financial statements and auditor’s report thereon, annual
   report, and Management Discussion and Analysis (MD&A)); and
•	 an offering document issued by the entity containing, or incorporating by
   reference, the entity’s financial statements and auditor’s report thereon. The
   proposed Section also deals with the auditor’s responsibilities when the auditor
   agrees to consent to the use of the auditor’s report on an entity’s financial
   statements and the entity intends to file an Annual Information Form (AIF) with
   securities regulatory authorities.

This would be a significant change from the scope of extant 7500 since the proposed
Section would:
•	 cover a narrower range of documents (for example, the extant Section covers
   annual reports not filed with securities regulators but such a document would not
   be covered in the scope of the proposed Section); and


Auditor’s Consent to the use of the Auditor’s report in ConneCtion with designAted doCuments   i
                                  •	 provide a significantly greater amount of material dealing with consent, including
                                     material currently contained in AuG-44 (that guideline would be deleted when
                                     proposed Section 7500 comes into effect).

                                  This change in scope is consistent with the AASB’s objective of clearly
                                  distinguishing proposed Section 7500 from CAS 720. This distinction is further
                                  clarified by stating that proposed Section 7500 applies after the completion of the
                                  audit.

                                  As a result of the change in scope, proposed Section 7500 would not deal with
                                  financial statements or interim financial statements reviewed by a public accountant
                                  or auditor. The AASB is proposing conforming amendments to AUDITOR REVIEW OF
                                  INTERIM FINANCIAL STATEMENTS, Section 7050, and PUBLIC ACCOUNTANT’S REVIEW
                                  OF FINANCIAL STATEMENTS, Section 8200, to address the public accountant’s or the
                                  auditor’s responsibilities in relation to other information in documents containing
                                  financial statements or interim financial statements reviewed by a public accountant
                                  or auditor. Further, proposed Section 7500 would not deal with summary financial
                                  statements, as such material is addressed in CAS 810, “Engagements to Report on
                                  Summary Financial Statements.”

                                  Annual Information Form (AIF)
                                  Proposed Section 7500 deals primarily with the auditor’s responsibilities when he
                                  or she agrees to provide consent to the use of the auditor’s report in connection with
                                  designated documents. The proposed Section also includes material dealing with the
                                  AIF, which is not a designated document for the purposes of the Section. The reason
                                  for including material on the AIF is that it often describes matters that are important
                                  to understanding key aspects of an entity’s business and the AASB believes that there
                                  is a clear expectation in the marketplace that an auditor is associated with the AIF.
                                  However, the AIF is often filed with securities regulatory authorities after the filing
                                  of the entity’s audited financial statements and MD&A and is not meant to be read
                                  concurrently with those documents. Accordingly, the AASB is proposing to include
                                  only one requirement (in proposed paragraph 23) dealing with the AIF. It states that
                                  the auditor is required to read the information in the AIF and consider whether there
                                  are any material inconsistencies between the information in the AIF and the audited
                                  financial statements; and if so, deal appropriately with such inconsistencies.

                                  Additional requirements and application and explanatory material
                                  As with all new or revised standards issued now by the AASB, proposed
                                  Section 7500 has been redrafted using the clarity format. Therefore, it includes
                                  subsections dealing with objectives, requirements and application and other
                                  explanatory material.

                                  The proposed requirements include those dealing with matters currently covered
                                  by recommendations in extant Section 7500, such as those dealing with accuracy
                                  of the reproduction of the financial statements and auditor’s report thereon,
                                  consideration of whether any of the other information in the relevant documents
                                  appears to be inconsistent with the audited financial statements, resolving identified
                                  inconsistencies and dealing with unresolved matters. Proposed Section 7500 includes
                                  additional requirements and related application and explanatory material dealing
                                  with:
                                  •	 agreeing on the terms of an engagement that includes a request for the auditor to
                                     issue consent; and
                                  •	 prerequisites for issuing consent, including:
                                     — determining the appropriate date of the consent;



ii re-exposure drAft – mAy 2009
     — updating the auditor’s subsequent events procedures to the date of consent;
     — determining that the designated document has been approved by appropriate
       officials of the entity; and
     — drafting a consent letter with respect to a continuous disclosure document,
       having the appropriate form and content.

 Much of this material has been carried forward from AuG-44, but elevated to the
 level of requirements.

 Requirement and guidance related to translation
 The issue of the accurate and complete translation of documents applies to a
 wider range of documents than is proposed to be within the scope of proposed
 Section 7500. Accordingly, the AASB is proposing, through a conforming
 amendment, that the requirement and guidance paragraphs currently set out in
 paragraphs 7500.37-.40 be incorporated into ASSOCIATION, Section 5020. No revision
 to the material regarding translation is being made at this time. The AASB will
 consider, at a future date, whether any change needs to be made to the requirement
 and guidance paragraphs dealing with translation.

 effective date

 The effective date of the proposed Section 7500, if approved, for an auditor’s consent
 to the use of the auditor’s report on audited financial statements is expected to be
 for periods ending on or after December 14, 2010 in connection with designated
 documents.

 This effective date corresponds with the effective date of the CASs so that the
 proposed Section 7500 comes into effect at the same date as CAS 720 and not earlier.

 Comments requested

 Comments are most helpful if they are related to a specific paragraph or group of
 paragraphs and, when expressing disagreement with the Exposure Draft, they clearly
 explain the problem and include a suggestion for alternative wording supported by
 specific reasoning. When a respondent agrees with proposals in the Exposure Draft,
 it is important for the AASB to be made aware of this view.




