HomeMy WebLinkAboutAFC 2017-01-16 Agenda.pdfCityCityCityCity of Maple Ridgeof Maple Ridgeof Maple Ridgeof Maple Ridge
Audit & Finance CommitteeAudit & Finance CommitteeAudit & Finance CommitteeAudit & Finance Committee
January 16, 2017January 16, 2017January 16, 2017January 16, 2017
9999:00 A:00 A:00 A:00 AMMMM
Blaney RoomBlaney RoomBlaney RoomBlaney Room
ChairpersonChairpersonChairpersonChairperson:::: Councillor Masse
Committee Members:Committee Members:Committee Members:Committee Members: Mayor Read; Councillors C. Bell; K. Duncan; G. Robson; T. Shymkiw;
C. Speirs
Staff:Staff:Staff:Staff: Chief Administrative Officer: T. Swabey
GM – Corporate & Financial Svc: P. Gill
GM – Public Works & Development F. Quinn
GM – Community Dev. Park & Rec K. Swift
Manager of Accounting: C. Nolan
Manager of Financial Planning T. Thompson
Manager Sustainability & Corporate Planning L. Benson
Guest:Guest:Guest:Guest: External Auditor (BDO Canada LLP) B. Cox
Recording Secretary:Recording Secretary:Recording Secretary:Recording Secretary: Amanda Gaunt
AGENDAAGENDAAGENDAAGENDA
1.1.1.1. Approval ofApproval ofApproval ofApproval of aaaagendagendagendagenda
2.2.2.2. Approval of Approval of Approval of Approval of mmmminutes of inutes of inutes of inutes of Nov 14, 2016Nov 14, 2016Nov 14, 2016Nov 14, 2016
3.3.3.3. Legislative Services BudgetLegislative Services BudgetLegislative Services BudgetLegislative Services Budget
4.4.4.4. Next MeetingNext MeetingNext MeetingNext Meetingssss (Tentative)(Tentative)(Tentative)(Tentative)
• March 6 – Preliminary year-end update
• April 24 – Consolidated Financial Statements
• May 8 – Post audit meeting with BDO
5.5.5.5. 2016 Audit Update2016 Audit Update2016 Audit Update2016 Audit Update
• Overview of 2016 audit by external auditor
• Private meeting with auditor
“Original signed by C. Nolan”
_________________________________________________________________________________________________
Agenda submitted by: C. Nolan, CPA, CGA
Manager of Accounting
CityCityCityCity of Maple Ridgeof Maple Ridgeof Maple Ridgeof Maple Ridge
Audit & Finance CommitteeAudit & Finance CommitteeAudit & Finance CommitteeAudit & Finance Committee Meeting MinutesMeeting MinutesMeeting MinutesMeeting Minutes
November 14, 2016
The Minutes of the Audit and Finance Committee Meeting held in the Blaney Room of the
Municipal Hall, 11995 Haney Place, Maple Ridge, BC on Monday, November 14, 2016 at
2:00 p.m.
PRESENTPRESENTPRESENTPRESENT
Committee MembersCommittee MembersCommittee MembersCommittee Members Municipal StaffMunicipal StaffMunicipal StaffMunicipal Staff
Councillor Masse, Chair T. Swabey, Chief Administrative Officer
Mayor Read P. Gill, General Manager Corporate & Financial Services
Councillor Duncan F. Quinn, General Manager: Public Works and Development
Councillor Bell Services
K. Swift, General Manager Parks, Recreation and Cultural Services
C. Nolan, Manager of Accounting
AbsentAbsentAbsentAbsent
Councillor Robson
Councillor Shymkiw
Councillor Speirs
T. Thompson, Manager of Financial Planning
L. Benson, Manager of Sustainability & Corporate Planning
The meeting was called to order at 2:05p.m.
1. Amendments to the AgendaAmendments to the AgendaAmendments to the AgendaAmendments to the Agenda
The agenda was amended with the addition of the following item:
Item 7: Investment Report – October 2016
MOVEDMOVEDMOVEDMOVED by Councillor Bell and SECONDEDSECONDEDSECONDEDSECONDED by Councillor Duncan that the agenda be
approved as amended to include the Investment Report
CARRIED
2. Approval of the AgendaApproval of the AgendaApproval of the AgendaApproval of the Agenda
MOVEDMOVEDMOVEDMOVED by Councillor Bell and SECONDEDSECONDEDSECONDEDSECONDED by Councillor Duncan that the agenda be
approved as amended.
CARRIED
3. Approval of minutes of Approval of minutes of Approval of minutes of Approval of minutes of June 13June 13June 13June 13, , , , 2012012012016666
MOVEDMOVEDMOVEDMOVED by Mayor Read and SECONDEDSECONDEDSECONDEDSECONDED by Councillor Duncan that the minutes of the
Audit & Finance Committee meeting of June 13, 2016 be approved.
CARRIED
Audit & Finance Committee Meeting Minutes
November 14, 2016
Page 2
4. 2016 Financial Update2016 Financial Update2016 Financial Update2016 Financial Update
The Manager of Accounting provided an update on 2016 financial performance to the end of
September.
5. 2017201720172017----2021 Business Planning Update2021 Business Planning Update2021 Business Planning Update2021 Business Planning Update
The Chief Administrative Officer provided an update on the upcoming business planning
sessions scheduled for November 28, 29 and 30.
