CAS 200 – Overall objectives of the independent auditor and the conduct of an audit with Canadian Audit Standards
The purpose of an audit is to enhance the degree of confidence of intended users in the financial statements. This is
achieved by the expression of an opinion by the auditor on whether the financial statements are prepared, in all
material respects, in accordance with an applicable financial reporting framework.
CASs do not impose responsibilities on management or those charged with governance and do not override laws
and regulations that govern their responsibilities.
As the basis for the auditor's opinion, CASs require the auditor to obtain reasonable assurance about whether the
financial statements as a whole are free from material misstatement, whether due to fraud or error
Reasonable assurance is a high level of assurance.
The auditor's opinion deals with the financial statements as a whole and, therefore, the auditor is not responsible for
the detection of misstatements that are not material to the financial statements as a whole.
The CASs require that the auditor exercise professional judgment and maintain professional skepticism throughout
the planning and performance of the audit and, among other things:
• Identify and assess risks of material misstatement, whether due to fraud or error, based on an understanding of
the entity and its environment, including the entity's internal control.
• Obtain sufficient appropriate audit evidence about whether material misstatements exist, through designing and
implementing appropriate responses to the assessed risks.
• Form an opinion on the financial statements based on conclusions drawn from the audit evidence obtained.
In all cases when reasonable assurance cannot be obtained and a qualified opinion in the auditor's report is
insufficient in the circumstances for purposes of reporting to the intended users of the financial statements, the
CASs require that the auditor disclaim an opinion or withdraw (or resign) 3 from the engagement, where withdrawal
is possible under applicable law or regulation.
CAS 570 – Going Concern
Under the going concern assumption, an entity is viewed as continuing in business for the foreseeable future.
The objectives of the auditor are:
(a) To obtain sufficient appropriate audit evidence regarding the appropriateness of management's use of the going
concern assumption in the preparation of the financial statements;
(b) To conclude, based on the audit evidence obtained, whether a material uncertainty exists related to events or
conditions that may cast significant doubt on the entity's ability to continue as a going concern; and
(c) To determine the implications for the auditor's report.
CAS 700 – Forming an opinion and reporting on financial statements
The auditor shall form an opinion on whether the financial statements are prepared, in all material respects, in
accordance with the applicable financial reporting framework.
The auditor shall evaluate whether, in view of the requirements of the applicable financial reporting framework:
(a) The financial statements adequately disclose the significant accounting policies selected and applied;
(b) The accounting policies selected and applied are consistent with the applicable financial reporting framework
and are appropriate;
(c) The accounting estimates made by management are reasonable;
(d) The information presented in the financial statements is relevant, reliable, comparable and understandable;
(e) The financial statements provide adequate disclosures to enable the intended users to understand the effect of
material transactions and events on the information conveyed in the financial statements; and (Ref: Para. A4)
(f) The terminology used in the financial statements, including the title of each financial statement, is appropriate.
The auditor shall express an unmodified opinion when the auditor concludes that the financial statements are
prepared, in all material respects, in accordance with the applicable financial reporting framework.
If the auditor:
(a) concludes that, based on the audit evidence obtained, the financial statements as a whole are not free from
material misstatement; or
(b) is unable to obtain sufficient appropriate audit evidence to conclude that the financial statements as a whole are
free from material misstatement,
the auditor shall modify the opinion in the auditor's report CAS 705 – Modifications to the opinion in the independent Auditors report
This CAS establishes three types of modified opinions, namely, a qualified opinion, an adverse opinion, and a
disclaimer of opinion. The decision regarding which type of modified opinion is appropriate depends upon:
The auditor shall express a qualified opinion when:
(a) The auditor, having obtained sufficient appropriate audit evidence, concludes that misstatements, individually or
in the aggregate, are material, but not pervasive, to the financial statements; or
(b) The auditor is unable to obtain sufficient appropriate audit evidence on which to base the opinion, but the
auditor concludes that the possible effects on the financial statements of undetected misstatements, if any, could
be material but not pervasive.