Auditor’s Consent to the use of the Auditor’s report in ConneCtion with designAted doCuments   iii
                                                     SECTION 7500
        AUDITOR’S CONSENT TO THE USE OF THE AUDITOR’S REPORT
             IN CONNECTION WITH DESIGNATED DOCUMENTS
               (Effective for auditor’s consents for periods ending on or after December 14, 2010)

                                                         CONTENTS
                                                                                                                        Paragraph
Introduction
Scope of this Section ..........................................................................................................              1-4
Effective Date ....................................................................................................................            5
Objectives ..........................................................................................................................         6-7
Definitions .........................................................................................................................          8
Requirements
Agreeing the Terms of Engagement ..................................................................................                          9-12
Prerequisites for Issuing Consent .......................................................................................                     13
Appropriate Date of Consent .............................................................................................                     14
Accurate Reproduction of the Financial Statements and the Auditor’s Report Thereon ..                                                         15
Consideration of Consistency of Other Information between the Designated Document
and the Financial Statements and Knowledge Obtained by the Auditor ...........................                                                16
Updating the Auditor’s Subsequent Event Procedures ......................................................                                   17-18
Resolving Identified Matters ..............................................................................................                 19-20
Approval of the Designated Document ..............................................................................                            21
Form and Content of Consent to the Use of the Auditor’s Report in Connection with a
Continuous Disclosure Document .....................................................................................                          22
Consideration of the Information in the AIF .....................................................................                             23
Application and Other Explanatory Material
Scope .................................................................................................................................. A1-A8
Agreeing Terms of Engagement ........................................................................................ A9-A11
Appropriate Date of Consent .............................................................................................                    A12
Accurate Reproduction of the Financial Statements and the Auditor’s Report Thereon ..A13-A17
Consideration of Consistency of Information between the Designated Document and the
Financial Statements and Knowledge Obtained by the Auditor ........................................A18-A20
Updating the Auditor’s Subsequent Event Procedures ......................................................A21-A25
Resolving Identified Matters ..............................................................................................A26-A31



                                                                                                                                        1
Form and Content of Consent to the Use of the Auditor’s Report in Connection with a
Continuous Disclosure Document .....................................................................................       A32
Appendix 1: Example Auditor’s Consent




                                                                                                                       2
Introduction
Scope of this Section
Designated Documents
1.       This Section deals with the auditor’s responsibilities, after the completion of the
         audit of the entity’s financial statements, when the auditor agrees to consent to the
         use of the auditor’s report in connection with the following designated documents:
           (a) One or more of the following continuous disclosure documents filed with
               securities regulatory authorities:
               (i) the entity’s financial statements and the auditor’s report thereon
               (ii) the entity’s Management Discussion and Analysis (MD&A) filed in
                    connection with the material in paragraph (i); and
               (iii) any other continuous disclosure document of the entity containing, or
                     incorporating by reference, financial statements and the auditor’s report
                     thereon; and
           (b) An offering document issued by the entity containing, or incorporating by
               reference, financial statements and the auditor’s report thereon. 1 (Ref: Para. A1-
               A3)
2.      This Section also deals, in paragraph 23, with the auditor’s responsibilities when the
        auditor agrees to consent to the use of the auditor’s report on an entity’s financial
        statements and the entity intends to file an Annual Information Form (AIF) with
        securities regulatory authorities. The AIF is not a designated document for the
        purposes of this Section since the entity’s AIF does not contain, or incorporate by
        reference, the entity’s financial statements or the auditor’s report thereon and
        because the AIF is not required to be filed with the entity’s financial statements.
        Nevertheless, the auditor is deemed to be associated with the entity’s AIF when the
        auditor consents to the use of the auditor’s report on an entity’s financial statements
        filed with a securities regulatory authority and accordingly follows the procedure set
        out in paragraph 23.
3.      The entity’s MD&A does not contain, or incorporate by reference, its audited
        financial statements or the auditor’s report thereon. However, securities legislation
        in many Canadian jurisdictions requires the MD&A to be filed concurrently with the
        entity’s financial statements. Further, the MD&A is meant to complement and
        supplement the entity’s financial statements and is meant to be read in conjunction
        with the entity’s financial statements. Accordingly, the auditor is deemed to be

1
     AUDITOR INVOLVEMENT WITH OFFERING DOCUMENTS OF PUBLIC AND PRIVATE
     ENTITIES, Section 7110, AUDITOR INVOLVEMENT WITH OFFERING DOCUMENTS OF PUBLIC
     AND PRIVATE ENTITIES ― CURRENT LEGISLATIVE AND REGULATORY REQUIREMENTS,
     Section 7115, and ASSURANCE AND RELATED SERVICES GUIDELINE, AuG-30, “The Auditor’s
     Consent and Comfort in Connection with Securities Offering Documents,” provide additional
     requirements and guidance when the auditor has been engaged to provide consent to the inclusion of his
     or her auditor’s report on financial statements contained in an offering document.


                                                                                                         3
        associated with the MD&A when the auditor consents to the use of the auditor’s
        report on the entity’s financial statements under paragraph 1(a)(i).
Consent to the Use of the Auditor’s Report
4.      Consenting to the use of the auditor’s report in the circumstances described in
        paragraph 1 is a matter of contract between the auditor and the entity. Accordingly,
        the auditor is never obliged to consent to the use of the auditor’s report in
        connection with a designated document unless the auditor has agreed to provide
        consent. (Ref: Para. A4-A8


Effective Date
5.      This Section is effective for an auditor’s consent to the use of the auditor’s report on
        audited financial statements for periods ending on or after December 14, 2010 in
        connection with designated documents.


Objectives
6.      If the auditor agrees to consent to the use of the auditor’s report in connection with a
        designated document, the objectives of the auditor are to:
        (a) determine whether the financial statements and the auditor’s report have been
            accurately reproduced in the designated document;
        (b) consider whether any of the other information in the designated document raises
            questions regarding, or appears to be inconsistent with, the audited financial
            statements; and
        (c) be satisfied that the auditor’s report and the audited financial statements
            appropriately take into account relevant events or developments that have
            occurred subsequent to the date of the auditor’s report on the financial
            statements.
7.      If the auditor agrees to consent to the use of the auditor’s report on an entity’s
        financial statements and the entity intends to file an AIF with securities regulatory
        authorities, the objective of the auditor is to respond appropriately when the auditor
        identifies a material inconsistency between the information in the AIF and the
        related financial statements.

Definitions
8.      For the purposes of this Section, the following terms have the meanings attributed
        below:
        (a)    Date of the auditor’s report – The date the auditor dates the report on the
               financial statements in accordance with CAS 700. 2


2
    CAS 700, “Forming an Opinion and Reporting on Financial Statements.”


                                                                                              4
      (b)   Consent – Acknowledgement by the auditor, in writing, that the auditor’s
            report can be used in connection with designated documents set out in
            paragraphs 1(a) and (b).
      (c)   Continuous disclosure document – Any written communication, other than an
            offering document, including a communication prepared and transmitted only
            in electronic form that is filed with securities regulatory authorities.
      (d)   Designated document – A document identified in paragraphs 1(a) and (b).
      (e)   EDGAR (Electronic Data Gathering, Analysis, and Retrieval) – the system for
            the receipt, acceptance, review and dissemination of documents submitted in
            electronic format to the United States Securities and Exchange Commission.
      (f)   Offering document – Any document that offers securities, whether in a
            primary or secondary offering, in exchange for cash, debt, other securities or
            other assets.
      (g)   Other information – all information included in a document except the
            financial statements and the auditor’s report thereon.
      (h)   SEDAR (System for Electronic Document Analysis and Retrieval) – the
            system used for electronically filing most securities related information with
            Canadian securities regulatory authorities.