6. Parks & Recreation Community InvestmentsParks & Recreation Community InvestmentsParks & Recreation Community InvestmentsParks & Recreation Community Investments
The GM – Corporate & Financial Services and the Chief Administrative Officer discussed the
need to begin advancing the funding strategy for the proposed community investments,
noting that additional discussion will take place as part of business planning process.
7. Distinguished Budget Presentation Distinguished Budget Presentation Distinguished Budget Presentation Distinguished Budget Presentation AwardAwardAwardAward
The GM – Corporate & Financial Services advised the committee that the City had received
the Government Finance Officers Association’s Distinguished Budget Presentation Award for
the 2015-2019 Financial Plan.
8. Investment Report Investment Report Investment Report Investment Report –––– October 2016October 2016October 2016October 2016
The Manager of Financial Planning reviewed the report and noted that the City’s return on
investment was 2.1% compared to the benchmark of 1.3%
AdjAdjAdjAdjournmentournmentournmentournment at 2:50
____________________________________________
B. Masse, Chair
City of Maple Ridge
Planning Report to the Audit & Finance Committee
For Audit of 2016 Financial Statements
I BDO
2
Direct Line: 604-443-4716
E-mail: bcox@bdo.ca
January 9, 2017
Audit & Finance Committee
City of Maple Ridge
11995 Haney Place
Maple Ridge, BC
V2X 6A9
Dear Members of the Audit & Finance Committee:
We are pleased to present our audit plan for the audit of the financial statements of the City of
Maple Ridge (the “City”) for the year ended December 31, 2016.
Our report is designed to highlight and explain key issues which we believe to be relevant to the
audit including audit risks, the nature, extent and timing of our audit work and the terms of our
engagement. The audit planning report forms a significant part of our overall communication
strategy with the Audit & Finance Committee and is designed to promote effective two-way
communication throughout the audit process. It is important that we maintain effective two-way
communication with the Audit & Finance Committee throughout the entire audit process so that
we may both share timely information. The audit process will conclude with an Audit & Finance
Committee meeting and the preparation of our final report to the Audit & Finance Committee.
This report has been prepared solely for the use of the Audit & Finance Committee and should not
be distributed without our prior consent. Consequently, we accept no responsibility to a third
party that uses this communication.
The Audit & Finance Committee plays an important part in the audit planning process and we look
forward to meeting with you to discuss our audit plan as well as any other matters that you consider
appropriate.
Yours truly,
Bill Cox, FCPA, FCA
Partner through a corporation
BDO Canada LLP
Chartered Professional Accountants
BC/
Tel: 604 688 5421
Fax: 604 688 5132
vancouver@bdo.ca
www.bdo.ca
BDO Canada LLP
600 Cathedral Place
925 West Georgia Street
Vancouver BC V6C 3L2 Canada
I BDO
City of Maple Ridge 3
TABLE OF CONTENTS
Executive Summary 4
APPENDIX A – Your BDO Engagement Team 11
APPENDIX B – Audit Strategy 12
APPENDIX C – Management Responsibilities 13
APPENDIX D – Circumstances Affecting Timing and Fees 14
APPENDIX E – Committee Responsibilities 15
APPENDIX F – Auditor’s Considerations of Possible Fraud and Illegal Activities 16
APPENDIX G – Independence Letter 17
APPENDIX H – Communication Requirements 18
APPENDIX I – Resources and Services 19
APPENDIX J – Changes in Accounting Standards With Potential to Impact the City 21
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EXECUTIVE SUMMARY
ENGAGEMENT LETTER
The terms and conditions of our engagement are included in the most recent engagement letter.
RESPONSIBILITIES
It is important for the Audit & Finance Committee (the “Committee”) to understand the
responsibilities that rest with the external auditor and the responsibilities of those charged with
governance. BDO’s responsibilities are outlined within the engagement letter. The oversight and
financial reporting responsibilities of the Committee as they pertain to the annual audit are
summarized below.
• Oversee the work of the external auditor engaged for the purpose of issuing an independent
auditor’s report.
• Receive report on any significant non-audit services to be provided to the City by the external
auditor.
• Facilitate the resolution of disagreements between management and the external auditor
regarding financial reporting matters, if any.
• Refer to Appendix F for full details on the responsibilities of the Committee.
ENGAGEMENT OBJECTIVES
• Express an opinion as to whether the financial statements present fairly, in all material
respects, the financial position, results of operations, changes in its financial assets, and
cash flows of the City in accordance with Public Sector Accounting Standards (“PSAS”).
• Present significant findings to the Committee including key audit and accounting issues, any
significant deficiencies in internal control and any other significant matters arising from our
work.
• Provide opinions on the C2 – Home Owner Grant/Treasure/Audit Certificate and the
compliance with the agreement relating to Part 8 of the School Act (British Columbia).
• Provide timely and constructive management letters. This will include deficiencies in
internal control identified during our audit.
• Consult regarding accounting, indirect taxes and reporting matters as requested throughout
the year.
• Read the other information included in the City’s Annual Report to identify material
inconsistencies, if any, with the audited financial statements.
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AUDIT STRATEGY
Changes in auditing standards now require auditors to document all significant manual and computer
systems. Building on this, we plan to focus much of our review of transaction streams using “tests
of controls” (compliance procedures) in combination with analytical review and testing. Balances
will be tested using a combination of compliance procedures and substantive procedures (such as
analysis of data and obtaining direct evidence as to the validity of the items).