The auditor shall express an adverse opinion when the auditor, having obtained sufficient appropriate audit
evidence, concludes that misstatements, individually or in the aggregate, are both material and pervasive to the
Disclaimer of Opinion
The auditor shall disclaim an opinion when the auditor is unable to obtain sufficient appropriate audit evidence on
which to base the opinion, and the auditor concludes that the possible effects on the financial statements of
undetected misstatements, if any, could be both material and pervasive.
The auditor shall disclaim an opinion when, in extremely rare circumstances involving multiple uncertainties, the
auditor concludes that, notwithstanding having obtained sufficient appropriate audit evidence regarding each of the
individual uncertainties, it is not possible to form an opinion on the financial statements due to the potential
Auditor's Judgment about the Pervasiveness of the Effects or Possible Effects on the Financial
Nature of Matter Giving Rise to the Modification Statements
Material but Not Pervasive Material and Pervasive
Financial statements are materially misstated Qualified opinion Adverse opinion
Inability to obtain sufficient appropriate audit evidence Qualified opinion Disclaimer of opinion
interaction of the uncertainties and their possible cumulative effect on the financial statements.
CAS – 706 Emphasis of matter paragraphs in the independent auditors report
Emphasis of Matter paragraph – A paragraph included in the auditor's report that refers to a matter appropriately
presented or disclosed in the financial statements that, in the auditor's judgment, is of such importance that it is
fundamental to users' understanding of the financial statements.
Other Matter paragraph – A paragraph included in the auditor's report that refers to a matter other than those
presented or disclosed in the financial statements that, in the auditor's judgment, is relevant to users'
understanding of the audit, the auditor's responsibilities or the auditor's report.
When the auditor includes an Emphasis of Matter paragraph in the auditor's report, the auditor shall:
(a) Include it immediately after the Opinion paragraph in the auditor's report;
(b) Use the heading "Emphasis of Matter," or other appropriate heading;
(c) Include in the paragraph a clear reference to the matter being emphasized and to where relevant disclosures
that fully describe the matter can be found in the financial statements; and
(d) Indicate that the auditor's opinion is not modified in respect of the matter emphasized.
CAS – 220 Quality control for an audit of financial statements
Quality control systems, policies and procedures are the responsibility of the audit firm. Under CSQC 1, the firm
has an obligation to establish and maintain a system of quality control to provide it with reasonable assurance that: (a) The firm and its personnel comply with professional standards and applicable legal and regulatory
(b) Reports issued by the firm or engagement partners are appropriate in the circumstances.
Personnel within the firm responsible for establishing and maintaining the firm's system of quality control shall have
an understanding of the entire text of this CSQC, including its application and other explanatory material, to
understand its objective and to apply its requirements properly.
The firm shall comply with each requirement of this CSQC unless, in the circumstances of the firm, the requirement
is not relevant to the services provided in respect of audits and reviews of financial statements, and other
The firm shall establish and maintain a system of quality control that includes policies and procedures that address
each of the following elements:
(a) Leadership responsibilities for quality within the firm.
(b) Relevant ethical requirements.
(c) Acceptance and continuance of client relationships and specific engagements.
(d) Human resources.
(e) Engagement performance.
CAS 240 – The auditor’s responsibility relating to fraud in an audit
Misstatements in the financial statements can arise from either fraud or error. The distinguishing factor between
fraud and error is whether the underlying action that results in the misstatement of the financial statements is
intentional or unintentional.
Two types of intentional misstatements are relevant to the auditor — misstatements resulting from fraudulent
financial reporting and misstatements resulting from misappropriation of assets. Although the auditor may suspect
or, in rare cases, identify the occurrence of fraud, the auditor does not make legal determinations of whether fraud
has actually occurred.
In accordance with CAS 200, the auditor shall maintain professional skepticism throughout the audit, recognizing
the possibility that a material misstatement due to fraud could exist, notwithstanding the auditor's past experience of
the honesty and integrity of the entity's management and those charged with governance.
Unless the auditor has reason to believe the contrary, the auditor may accept records and documents as genuine. If
conditions identified during the audit cause the auditor to believe that a document may not be authentic or that terms
in a document have been modified but not disclosed to the auditor, the auditor shall investigate further.