Requirements
Agreeing the Terms of Engagement
9.    Before accepting an engagement that includes a request for the auditor to issue
      consent, the auditor shall reach an understanding and agreement with the entity as to
      the nature and terms of the engagement, including the date on which the consent is
      expected to be required. (Ref: Para. A9)
10. The auditor may become aware that an entity’s financial statements and the auditor’s
    report thereon are used in connection with a designated document. If,
      (a)       the auditor does not plan to provide consent; or
      (b)      the entity has not, or does not intend to, permit the auditor to perform the
               work necessary to provide consent,
      the auditor shall advise those charged with governance that the auditor does not
      consent to the use of the auditor’s report in that document and disclaim any
      responsibility with respect to the document. (Ref: Para. A10)
11.     The auditor may encounter circumstances when the auditor may be considered to
        have agreed to provide consent, when that was not the auditor’s intention. When
        the auditor believes that there may be misunderstanding as to whether the auditor
        has agreed to provide consent, the auditor shall clarify the situation by either:
        (a)    specifically reaching an understanding and agreement with the entity in
               accordance with paragraph 9; or



                                                                                            5
            (b)    advising the entity that he or she does not consent to the use of the
                   auditor’s report in accordance with paragraph 10.
12.   The auditor shall not express any assurance, either positive or negative:
        (a)       on other information in any designated document, unless he or she has
                  audited or reviewed the information in accordance with assurance standards;
                  nor
        (b)       on the designated document as a whole. (Ref: Para. A11)

Prerequisites for Issuing Consent
13. After completing the audit of the financial statements and issuing the auditor’s
    report thereon, the auditor shall consent to the use of the auditor’s report only after:
      (a)          determining the appropriate date of the consent;
      (b)          determining whether the financial statements and the auditor’s report
                   thereon have been accurately reproduced in the designated document;
      (c)          considering whether any of the other information in the designated
                   document appears to be inconsistent with the audited financial statements
                   or knowledge obtained by the auditor in the course of the audit or in
                   performing the procedures in this Section;
      (d)          updating the auditor’s subsequent events procedures;
      (e)          resolving identified matters; and
      (f)          determining that the designated document has been approved by
                   appropriate officials of the entity.


Appropriate Date of Consent
14.         Management has the responsibility for identifying subsequent events and
            providing appropriate disclosure in, or adjustment of, the financial statements as a
            result of such events as required by generally accepted accounting principles.
            Accordingly, the auditor's consent shall be dated on the date on which
            management has completed the procedures it has established to ensure that
            subsequent events are identified and appropriately dealt with in the financial
            statements, or as soon thereafter as is reasonable and practicable. (Ref: Para. A12)


Accurate Reproduction of the Financial Statements and the Auditor’s Report
Thereon
15. Before an entity issues a designated document, the auditor shall determine whether
    the financial statements and the auditor’s report thereon are accurately reproduced.
      (Ref: Para. A13-A17)




                                                                                              6
Consideration of Consistency of Other Information between the Designated
Document and the Financial Statements and Knowledge Obtained by the Auditor
16. The auditor shall read the other information in a designated document and assess
    whether any of this information appears to be inconsistent with:
       (a) the audited financial statements; or
       (b) knowledge obtained by the auditor in the course of the audit or in performing
           the procedures required by this Section. (Ref: Para. A18-A20)


Updating the Auditor’s Subsequent Event Procedures
Events up to Date of Consent
17. To identify subsequent events, if any, that may require restatement of the financial
    statements or disclosure in the financial statements, the auditor shall:
       (a)   update the subsequent events procedures performed as part of the audit of the
             entity’s financial statements in accordance with CAS 560, 3 including obtaining
             updated management representations to the date of the auditor’s consent; and
       (b)   perform review procedures on the most recently issued interim statements in
             accordance with Section 7050, 4 if unaudited interim financial statements have
             been issued for a period subsequent to the date of the audited financial
             statements.
       The period covered by these procedures shall extend from the date of the auditor’s
       report on the financial statements connected with the designated document to the
       date of consent or to a date as close thereto as is reasonable and practicable in the
       circumstances. (Ref: Para. A21-A24)
Events Subsequent to the Date of Consent
18. If the auditor becomes aware of a subsequent event occurring between the date of a
    designated document and the date it is filed with securities regulatory authorities that
    requires a restatement of, or disclosure in, the financial statements, the auditor shall
    perform the procedures required in CAS 560. (Ref: Para. A25)


Resolving Identified Matters
Identification of Matters
19. If the auditor identifies:
       (a) an error in the reproduction of the financial statements or the auditor’s report
           thereon;



3
    CAS 560, “Subsequent Events.”
4
    Section 7050, AUDITOR REVIEW OF INTERIM FINANCIAL STATEMENTS.


                                                                                          7
      (b) inconsistencies between the other information and the financial statements or
          between the other information and the knowledge obtained by the auditor in the
          course of the audit or in performing the procedures in this Section when the
          other information requires revision;
      (c) information that, although not inconsistent with the financial statements in a
          designated document, appears to be a misrepresentation;
      (d) an apparent failure, through omission or otherwise, of the designated document
          to meet the requirements of securities legislation or regulation; or
      (e) a subsequent event requiring a restatement of, or disclosure in, the financial
          statements,
      the auditor shall discuss the concerns with management and, when appropriate,
      those charged with governance. (Ref: Para. A26-A29)
Unresolved Matters
20. If the auditor is unable to resolve satisfactorily the treatment in a designated
    document of:
      •    an error in the reproduction of the financial statements or the auditor’s report
           thereon;
      •    an inconsistency between the other information and the financial statements or
           between the other information and the knowledge obtained by the auditor in the
           course of the audit or in performing the procedures in this Section when the
           other information requires revision;
      •    an apparent misrepresentation;
      •    an apparent failure, through omission or otherwise, to meet the requirements of
           securities legislation and regulations; or
      •    a subsequent event requiring a restatement of, or disclosure in, the financial
           statements,
      the auditor shall:
      (a) inform those charged with governance of the unresolved matter;
      (b) notify those charged with governance that he or she does not consent to the use
          of the auditor’s report in connection with the document; and
      (c) consider whether to resign from the engagement.
      In the event that the matter comes to the auditor's attention after the document has
      been released, and cannot be satisfactorily resolved, the auditor shall follow the
      procedures in paragraphs (a)-(c) above. (Ref: Para. A30-A31)


Approval of the Designated Document
21.       Before agreeing to issue his or her consent, the auditor shall determine that the
          designated document has been approved by appropriate officials of the entity.