Refer to Appendix B for a high level overview of our audit strategy.
MATERIALITY
Misstatements, including omitted financial statement disclosures, are considered to be material if
they, individually or in aggregate, could reasonably be expected to influence the economic decisions
of users taken on the basis of the financial statements.
Judgments about materiality are made in light of surrounding circumstances and include an
assessment of both quantitative and qualitative factors and can be affected by the size or nature of
a misstatement, or a combination of both.
For purposes of our audit, we have set preliminary materiality at $2,500,000 for the City and a
preliminary performance materiality (used for testing) at $1,875,000.
Our materiality calculation is based on the City’s prior year results. In the event that actual results
vary significantly from those used to calculate preliminary materiality, we will communicate these
changes to the Committee as part of our year end communication.
We will communicate all corrected and uncorrected misstatements identified during our audit to the
Committee, other than those which we determine to be “clearly trivial” i.e. less than $25,000 for
the City. Misstatements are considered to be clearly trivial for purposes of the audit when they are
inconsequential both individually and in aggregate.
We encourage management to correct any misstatements identified throughout the audit process.
RISKS AND PLANNED AUDIT RESPONSES
Based on our knowledge of the City’s operations and knowledge gained from management and the
Committee, we have identified the following significant risks; those risks of material misstatement
that, in our judgment, require special audit consideration.
Significant risks arise mainly because of the complexity of the accounting rules, the extent of
estimation and judgment involved in the valuation of these financial statement areas, and the
existence of new accounting pronouncements that affect them. We request your input on the
following key risks and whether there are any other areas of concern that the Committee has
identified.
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RISKS AND PLANNED AUDIT RESPONSES (CONTINUED)
Audit Risk Proposed Audit Approach
Management Override
of Internal Controls
(Mandatory audit
procedure)
The City’s current internal
control systems could be
subject to an override of
existing controls by
management resulting in
unauthorized transactions or
unauthorized adjustments to
the accounting records.
Review of significant
transactions recorded in the
various ledgers for unusual or
non-recurring adjustments not
addressed by other audit
procedures.
Recognition of Revenue Accounting standards have
changed in this area and are
complex and open to
interpretation. There is a risk
that revenue may be
incorrectly deferred into
future periods.
Grant funding will be
confirmed through a review of
the agreements, which ensures
that the amounts recorded
exist, are complete and are
recorded accurately.
Grant expenditures will also be
reviewed to ensure that they
meet the requirements per the
grant agreement.
Other revenues streams also
contain revenue recognition
issues which will be reviewed
in accordance with latest
revenue recognition standards.
Other areas that may be considered higher risk are as follows:
Audit Risk Proposed Audit Approach
Cash and Investments Cash planning and investment
management are important
aspects of good financial
controls.
Due to its nature, cash and
investments are almost always
considered to be a risk area in
any audit.
Our planned audit procedures
include review of
reconciliations, substantive
testing of transactions and
confirmations of end of period
balances.
We will also review reports on
return and investment
strategies.
Staff Salaries A significant single type of
expenditure that covers many
employees and departments.
As a municipality, this figure is
often of particular interest to
financial statement users
(ratepayers).
Application of computer audit
testing to analyze all payroll
transactions in the year is a key
step to identify unusual payroll
relationships for testing.
We will also perform systems
testing, tests of controls and
analytical review of staff salary
and levels.
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Tangible Capital Assets
and Accumulated
Amortization
Useful life estimates will need
to be re-evaluated on the
tangible capital assets to
determine if they are still
accurate. This involves a high
level of estimation and
coordination of the finance
department with other
departments.
We will perform test of
controls for appropriate
authorization of purchases
combined with substantive
testing of additions and
disposals in the year and
amortization calculations.
Useful lives of existing assets
will be reviewed for changes in
estimates, if applicable.
Repairs and maintenance
ledgers will also be reviewed
for possible capital items that
have been expensed.
Employee Future
Benefits
A complex area that requires a
great degree of estimation and
reliance on actuarial experts.
We will review actuarial
reports and audit the
significant assumptions.
We will test the data provided
to the actuary for accuracy and
completeness, as it drives the
actuarial calculations.
We will directly communicate
with the external actuaries.
Contaminated Sites The City adopted standard PS
3260 – Liability for
Contaminated Sites in the prior
year. Due to recent adoption,
we have considered a
continued higher risk in the
current year to contemplate
continued compliance with the
standard.
We will review the
management’s process for
identifying the potential
contaminated sites, and
management’s assessment on
whether a liability exists. If
applicable, we will review the
calculation on the liability.
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EXPERTS
In order for us to perform adequate audit procedures on certain financial statement areas, we
will be relying on the work of, and the report prepared by the external actuaries. Canadian
generally accepted auditing standards require us to communicate with the expert. We propose
to discuss the following with the actuaries:
• The objective and nature of our audit engagement and how we intend to use the expert's
findings and report.
• Our assessment of the significance and risk aspects of the engagement that will affect the
expert's work.
• The requirement to advise us if they have any relationship with the organization which could
impair their judgment or objectivity in the conduct of their engagement.
• The nature, timing and extent of the expert's work and our planned review of it, possibly
including review of their working papers.