CAS 520 – Analytical Procedures
The term "analytical procedures" means evaluations of financial information through analysis of plausible
relationships among both financial and non-financial data. Analytical procedures also encompass such investigation
as is necessary of identified fluctuations or relationships that are inconsistent with other relevant information or that
differ from expected values by a significant amount.
When designing and performing substantive analytical procedures, ei3her alone or in combination with tests of
details, as substantive procedures in accordance with CAS 330, the auditor shall: (Ref: Para. A4-A5)
(a) Determine the suitability of particular substantive analytical procedures for given assertions, taking account of
the assessed risks of material misstatement and tests of details, if any, for these assertions; (Ref: Para. A6-A11)
(b) Evaluate the reliability of data from which the auditor's expectation of recorded amounts or ratios is developed,
taking account of source, comparability, and nature and relevance of information available, and controls over
preparation; (Ref: Para. A12-A14)
(c) Develop an expectation of recorded amounts or ratios and evaluate whether the expectation is sufficiently
precise to identify a misstatement that, individually or when aggregated with other misstatements, may cause the
financial statements to be materially misstated; and (Ref: Para. A15)
(d) Determine the amount of any difference of recorded amounts from expected values that is acceptable without
OCS 5025 – Standards for assurance engagements other than audits of financial statements and other historical
For purposes of this Section, an assurance engagement is an engagement (other than an audit of financial
statements or other historical financial information) where, pursuant to an accountability relationship between two or
more parties, a practitioner is engaged to issue a written communication expressing a conclusion concerning a
subject matter for which the accountable party is responsible. An accountability relationship is a prerequisite for an assurance engagement. An accountability relationship
exists when one party (the accountable party) is answerable to and/or is responsible to another party (the user) for a
subject matter or voluntarily chooses to report to another party on a subject matter. The accountability relationship
may arise either as a result of an agreement or legislation, or because a user can be expected to have an interest in
how the accountable party has discharged its responsibility for a subject matter.
Engagement risk is the risk that the practitioner will express an inappropriate conclusion in his or her report. This
risk consists of:
(a) Risks that are beyond the control of management and the practitioner (inherent risk).
(b) Risks that are within the control of management (control risk).
(c) Risks that are within the control of the practitioner (detection risk). The practitioner would plan and perform the
engagement so that in his or her professional judgment engagement risk is reduced to an appropriate
level for the type of engagement.
Relevance Relevant criteria contribute to findings and conclusions that meet the objective of the
Reliability Reliable criteria result in consistent conclusions when used by different practitioners in similar
Neutrality Neutral criteria are free from bias that would cause the practitioner's findings and conclusions
to mislead intended users of his or her report.
Understandability Understandable criteria are clearly stated and are not subject to significantly different
interpretations by intended users.
Completeness Complete criteria exist when all criteria that could affect the practitioner's conclusion are
identified or developed, and used.
Auditing Society’s - the term coined by Michael Power for societies in which there is extensive examination by auditors of economic and
other politically important activities
Auditing - the verification of information by someone other than the one providing it
Generally Accepted Accounting Principles (GAAP) - those accounting methods that have been established in a particular jurisdiction by
formal recognition by a standard- setting body, or by authoritative support or precedent such as the accounting recommendations of the
Three-party accountability - an accountability relationship in which there are three distinct parties (individuals): an asserter, an assurer, and
a user of the asserted information Exhibit 1-1
Accountability relationship - a relationship in which at least one of the parties needs to be able to justify its actions or claims to another
party in the relationship Exhibit 1-2
Acting in the public interest – acting in the interests of the users of the financial statements; also, more generally, fulfilling the social role
expected of the professional
Conflict of interest - A situation faced by a professional accountant in which there may be a divergence between the interests of two (or
more) parties for whom the professional accountant undertakes a professional activity (e.g., clients), or between the interests of the
professional and the interests of such parties, that could create a threat to the professional’s objectivity or other fundamental ethical
Accounting - the process of recording, classifying, and summarizing into financial