                                                                                         8
Form and Content of Consent to the Use of the Auditor’s Report in connection with
a Continuous Disclosure Document
22.     As stated in paragraph 8(b), the auditor consents when he or she acknowledges, in
        writing, that the auditor’s report can be used in connection with a continuous
        disclosure document or an offering document. Securities legislation may require
        an auditor’s consent to the inclusion in a designated document of any report
        issued by the auditor. In other instances, consent arises through an agreement
        between the auditor and the entity and the auditor’s consent is provided only to
        the entity. Paragraphs 7110.68-.69 provide the requirement and guidance relating
        to the form and content of the auditor’s consent to be included in an offering
        document of a public or private entity. In other instances, the consent shall:
        (a)    be addressed to the issuer of the designated document;
        (b)    identify the designated document in which the auditor’s report appears or
               is incorporated by reference (for example, a filing with securities
               regulatory authorities through SEDAR or EDGAR, or the entity's annual
               report to shareholders);
        (c)    identify the auditor’s report and any reservations therein;
        (d)    identify the financial statements to which the report applies;
        (e)    state that the auditor has carried out no procedures subsequent to the date
               of the consent;
        (f)    express the auditor's consent to the use of the report in connection with the
               document; and
        (g)    state that the auditor's consent is provided for use solely in connection
               with the continuous disclosure document pursuant to the continuous
               disclosure provisions of securities legislation of an identified jurisdiction
               or jurisdictions in Canada, and that, accordingly, the auditor does not
               consent to the use of the auditor’s report for any other purpose. (Ref: Para.
               A32)


Consideration of the Information in the AIF
23. With respect to an AIF that an entity intends to file with securities regulatory
    authorities and with which the auditor is, or plans to be, deemed to be associated (as
    described in paragraph 2), the auditor shall:
      (a)      read the information contained in the AIF and consider whether such
               information is materially inconsistent with the related financial statements;
      (b)      if a material inconsistency is identified, discuss this matter with
               management and, if appropriate, those charged with governance; and




                                                                                               9
      (c)      if the inconsistency is not satisfactorily resolved, inform those charged
               with governance of the unresolved matter.


                                             ***


Application and Other Explanatory Material
Scope
Designated Documents (Ref: Para. 1)
A1. A continuous disclosure document contemplated by paragraph 1(a)(iii) can take
    several forms, including:
      (a)      an annual report;
      (b)      a material change report;
      (c)      a business acquisition report; and
      (d)      a non-offering prospectus,
      that contains financial statements and the auditor’s report thereon.
A2. An offering document contemplated by paragraph 1(b) can take several forms,
    including:
      (a)      a preliminary prospectus or prospectus filed with securities regulatory
               authorities;
      (b)      an offering memorandum relating to a private placement or other exempt
               offering of securities;
      (c)      a share exchange takeover bid circular or issuer bid circular; and
      (d)      a management information circular relating to a meeting of security
               holders that is being held to consider an amalgamation, statutory
               arrangement, merger, reorganization or reverse takeover, under which
               securities are to be issued or transferred to security holders.
      Section 7110 deals with when the auditor is associated with a designated document
      such as those identified above.
Involvement with Offering Documents (Ref: Para. 1)
A3.     Paragraph 7110.14 deals with when the auditor becomes aware that financial
        statements with which he or she is associated are used in connection with a
        securities offering document, and he or she is not engaged to perform work on the
        document.
Consent to the Use of the Auditor’s Report
Consent Relating to Designated Documents (Ref: Para. 4)




                                                                                      10
A4. It may not be appropriate for some auditors to agree to provide consent to the use of
    their auditor’s report in connection with a designated document. Practice involving
    the audit of public entities or involvement with securities offerings requires
    professional expertise and knowledge beyond that required to practice as the auditor
    of a private entity, and often entails a higher degree of risk. Some auditors may
    choose not to act as auditor of a public entity or to be involved with an offering of
    securities to the public. It is possible that an auditor does not carry insurance that
    permits him or her to practice as the auditor of a public entity, or to act in
    connection with an offering of securities made outside Canada. In some cases, an
    auditor may not be licensed to report on financial statements contained in a
    regulated offering document in one or more jurisdictions in which the securities are
    being offered. In other cases, a predecessor auditor may decline to consent to the
    use of his or her auditor's report in an offering made after the termination of his or
    her engagement as auditor.
A5. In connection with provisions of the securities legislation in many Canadian
    jurisdictions, a publicly traded entity may request the auditor to consent to the use
    of the auditor’s report on its financial statements. A request may be made in
    connection with an entity's initial filing of its financial statements and the auditor’s
    report with securities regulatory authorities through SEDAR or EDGAR, and again
    later on the publication of the entity's annual report to shareholders or other owners.
    In addition, the auditor of an acquiring entity or the auditor of an acquired business
    may be asked to issue consent to the use of the auditor’s report in a business
    acquisition report filed by the acquiring entity.
A6. An entity involved in the issue, acquisition or exchange of its securities may be
    required by securities legislation or by contract, or may elect, to provide
    information of a financial and non-financial nature to investors to assist them in
    making informed decisions with respect to the securities. Such information may be
    disseminated through various types of securities offering documents. Securities
    legislation may require an auditor's consent to the inclusion in the offering
    document of any report issued by the auditor, whether it relates to the issuer, to an
    acquired business, or to a guarantor or other credit supporter. In other instances (for
    example, a private placement), the consent requirement arises through agreement
    between the auditor and the issuer.
Consent Relating to a Designated Document Issued in a Foreign Country (Ref: Para. 4)
A7. The auditor may provide consent to the use of the auditor’s report in a designated
    document that is either Canadian or foreign. When such a document is distributed in
    another country such as the United States, assurance standards and legal and
    regulatory requirements of that country frequently impose obligations on the auditor
    in addition to requirements prevailing in Canada.
Other Potential Forms of Consent (Ref: Para. 4)
A8. It is important that auditors be aware of what documents may constitute consent, or
    an agreement to provide consent, to the use of the auditor’s report, and avoid
    entering into agreements that would not meet the requirements of this Section. In