• Confirmation that the assumptions used in their calculations are consistent with those used
in the prior periods and with industry standards.
• Their obligation to advise BDO Canada LLP of any matters up to the estimated audit report
date that may affect their calculations and their report.
We ask that the appropriate level of management review the data provided to the actuaries and
that they also review the assumptions used and results reported by the expert for reasonableness.
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FRAUD RISK
Canadian generally accepted auditing standards require us to discuss fraud risk with the Committee
on an annual basis. We have prepared the following comments to facilitate this discussion.
Required Discussion BDO Response Question to the
Committee
Details of existing
oversight processes
with regards to fraud.
Through our planning process, results
from prior years’ audits and based on
our discussion with management and the
Audit & Finance Committee, we will
develop an understanding of your
oversight processes including:
• Fraud discussion between
management and Audit & Finance
Committee;
• Review of related party
transactions; and
• Consideration of tone at the top.
Are there any new
processes or changes
in existing processes
relating to fraud that
we should be aware
of?
Knowledge of actual,
suspected or alleged
fraud.
Currently, we are not aware of any
fraud.
Are you aware of any
instances of actual,
suspected or alleged
fraud affecting the
City?
Refer to Appendix G for our considerations of possible fraud and illegal activities during the
performance of our audit.
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FINAL ENGAGEMENT REPORTING
As part of our final reporting to the Committee, we will provide a communications package to support
the Committee in discharging their responsibilities. This communication will include any identified
significant deficiencies in internal controls. See Appendix I for a comprehensive list of communication
requirements throughout the audit.
OTHER MATTERS
Timing The following schedule has been agreed to with management:
• Interim audit fieldwork – December 12-16, 2016 (completed
without issue)
• Year end audit fieldwork – March 13 - 24, 2017
• Review of draft financial statements with the Committee or
delegates – TBD (by early May 2017)
• Finalization of financial statements – Immediately subsequent to
approval by Mayor and Council
Independence Our annual independence letter has been included as Appendix H.
Management
Representations
As part of our audit finalization we will obtain written representation from
management, a copy of these representations will be included as part of
our final report.
New Accounting
Standards
Refer to Appendix K for changes in standards.
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APPENDIX A – Your BDO Engagement Team
Name Title E-mail Phone
Bill Cox, FCPA, FCA Engagement Partner bcox@bdo.ca 604.443.4716
Patrick Chan, CPA, CA Audit Senior Manager pchan@bdo.ca 604.646.4710
Limin Ruan, CPA, CA Audit Manager lruan@bdo.ca 604.688.5421
Marjorie Mercado, CPA,
CA
Audit Fieldwork Leader mmercado@bdo.ca 604.688.5421
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APPENDIX B – Audit Strategy
Our overall audit strategy involves extensive partner and manager involvement in all aspects of the
planning and execution of the audit and is based on our overall understanding of the City.
We will perform a risk-based audit which allows us to focus our audit effort on higher risk areas and
other areas of concern for management and the Committee.
To assess risk accurately, we need to
gain a detailed understanding of the
City’s operations and the environment
it operates in. This allows us to
identify, assess and respond to the
risks of material misstatement.
To identify, assess and respond to
risk, we obtain an understanding of
the system of internal control in place
in order to consider the adequacy of
these controls as a basis for the
preparation of the financial
statements. We then determine
whether adequate accounting records
have been maintained and assess the
adequacy of these controls and
records as a basis upon which to
design and undertake our audit
testing.
Based on our risk assessment, we design an appropriate audit strategy to obtain sufficient assurance
to enable us to report on the financial statements.
We choose audit procedures that we believe are the most effective and efficient to reduce audit risk
to an acceptably low level. The procedures are a combination of testing the operating effectiveness
of internal controls, substantive analytical procedures and other tests of detailed transactions.
Having planned our audit, we will perform audit procedures maintaining an appropriate degree of
professional skepticism, in order to collect evidence to support our audit opinion.
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Scoping
Identify and assess risk
Design audit response
Obtain audit evidence
Form opinion
Report
City of Maple Ridge 13
APPENDIX C – Management Responsibilities
All facets of the City’s internal controls including those governing the accounting records, systems
and financial statements will be impacted by the organization’s complexity, the nature of risks, and
the related laws, regulations, or stakeholder requirements. It is management’s responsibility to
determine the level of internal control required to respond reasonably to the City’s risks.
The preparation of the City’s financial statements including all disclosures in accordance with
Canadian public sector accounting standards is the responsibility of management. Among other
things, management is responsible for:
1. Designing and implementing internal controls over financial reporting to enable the
preparation of financial statements that are free of material misstatements;
2. Informing the City’s auditors of any deficiencies in design or operation of internal controls;
3. Updating the City’s auditors for any material change in the City’s internal controls including
if the individuals responsible for the controls that have changed;
4. Identifying and complying with any laws, regulations, and/or agreements which apply to the
City;
5. Recording any adjustments required to the financial statements to correct material
misstatements;
6. Safeguarding of assets;
7. Providing the auditor with all financial records, and related data which may be related to
the recognition, measurement and or disclosure of transactions in the financial statements;
8. Providing accurate copies of all minutes of the regular and closed meetings of the Committee
and Council;
9. Providing timely, accurate information as requested for the completion of the audit;
10. Allowing unrestricted access to persons or information as requested as part of the audit; and
11. Notifying the auditor of any circumstances which arise between the date the audit work is
completed and the approval date of the financial statements.