                                                                                         11
      assessing whether a communication might be considered to provide consent, or an
      agreement to provide consent, the auditor may wish to seek legal advice. The
      concept of “consent in writing” as used in the relevant securities legislation may be
      interpreted to include instances in which the auditor has not literally issued a written
      consent. For example, some may consider the auditor to have consented, or agreed
      to provide consent, by acknowledging, in any written communication with the
      issuer, that the auditor’s report would be made available to the public or used in
      connection with an offering document. An example of such a written
      communication might be a letter documenting the terms of the engagement in
      which the auditor acknowledges that the auditor’s report will be made available to
      the public or used in connection with an offering document. Further, such consent
      may be considered to have been provided as at the date the financial statements and
      auditor’s report are made available to the public or, in the case of a private offering,
      to participants.

Agreeing the Terms of Engagement
Matters Included in an Agreement between the Auditor and Entity (Ref: Para. 9)
A9.    It is preferable for the agreement between the auditor and the entity as to the
       nature, timing and extent of the auditor's involvement with a designated document
       to be in writing. This agreement may be set out in an annual engagement letter
       dealing with, in addition to the date on which the consent is expected to be
       required, matters such as the following:
       (a)   the auditor's involvement with the annual report, MD&A, and any other
             types of document;
       (b)   the auditor's involvement with any type of securities offering document;
       (c)   management's agreement to provide adequate notice of the preparation of
             any of the above documents;
       (d)   management's agreement that the auditor is not responsible for reading any
             other document issued by the entity unless agreement is reached in advance
             as to the auditor's procedures and the form in which the auditor is to report;
             and
       (e)   management's agreement as to the auditor's responsibility with respect to
             any document transmitted to, or posted on, SEDAR, EDGAR, the entity's
             website, or any other electronic site.
Those Charged with Governance (Ref: Para. 10)
A10. For the purpose of this Section, those charged with governance are generally the
     Board of Directors or the Audit Committee.
Prohibition from Expressing Assurance on Information in the Designated Document (Ref:
Para. 12)
A11. Determining whether the financial statements and the auditor’s report have been
     accurately reproduced in a designated document and reading the other information


                                                                                           12
       in such a document, do not provide the auditor with a basis to express any
       assurance, positive or negative, on other information in the designated document or
       on the document as a whole.


Appropriate date of consent (Ref: Para. 14)
A12. Securities legislation may require management, in preparing the MD&A, to take
     into account information up to the date of the MD&A. Accordingly, if management
     has not completed the procedures it has established to ensure that subsequent events
     are identified and appropriately dealt with in the financial statements up to the date
     of the MD&A, it would not be appropriate for the auditor to consent. This is
     because by consenting, the auditor is signifying that as of the date of consent the
     use of the auditor’s report is appropriate in the context of the document in which it
     appears.


Accurate Reproduction of the Financial Statements and the Auditor’s Report
Thereon (Ref: Para. 15)
A13.    Designated documents may be issued in hard (paper) copy or by electronic means
        (posted on the Internet, or sent by electronic mail (e-mail)), or both. When an
        entity issues a designated document, there is a question as to the auditor's
        professional responsibility for determining that the financial statements and the
        auditor’s report thereon that are made available to the public, or in the case of a
        private offering, to participants, have been accurately reproduced from the
        original. The “original” may be, for example, previously issued financial
        statements or the previous version on which the auditor last performed
        procedures.
A14.    When an entity issues a designated document, the auditor has a professional
        responsibility to compare and agree the wording and figures of the financial
        statements and the auditor’s report thereon, to the original. When the document is
        issued in hard copy, in complying with paragraph 15, the auditor may read drafts
        and/or printer's proofs before the document is printed, and may later check the
        final document to determine whether the financial statements and the auditor’s
        report thereon have been accurately reproduced.
A15.    When an entity issues a designated document, the document may be posted on
        SEDAR or EDGAR or on the entity's web site. In complying with paragraph 15,
        the auditor may read the financial statements and the auditor’s report thereon that
        are to be posted on SEDAR or EDGAR or on the entity's web site, and may
        compare the financial statements and the auditor’s report thereon to the version(s)
        ultimately posted to determine whether the financial statements and the auditor’s
        report thereon have been accurately reproduced from the original. The auditor has
        no obligation to monitor subsequent amendments to the financial statements on
        the web site, or posted on other electronic sites, unless engaged to do so.




                                                                                        13
A16.   If an error in the reproduction of the financial statements or the reproduction of
       the auditor’s report in a designated document is discovered before its release,
       paragraph 19 requires the auditor to discuss his or her concerns with management
       and, when appropriate, those charged with governance. For example, the auditor
       may request that the error be corrected. If an error is discovered after release, the
       auditor’s discussion of his or her concerns with management and, when
       appropriate, those charged with governance, may include, for example, whether
       management has made reasonable efforts to notify users of the document about
       the error through correspondence, amendment of the document (clearly labelled
       as such) or some other means. If the auditor concludes that reasonable efforts
       have not been made to prevent users from being misled by the error, paragraph 20
       sets out the auditor’s responsibilities for unresolved matters.
A17.   Except in the circumstances described in paragraphs A13-A14, the auditor has no
       professional obligation to obtain and perform procedures on a copy of a
       designated document that is reproduced, in whole or in part, either in hard copy or
       in electronic form. Such reproduction is only a means of distributing information,
       and references to designated documents in this Section do not include such
       reproduction.


Consideration of Consistency of Information between the Designated Document and
the Financial Statements and Knowledge Obtained by the Auditor (Ref: Para. 16)
A18.   An inconsistency between the financial statements and the other information in a
       designated document may indicate a misstatement in the financial statements or
       an apparent misrepresentation in the other information in a designated document.
       Accordingly, paragraph 16 requires the auditor to read and consider the other
       information to assess whether it is inconsistent with the financial statements
       contained in the document. As required by paragraph 16, the auditor considers the
       other information in the light of knowledge acquired during the course of the
       audit or in performing the procedures required by this Section, with particular
       attention to matters related to the financial statements. Beyond reading the other
       information in the document, the auditor has no obligation under this Section to
       perform any additional procedures with respect to such information. In some
       cases, documents may contain information dealing with matters remote from
       financial reporting. In such cases, the auditor may consider whether it is necessary
       to read such information in detail.
A19.   The auditor’s consideration of the other information in a designated document
       may be based on a reading of drafts and/or printer's proofs. Because the auditor
       has no direct responsibility with respect to the other information, and because it
       falls to others to ensure that it is appropriately transcribed, the auditor is not
       obligated to determine that it has been accurately reproduced in its final hard copy
       or electronic form.
A20.   The auditor may become aware of an apparent error or inconsistency in a
       document issued by a client entity when the auditor is not associated with the


                                                                                         14
        document. In such a case, paragraph 19 requires the auditor to discuss the matter
        with management in an attempt to have the problem resolved and, if necessary, to:
        (a)    propose that management raise the auditor's concerns with the entity's
               legal counsel;
        (b)    discuss the matter with those charged with governance; and
        (c)    consider what further action, if any, may be appropriate.


Updating the Auditor’s Subsequent Events Procedures
Events up to the Date of Consent (Ref: Para. 17)
A21.    Frequently, the auditor’s report on financial statements will bear a date prior to the
        date of the consent. By issuing the consent, the auditor signifies that at the date of
        the consent the use of the report is appropriate in the context of the document in
        which it appears, when posted on SEDAR or EDGAR, or in the context of an
        offering document. For this purpose, the auditor would need to be satisfied that
        the auditor’s report and the audited financial statements take into account any
        relevant events or developments that have occurred subsequent to the date of the
        report.
A22.    If the date of consent is the same as the date of the auditor’s report, the auditor
        would have complied with the requirement in paragraph 17 through performing
        subsequent event procedures as part of the audit of the financial statements.
Subsequent Event Procedures in the Context of MD&A or an Offering Document (Ref:
Para. 17)
A23.    As explained in paragraph A12, the auditor would be able to consent only if
        management has completed the procedures it has established to ensure that
        subsequent events are identified and appropriately dealt with in the financial
        statements. Securities legislation may require management to be responsible for
        considering subsequent events up to the date of the MD&A. Therefore, in the case
        of the auditor consenting to the use of the auditor’s report filed in connection with
        the MD&A, the subsequent event procedures would extend from the date of the
        auditor’s report to the date of the MD&A or a date as close thereto as is
        reasonable in the circumstances. With respect to offering documents, securities
        legislation may require management to be responsible for considering subsequent
        events up to the date of the offering document. Therefore, in connection with an
        offering document, the subsequent event procedures would extend from the date
        of the auditor’s report to the date of the offering document or a date as close
        thereto as is reasonable in the circumstances. If management delays filing the
        audited financial statements with securities regulators, the auditor would be
        concerned that significant subsequent events may have occurred between the date
        of the consent and the date the financial statements are filed. In such
        circumstances, the auditor would inquire of management whether they are aware
        of any such subsequent events, and consider whether management should be



                                                                                           15
           requested to update their subsequent events procedures through to the date of
           filing.
Predecessor Auditor (Ref: Para. 17)
A24.       In complying with paragraph 17, it would normally be appropriate for a
           predecessor auditor to confine his or her subsequent events procedures to
           obtaining updated representations from management and a written representation
           from the continuing auditor with respect to subsequent events that would affect
           the financial statements previously reported on.5
Events Subsequent to the Date of Consent (Ref: Para. 18)
A25.       After the release of the auditor's consent, the auditor may become aware of a
           possible misstatement in the financial statements that are the subject of the
           auditor’s report. In these circumstances, the auditor would follow the
           requirements set out in CAS 560 6 and paragraph 20. If it is determined that a
           misstatement has occurred, paragraph 20 requires the auditor to inform those
           charged with governance as soon as possible that he or she no longer consents to
           the use of the auditor’s report on the financial statements as originally issued. If
           the auditor believes that management has not dealt appropriately with the
           misstatement, the auditor would consider seeking legal advice as to the action he
           or she should take.


Resolving Identified Matters
Identification of Matters
Misrepresentation (Ref: Para. 19(c))
A26.       Some securities legislation provides a right of action against the directors, officers
           and insiders of an entity and, in some circumstances, auditors and other experts, if
           a document with which they are associated contains a misrepresentation (as
           defined in legislative provisions). In the absence of such legislative provisions,
           comparable rights (and a definition of the term "misrepresentation") may be
           provided by an offering document as a matter of contract between the issuer and a
           purchaser. The word “misrepresentation” has different definitions under different
           securities acts. Generally, the word refers to an untrue statement of a material fact
           or an omission to state a material fact that is required to be stated or that is
           necessary to make a statement not misleading in the light of the circumstances in
           which it was made. In this context, a “material fact” means a fact that would
           reasonably be expected to have a significant effect on the market price or value of
           the securities. In the absence of such legislative provisions and comparable rights,
           the auditor’s concern would be limited to matters that appear to represent an
           untrue statement of a material fact.


5
    Section 7110, paragraph 26.
6
    CAS 560, paragraphs 14-17.


                                                                                              16
A27.   In connection with the discussions with management and, as needed, those
       charged with governance, the auditor may consider that he or she may not have
       the expertise to assess a potential misrepresentation, that there may be no
       satisfactory standard to determine its resolution, and that there may be valid
       differences of judgment or opinion. Accordingly, the auditor may wish to propose
       that management discuss the matter further with legal counsel or other experts. If
       the auditor still has a reasonable basis to believe that there is a misrepresentation,
       paragraph 20 requires the auditor to inform those charged with governance of the
       unresolved matter. If applicable, notify those charged with governance that he or
       she does not consent to the use of his or her report in the document and consider
       whether to resign from the engagement.
Subsequent events Requiring a Restatement of, or Disclosure in, the Financial Statements
(Ref: Para. 19(e))
A28.   A situation may arise in which the auditor believes that an identified subsequent
       event requires additional disclosure and/or restatement in the audited financial
       statements, but because the event has been disclosed elsewhere (for example, in a
       press release, a material change report or interim financial statements), the entity
       indicates its intention to issue the continuous disclosure document containing the
       audited financial statements without recognition of the event in those statements.
       However, under paragraph 20(b), the auditor would not be able to issue consent
       until he or she is satisfied that the financial statements comply with generally
       accepted accounting principles at the date of the consent.
A29.   Depending on the circumstances, restatement of the audited financial statements
       may be required for:
       (a)   a retroactive change in accounting policy or method of application when that
             change has been reflected in subsequently issued interim or annual financial
             statements;
       (b)   correction of an error;
       (c)   a disposition or reorganization that has occurred subsequently or is probable
             (including, for example, discontinued operations) that has been reflected in
             subsequently issued interim or annual financial statements; or
       (d) a subsequent change in the basis of presentation (for example, the
           classification of segment information) when that change has been reflected in
           subsequently issued interim or annual financial statements.
Unresolved Matters (Ref: Para. 20)
A30.   In the event that the matter comes to the auditor's attention after the document has
       been released and cannot be satisfactorily resolved, the auditor may wish to
       consult legal counsel concerning the legal implications of performing the
       procedures listed in paragraphs 20 (a)-(c).
A31.   When reading a designated document, the auditor may become aware of an
       apparent failure of the document, through omission or otherwise, to meet the
       requirements of securities legislation or regulation. In such an event, paragraph 19