Representation Letter
We will make specific inquiries of the City’s management about the representations embodied in the
financial statements and internal control over financial reporting. During the completion of our audit
documentation, we will require management to confirm in writing certain representations in
accordance with Canadian generally accepted auditing standards. These representations are to be
provided to us in the form of a representations letter which will be provided as near as practicable
to, but not after the date of our auditor’s report on the financial statements.
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APPENDIX D – Circumstances Affecting Timing and
Fees
Our professional fee for the audit is based on careful consideration of the time required to complete
the required work. Circumstances may arise during the engagement which could significantly impact
the targeted completion dates and or the extent of work required to complete the audit. As a result,
additional fees may be necessary. Such circumstances include, but are not limited to, the following:
Significant Issues
1. Changes in the design or function of internal controls can impact the audit and result in
additional substantive testing;
2. Significant number of proposed adjustments which are identified during the audit work;
3. Significant changes are required to the format or information contained in the financial
statements;
4. New issues resulting from changes to:
a. Accounting standards, policies or practices
b. Special events or transactions which were not contemplated in the original budget
c. The financial reporting process or systems involved
d. Accounting personnel or availability of accounting personnel
e. The requirement to include specialists in the audit work
5. Changes to the scope of the audit.
Audit Execution
1. Audit schedules are not provided in a timely manner, are not mathematically correct, or do
not agree to the underlying accounting records.
2. There are significant delays in responding to our requests for information or responses require
significant further investigation.
3. The quality of the supporting information for the audit work has deteriorated from our
previous experience.
4. A complete working paper package is not provided on the agreed upon date.
5. There is a limitation of access to the financial staff required to complete the audit.
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APPENDIX E – Committee Responsibilities
General Responsibilities
It is the Committee’s responsibility to provide oversight of the financial reporting process. This
includes management’s preparation of the financial statements, monitoring of the City’s internal
controls, overseeing the work of the external auditor, facilitating the resolution of disagreements
between management and the auditor, as well as the final review of the financial statements and
other annual reporting.
Significant Audit Findings
Based on the work we perform, any significant identified deficiencies in internal control will be
reported to you in writing. The purpose of our audit is to express an opinion on the financial
statements. While our audit includes a consideration of the internal control structure of the City,
our work is focused on those controls relevant to financial reporting. As such, our work was not
designed to provide an opinion on the effectiveness of the internal controls.
We will communicate our views regarding any significant qualitative aspects of the City’s accounting
practices. This would include the selection and application of accounting policies, estimates and
financial statement disclosure. If during our audit we feel that the selected policies, estimates or
disclosures are not appropriate for the City under its reporting framework, we will communicate
these matters to the Committee.
In addition, we will communicate:
• Any significant difficulties which arose during the audit;
• Any reasons identified which may cause doubt as to the City’s ability to continue as a
going concern;
• The written representations we will request from management;
• Any identified unadjusted misstatements; and
• Any identified or suspected fraudulent activities.
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APPENDIX F – Auditor’s Considerations of Possible
Fraud and Illegal Activities
We are responsible for planning and performing the audit to obtain reasonable assurance that the
financial statements are free of material misstatements, whether caused by error or fraud, by:
• Identifying and assessing the risks of material misstatement due to fraud;
• Obtaining sufficient and appropriate audit evidence regarding the assessed risks of material
misstatement due to fraud, through designing and implementing appropriate responses; and
• Responding appropriately to fraud or suspected fraud identified during the audit.
The likelihood of not detecting a material misstatement resulting from fraud is higher than the
likelihood of not detecting a material misstatement resulting from error because fraud may involve
collusion, as well as sophisticated and carefully organized schemes designed to conceal it.
During the audit, we will perform risk assessment procedures and related activities to obtain an
understanding of the entity and its environment, including the City’s internal control system, to
obtain information for use in identifying the risks of material misstatement due to fraud and make
inquiries of management regarding:
• Management’s assessment of the risk that the financial statements may be materially
misstated due to fraud, including the nature, extent and frequency of such assessments;
• Management’s process for identifying and responding to the risks of fraud in the City,
including any specific risks of fraud that management has identified or that have been
brought to its attention, or classes of transactions, account balances, or disclosures for which
a risk of fraud is likely to exist;
• Management’s communication, if any, to those charged with governance regarding its
processes for identifying and responding to the risks of fraud in the City; and
• Management’s communication, if any, to employees regarding its view on business practices
and ethical behaviour.
In response to our risk assessment and our inquiries of management, we will perform procedures to
address the assessed risks, which may include:
• Inquiring of management, members of the Committee and others related to any knowledge
of fraud, suspected fraud or alleged fraud;
• Performing disaggregated analytical procedures and considering unusual or unexpected
relationships identified in the planning of our audit;
• Incorporating an element of unpredictability in the selection of the nature, timing and extent
of our audit procedures; and
• Performing additional required procedures to address the risk of management’s override of
controls including:
o Testing internal controls designed to prevent and detect fraud;
o Testing the appropriateness of a sample of adjusting journal entries and other
adjustments for evidence of the possibility of material misstatement due to fraud;
o Reviewing accounting estimates for biases that could result in material
misstatements due to fraud, including a retrospective review of significant prior
years' estimates; and
o Evaluating the business rationale for significant unusual transactions.
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APPENDIX G – Independence Letter
Direct Line: 604-443-4716
E-mail: bcox@bdo.ca
January 9, 2017
Audit & Finance Committee
City of Maple Ridge
11995 Haney Place
Maple Ridge, BC V2X 6A9
Dear Members of the Audit & Finance Committee:
We have been engaged to audit the financial statements of the City of Maple Ridge (the “City”) for
the year ended December 31, 2016.
Canadian generally accepted auditing standards (GAAS) no longer require that we communicate
formally to you in regard to independence matters, however we consider it to be a good practice.
As such, we are reporting to you regarding all relationships between the City (and its related entities)
and our firm that, in our professional judgment, may reasonably be thought to bear on our
independence.
In determining which relationships to report, these standards require us to consider relevant rules
and related interpretations prescribed by the Chartered Professional Accountants of British Columbia
and applicable legislation, covering such matters as:
• Holding a financial interest, either directly or indirectly in a client;
• Holding a position, either directly or indirectly, that gives the right or responsibility to exert
significant influence over the financial or accounting policies of a client;
• Personal or business relationships of immediate family, close relatives, partners or retired
partners, either directly or indirectly, with a client;
• Economic dependence on a client; and
• Provision of services in addition to the audit engagement.
We are not aware of any relationships between the City and our firm that, in our professional
judgment, may reasonably be through to bear on our independence.
We hereby confirm that we are independent with respect to the City within the meaning of the Rules
of Professional Conduct of the Chartered Professional Accountants of British Columbia as of the date
of this letter.
This letter is intended solely for the use of the Committee and management and should not be used
for any other purposes.
Yours truly,
Bill Cox, FCPA, FCA
Partner through a corporation
BDO Canada LLP
Chartered Professional Accountants
BC/
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APPENDIX H – Communication Requirements
Required Communication Audit Planning
Letter
Audit Results
Letter
Communication
Completed
1. Our responsibilities under
Canadian GAAS
Y
2. Our audit strategy and audit
scope
Y
3. Fraud risk factors Y
4. Going concern matters N
5. Significant estimates or
judgments
N
6. Audit adjustments N
7. Unadjusted misstatements N
8. Omitted disclosures N
9. Disagreements with
Management
N
10. Consultations with other
accountants or experts
N
11. Major issues discussed with
Management in regards to
retention
N
12. Significant difficulties
encountered during the audit
N
13. Significant deficiencies in
internal control
N
14. Material written communication
between BDO and Management
N
15. Any relationships which may
affect our independence
Y
16. Any illegal acts identified
during the audit
N
17. Any fraud or possible
fraudulent acts identified
during the audit
N
18. Significant transactions with
related parties not consistent
with ordinary business
N
19. Non-compliance with laws or
regulations identified during
the audit
N
20. Limitations of scope over our
audit, if any
N
21. Written representations made
by Management
N
22. Any modifications to our
opinion, if required
N
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APPENDIX I – Resources and Services
OTHER BDO SERVICES
Advisory As Canada’s leading financial advisory firm, BDO helps organizations and
their management teams effectively assess, develop and manage strategic
initiatives, such as:
Asset Reserve Policies - Asset reserves seem to be on everyone’s agenda
these days. Municipalities and Regional Districts across the country are
asking themselves if they have enough money for infrastructure, how much
they have, how much they will need and so on. BDO is excited to host
interactive workshops on Managing Asset Reserves.
Internal Control Assessments - BDO has been engaged by many clients to
perform a review and assessment of current processes and key internal
controls over financial reporting (ICFR), as well as the structure of
accounting/finance departments. The engagements include identification
of gaps in control, as well as assessment of the current governance and
reporting structure of the accounting/finance department.
Visit the following link to find out more:
http://www.bdo.ca/en/Services/Advisory/Financial-
Advisory/pages/default.aspx
Indirect Tax Government Entities operating in Canada are impacted by commodity taxes
in some way or another. These include GST/HST, QST, PST, various
employer taxes, and unless managed properly, can have a significant impact
on your organization’s bottom line. The rules for Government Entities can
be especially confusing, and as a result many organizations end up paying
more for indirect tax then they need to.
Government Entities must keep on top of changes to ensure they are taking
advantage of the maximum refund opportunities. At BDO, we have helped
a number of organizations of all sizes with refund opportunities, which can
reduce costs for the organization and improve overall financial health.
For more information, please visit the following link:
http://www.bdo.ca/en/Services/Tax/Indirect-Tax/pages/default.aspx
Solutions BDO Solutions provides accounting software management tools need to run
a better operation. Our expert team understands the complex reporting
requirements government entities must adhere to, as well as the limited
resources they have to address these needs. Spend more time serving your
constituents, better manage budgets, allocate time and resources more
effectively and improve your ability to focus on the work that really matters
to your organization.
For more information, please visit the following link:
http://www.bdosolutions.com/ca/
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BDO PUBLICATIONS
BDO’s national and international accounting and assurance department issues publications on
the transition and application of Public Sector Accounting Standards. In addition, we offer a
wide array of publications on Accounting Standards for Private Enterprises (ASPE),
International Financial Reporting Standards (IFRS), and Accounting Standards for Not-for-profit
organizations (ASNPO).