                                                                                          17
       requires the auditor to draw the matter to the attention of management. If
       management fails to remedy the apparent deficiency, the auditor, after considering
       the nature of the matter, may wish to propose to management that they discuss it
       further with the entity's legal counsel. Because legal counsel are experts in legal
       disclosure requirements, the auditor will normally be able to rely on their opinion
       as to whether the document requires amendment. If the auditor is not satisfied
       with the resolution of the matter, he or she would consider what further action
       may be appropriate in accordance with paragraph 20.


Form and Content of Consent to the Use of the Auditor’s Report in Connection with
a Continuous Disclosure Document (Ref: Para. 22)
A32.   The auditor’s consent to the use of the auditor’s report in a continuous disclosure
       document to be filed on SEDAR may be worded as shown in Appendix 1.




                                                                                       18
                                                                                      Appendix 1

Example Auditor’s Consent (Ref: Para. A32)


                                          AUDITOR'S CONSENT

To: XYZ Company Inc. 7

I consent to the use of my auditor’s report dated February 15, 20X5 to the [directors /
shareholders] of XYZ Company Inc. (the Company) on the financial statements of the
Company comprising the balance sheets of the Company as at December 31, 20X4 and
20X3, and the income statements, statements of changes in equity and cash flow
statements for each of the years in the [three- / two-year] period ended December 31,
20X4, to be filed with securities regulatory authorities on SEDAR on [date of filing].

I have not performed any procedures subsequent to the date of this consent.

This consent is provided to the Company for use solely in connection with the above
filing of these financial statements pursuant to the continuous disclosure provisions of
securities legislation of [jurisdiction]; accordingly, I do not consent to the use of my
auditor’s report for any other purpose.

City              (signed)...................................................
Date              CHARTERED ACCOUNTANT




7
    When the auditor of an acquired business consents to the use of the auditor’s report in a business
      acquisition report, the consent would be addressed to the acquiring party.


                                                                                                   19
CONFORMING AMENDMENTS


1.     Conforming amendment to ASSOCIATION, Section 5020
1.1    Adding material dealing with translation in extant Section 7500 to Section 5020
The following paragraphs will be inserted in Section 5020:
       TRANSLATION
.21    A document with which an auditor is associated may be issued in each of
       Canada's official languages and/or may be translated into a foreign language.
       When the auditor is associated with a document that is to be issued in more than
       one language, he or she would make the necessary arrangements to be satisfied
       with the appropriateness of the translation.
.22    In order to be satisfied with the translation of the financial statements and, when
       applicable, of his or her report, the auditor seeks to establish that they include the
       same information and, in essence, carry the same meaning. The auditor's
       responsibility with respect to the other information in the document is less
       onerous, but is directed towards confirming that it has been translated in such a
       way as not to be inconsistent with the financial statements or the report of the
       auditor.
.23    ♦ When a document with which the auditor is associated is issued in more than
       one language, the auditor should satisfy himself or herself:
       (a)      that each version of the financial statements with which the auditor is
                associated and, when applicable, the report of the auditor, includes the
                same information and in all material respects carries the same meaning as
                each other version; and
       (b)      that the other information contained in the document has been translated
                in such a way as not to be inconsistent with the financial statements or,
                when applicable, the report of the auditor.
.24    The auditor may be requested by a client entity, an underwriter or their respective
       legal counsel to provide a letter concerning the conformity of the translation from
       the language used in the original version to another language relating to all or part
       of the financial information contained in a document with which the auditor is
       associated. While the wording of this communication will vary depending upon
       the work the auditor has been requested to perform, the auditor would not state
       that the translated version is not susceptible of materially different interpretation.
Explanation for proposed conforming amendment:
The auditor’s responsibility for translated material goes beyond the scope of proposed
Section 7500. Accordingly, the AASB is proposing to move the material to Section 5020.




                                                                                           20
1.2       Changing Appendix B of Section 5020
In addition, the references to Section 7500 in the example of information and the nature
and extent of the public accountant's involvement with such information would be
amended as follows:
Type of Information         Nature and extent of            Nature and          Work                   Reporting
                            involvement                     extent of
                                                            association
Annual report, interim      To determine whether the        The auditor has     The auditor            No
report or other             financial statements and        already             discharges his or      reporting
designated public           the report to the auditor, if   associated          her responsibilities   standard
document containing         any, are accurately             himself or          by complying with      (see
audited or reviewed         reproduced in the               herself with the    the requirements       paragraph
financial statements;       document.                       financial           contained in           5020.10)
also annual information                                     statements in the   AUDITOR
                            To respond appropriately
form or management                                          document by         ASSOCIATION
                            when documents
discussion and analysis                                     virtue of the       WITH ANNUAL
                            containing audited
                                                            audit or review     REPORTS,
Annual reports (or          financial statements and
                                                            work carried out.   INTERIM
similar documents) that     the auditor’s report
                                                                                REPORTS AND
are issued to owners (or    thereon include other
                                                                                OTHER PUBLIC
similar stakeholders),      information that could
                                                                                DOCUMENTS,
containing financial        undermine the credibility
                                                                                Section 7500 CAS
statements and the          of those financial
                                                                                720, “The
auditor’s report thereon.   statements and the
                                                                                Auditor’s
                            auditor’s report.
                                                                                Responsibilities
                                                                                Relating to Other
                                                                                Information in
                                                                                Documents
                                                                                Containing Audited
                                                                                Financial
                                                                                Statements.”
                            To read the other               The auditor has
                            information in the              also associated
                            document and consider           himself or
                            whether any of this             herself with the
                            information is                  other
                            inconsistent with the           information in
                            financial statements or         the document by
                            contains a material             virtue of the
                            misstatement of fact or, as     work carried out
                            applicable, a                   under Section
                            misrepresentation.              7500 CAS 720
                                                            (see paragraph
                                                            5020.04)
Financial statements        To determine whether the        The auditor         The auditor            No
and the auditor’s report    financial statements and        associates          discharges his or      reporting
thereon; management         the auditor’s report have       himself or          her responsibilities   standard
discussion and analysis     been accurately                 herself with the    by complying with
and annual information      reproduced; to consider         document by         the requirements
form; and any other         whether any of the other        virtue of           contained in
continuous disclosure       information in the              providing           AUDITOR’S
documents containing,       designated document             consent to the      CONSENT TO