For additional information on PSAS, including links to archived publications and model financial
statements, refer to the link below:
http://www.bdo.ca/en/library/services/assurance-and-accounting/pages/default.aspx.
MYPDR
Class is in session! Meeting Your Professional Development Requirements (MYPDR) is an
educational program designed to support our clients, contacts and alumni in achieving their
ongoing professional development requirements.
Through the MYPDR program, we are committed to providing timely, relevant topics that can
support you in meeting your ongoing professional development needs. For more information
on the MYPDR program please contact the BDO partner.
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APPENDIX J – Changes in Accounting Standards
With Potential to Impact the City
The following summarizes the status of new standards and the changes to existing standards as of
the fall of 2016. The Appendix also reviews Exposure Drafts, Consultation Papers, Statements of
Principles, projects and Post Implementation Reviews that provide information on the future
direction of CPA Public Sector Accounting Handbook.
NEW STANDARDS – PUBLIC SECTOR ACCOUNTING STANDARDS (“PSAS”)
Government Not-for-Profit Organizations, Sections PS 4200 – 4270
The Province of British Columbia continue to direct that the PS 4200 sections for Government Not-
for-Profit Organizations not be used by any entity that is part of the Government of BC reporting
entity.
There are no new standards required to be adopted for years beginning on or after April 1, 2016.
NEW STANDARDS - PSAS (NOT YET EFFECTIVE)
Amendments to the Introduction
PSAB amended the introduction to Public Sector Accounting Standards to clarify the applicability of
the CPA PSA Handbook for various public sector entities. A government component, for example a
provincial Ministry, that prepares standalone statements, would be directed to use PSAB effective on
or after January 1, 2017.
Section PS 1201, Financial Statement Presentation
This Section revises and replaces Financial Statement Presentation, Section PS 1200. The following
changes have been made to the Section:
• Remeasurement gains and losses are reported in a new statement;
• Other comprehensive income that can arise when a government includes results of
government business enterprises and government business partnerships in its summary
financial statements is reported in the statement of remeasurement gains and losses; and
• The accumulated surplus or deficit is presented as the total of the accumulated operating
surplus or deficit and the accumulated remeasurement gains and losses.
Part of this standard will not have much of an impact until Section PS 3450 - Financial Instruments
has been adopted.
The standard is effective for fiscal years beginning on or after April 1, 2012. In the case of
governments, the new requirements are effective for fiscal years beginning on or after April 1, 2019.
For entities with a December year end, this means that 2020 is the first year that the standard must
be followed. However, we are expecting that the Standard will be further deferred. Earlier adoption
is permitted.
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Section PS 2200, Related Party Disclosures
This new Section defines a related party and establishes disclosures required for related party
transactions.
A related party exists when one party has the ability to exercise control or shared control over the
other. Two or more parties are related when they are subject to common control or shared control.
Related parties also include individuals that are members of key management personnel and close
family members.
• Disclosure of key management personnel compensation arrangements, expense allowances
and other similar payments routinely paid in exchange for services rendered is not required.
• Two entities that have a member of key management personnel in common may be related
depending upon that individual’s ability to affect the policies of both entities in their mutual
dealings.
• Disclosure is only required when transactions and events between related parties have or
could have a material financial effect on the financial statements.
• Determining which related party transactions to disclosure is a matter of judgment based on
the assessment of certain factors.
This Section is effective for fiscal periods beginning on or after April 1, 2017. For entities with a
December year end, this means that 2018 is the first year that the standard must be followed. Earlier
adoption is permitted.
Section PS 2601, Foreign Currency Translation
This Section revises and replaces PS 2600, Foreign Currency Translation. The following changes have
been made to the Section:
• The definition of currency risk is amended to conform to the definition in PS 3450, Financial
Instruments;
• The exception to the measurement of items on initial recognition that applies when synthetic
instrument accounting is used is removed;
• At each financial statement date subsequent to initial recognition, non-monetary items
denominated in a foreign currency that are included in the fair value category in accordance
with Section PS 3450 are adjusted to reflect the exchange rate at that date;
• The deferral and amortization of foreign exchange gains and losses relating to long-term
foreign currency denominated monetary items is discontinued;
• Until the period of settlement, exchange gains and losses are recognized in the statement of
remeasurement gains and losses rather than the statement of operations; and
• Hedge accounting and the presentation of items as synthetic instruments are removed.
The new requirements are to be applied at the same time as PS 3450, Financial Instruments, and are
effective for fiscal years beginning on or after April 1, 2012. In the case of governments, the new
requirements have been delayed and are now effective for fiscal years beginning on or after April 1,
2019. For entities with a December year end this means 2020 is the first year that the standard must
be followed. However, we expect that the standard will be further deferred. Earlier adoption is
permitted.
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Section PS 3041, Portfolio Investments
This Section revises and replaces Section PS 3040, Portfolio Investments. The following changes have
been made:
• The scope is expanded to include interests in pooled investment funds;
• Definitions are conformed to those in PS 3450, Financial Instruments;
• The requirement to apply the cost method is removed, as the recognition and measurement
requirements within Section PS 3450 apply, other than to the initial recognition of an
investment with significant concessionary terms; and
• Other terms and requirements are conformed to Section PS 3450, including use of the
effective interest method.