                                                                                                             21
or incorporating by         raises questions             use of the         THE USE OF THE
reference, financial        regarding, or appears to     auditor’s report   AUDITOR’S
statements and the          be, inconsistent with, the   in connection      REPORT IN
auditor’s report thereon    financial statements; and    with the           CONNECTION
filed with securities       be satisfied that the        document.          WITH A
regulatory authorities.     auditor’s report and the                        DESIGNATED
Also, offering              audited financial                               DOCUMENT,
documents containing,       statements take into                            Section 7500.
or incorporating by         account relevant events or
reference, financial        developments that have
statements and the          occurred subsequent to
auditor’s report thereon.   the date of the auditor’s
                            report.

Explanation for proposed conforming amendment:
The AASB is proposing to update the Appendix for association arising out of CAS 720
and association arising out of proposed Section 7500.


Conforming amendments to AUDITOR REVIEW OF INTERIM FINANCIAL
STATEMENTS, Section 7050
Amend paragraph 7050.37 to read:
.37       When the interim financial statements are to be included in a designated public
          document as defined in AUDITOR ASSOCIATION WITH ANNUAL
          REPORTS, INTERIM REPORTS AND OTHER PUBLIC DOCUMENTS,
          Section 7500, the entity's auditor would read the entire document and perform the
          other procedures set out in that Section.
.37       ♦ The auditor should read the information contained in the interim Management
          Discussion and Analysis (MD&A) that accompanies the interim financial
          statements filed with securities regulatory authorities to consider whether such
          information is materially inconsistent with the interim financial statements. If the
          auditor concludes that there is a material inconsistency or becomes aware of
          information that he or she believes is an untrue statement of a material fact, the
          action taken will depend on his or her judgment in the particular circumstances.
          In determining the appropriate course of action, the auditor should consider the
          guidance set out in CAS 720, “The Auditor’s Responsibilities Relating to Other
          Information in Documents Containing Audited Financial Statements.”
Explanation for proposed conforming amendment:
Since the objective of the procedures in proposed Section 7500 has changed, the AASB is
proposing that the reference to Section 7500 be changed to CAS 720 given the similarity
of the objective of the procedures between extant Section 7500 and CAS 720 as well as
expanding paragraph 7050.37 to better link this paragraph with CAS 720.




                                                                                             22
Conforming amendments to PUBLIC ACCOUNTANT’S REVIEW OF
FINANCIAL STATEMENTS, Section 8200
Amend paragraph 8200.17 to read:
.17    Financial statements may be issued in hard (paper) copy or by electronic means
       (posted on the Internet, or sent by electronic mail (e-mail)), or both. When a client
       issues financial statements, there is a question as to the public accountant's
       professional responsibility for determining that the financial statements and, when
       applicable, the report of the public accountant that are made available in a
       designated public document have been accurately reproduced or appropriately
       summarized from the original. The public accountant's responsibilities for:
       (a)     the accurate reproduction of the financial statements and the public
               accountant's report; and
       (b)     the consideration of other information in public documents that contain or
               incorporate by reference either full or summarized financial statements
               that the public accountant has reviewed;
       would be documented in the written agreement documenting the terms of the
       engagement (for example, see AUDITOR ASSOCIATION WITH ANNUAL
       REPORTS, INTERIM REPORTS AND OTHER PUBLIC DOCUMENTS,
       Section 7500).
Amend 8200.20 to read:
.20    Financial statements may be issued in hard (paper) copy or by electronic means
       (posted on the Internet, or sent by electronic mail (e-mail)), or both. It is
       important that there be a clear understanding and agreement between the public
       accountant and the client as to the nature, timing and extent of the public
       accountant's involvement with:
       (a)     the accurate reproduction of the financial statements and the public
               accountant's report; and
       (b)     the consideration of other information in designated public documents that
               contain or incorporate by reference either full or summarized financial
               statements that the public accountant has reviewed.
       Management's responsibilities with respect to the financial statements issued are
       included in the written agreement documenting the terms of the engagement (for
       example, see AUDITOR ASSOCIATION WITH ANNUAL REPORTS,
       INTERIM REPORTS AND OTHER PUBLIC DOCUMENTS, Section 7500).
Insert additional paragraph after 8200.24:
.24a   ♦ The public accountant should read the information contained in documents
       containing financial statements reviewed by the public accountant. If the public
       accountant concludes that there is a material inconsistency or becomes aware of
       information that he or she believes is an untrue statement of a material fact, the
       action taken will depend on his or her judgment in the particular circumstances.
       In determining the appropriate course of action, the public accountant should


                                                                                         23
       consider the guidance set out in CAS 720, “The Auditor’s Responsibilities
       Relating to Other Information in Documents Containing Audited Financial
       Statements.”
Explanation for proposed conforming amendment:
In both paragraphs 8200.17 and 8200.20, an example reference to Section 7500 was
included to provide guidance on what a public accountant could include in the terms of
agreement. Due to the change in focus and scope of the proposed Section 7500, the
example reference would likely result in confusion. Accordingly, the AASB is proposing
to delete the example reference.
Further, the AASB is proposing that an additional paragraph be included in Section 8200
to make Section 8200 “self-standing.” This approach is consistent with the proposed
approach for Section 7050.


Conforming amendment to ASSURANCE AND RELATED SERVICES
GUIDELINE, AuG-44, The Auditor’s Written Consent To The Use Of The Audit
Report In A Continuous Disclosure Document
Withdraw AuG-44.
Explanation for proposed conforming amendment:
The material in AuG-44 is incorporated in proposed Section 7500.




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