This Section is to be applied for government organizations are effective for fiscal years beginning on
or after April 1, 2012. In the case of governments, the new requirements are effective for fiscal years
beginning on or after April 1, 2019. For entities with a December year end, this means that 2020 is
the first year that the standard must be followed. Earlier adoption is permitted.
Section PS 3420, Inter-Entity Transactions
This new Section establishes standards on how to account for and report transactions between public
sector entities that comprise a government’s reporting entity from both a provider and recipient
perspective.
The main features are:
• Inter-entity transactions involving the transfer of assets or liabilities should be recognized by
both a provider and a recipient at carrying amount, exchange amount or fair value depending
on the particular circumstances of each case.
• Inter-entity transactions in the normal course of operations or under a policy of cost
allocation and recovery should be recognized on a gross basis at the exchange amount.
• A recipient may recognize unallocated costs as a revenue and expense at carrying amount,
fair value or another amount based on existing policy, accountability structure or budget
practice depending on the particular circumstances of each case.
• Information about inter-entity transactions would be disclosed in accordance with the new
Section on related party disclosures.
This Section is effective for fiscal periods beginning on or after April 1, 2017. For entities with a
December year end, this means that 2018 is the first year that the standard must be followed. Earlier
adoption is permitted.
Section PS 3210, Assets
This new Section provides additional guidance on the definition of assets and establishes general
disclosure standards for assets. Disclosure of types of assets that are not recognized is required.
However, this standard does not address intangible assets which are still not recognized under the
PSAB accounting framework.
This Section is effective for fiscal periods beginning on or after April 1, 2017. For entities with a
December year end, this means that 2018 is the first year that the standard must be followed. Earlier
adoption is permitted.
Section PS 3320, Contingent Assets
This new Section defines and establishes disclosure standards on contingent assets. Disclosure about
contingent assets is required when the occurrence of the confirming future event is likely.
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This Section is effective for fiscal periods beginning on or after April 1, 2017. For entities with a
December year end, this means that 2018 is the first year that the standard must be followed. Earlier
adoption is permitted.
Section PS 3380, Contractual Rights
This new Section defines and establishes disclosure standards on contractual rights. Disclosure about
contractual rights is required including the description about their nature and extent and the timing.
This Section is effective for fiscal periods beginning on or after April 1, 2017. For entities with a
December year end, this means that 2018 is the first year that the standard must be followed. Earlier
adoption is permitted.
Section PS 3430, Restructuring Transactions
This Section addresses a problem area for public sector accounting. In the past there was no Canadian
standard that addressed acquisition of services and service areas, therefore, accountants looked to
the US and international standards for guidance.
This new Section defines a restructuring transaction and establishes standards for recognizing and
measuring assets and liabilities transferred in a restructuring transaction. A restructuring transaction
is defined as a transfer of an integrated set of assets and/or liabilities, together with related program
or operating responsibilities, that does not involve an exchange of consideration based primarily on
the fair value of the individual assets and liabilities transferred.
• The net effect of the restructuring transaction should be recognized as a revenue or expense
by the entities involved.
• A recipient should recognize individual assets and liabilities received in a restructuring
transaction at their carrying amount with applicable adjustments at the restructuring date.
• The financial position and results of operations prior to the restructuring date are not
restated.
• A transferor and a recipient should disclose sufficient information to enable users to assess
the nature and financial effects of a restructuring transaction on their financial position and
operations.
This Section applies to restructuring transactions occurring in fiscal years beginning on or after April
1, 2018. For entities with a December year, end this means that 2019 is the first year that the
standard must be followed. Earlier adoption is permitted.
Section PS 3450, Financial Instruments
PSAB approved amendments to Section PS 3450, Financial Instruments, to align the reporting of
income on externally restricted assets that are financial instruments with the requirements in Section
PS 3100, Restricted Assets and Revenues. The amendments clarify the application of Section PS 3100
(paragraphs PS 3100.11 - .12) when accounting for:
• A change in the fair value of a financial asset in the fair value category that is externally
restricted;
• Income attributable to a financial instrument that is externally restricted; or
• A gain or loss associated with a financial instrument that is externally restricted.
These amendments recognize the importance of the nature of restrictions and the terms of
contractual agreements in reporting such transactions and events when externally restricted assets
and income are involved.
This new Section, although not as demanding as the private sector section, establishes standards for
recognizing and measuring financial assets, financial liabilities and non-financial derivatives.
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The main features of the new Section are:
• Items within the scope of the Section are assigned to one of two measurement categories:
fair value, or cost or amortized cost;
• Almost all derivatives, including embedded derivatives that are not closely related to the
host contract, are measured at fair value;
• Fair value measurement also applies to portfolio investments in equity instruments that are
quoted in an active market;
• Other financial assets and financial liabilities are generally measured at cost or amortized
cost;
• Until an item is derecognized, gains and losses arising due to fair value remeasurement are
reported in the statement of remeasurement gains and losses;
• Budget-to-actual comparisons are not required within the statement of remeasurement gains
and losses;
• When the reporting entity defines and implements a risk management or investment strategy
to manage and evaluate the performance of a group of financial assets, financial liabilities
or both on a fair value basis, the entity may elect to include these items in the fair value
category;
• New requirements clarify when financial liabilities are derecognized;
• The offsetting of a financial liability and a financial asset is prohibited in absence of a legally
enforceable right to set off the recognized amounts and an intention to settle on a net basis,
or to realize the asset and settle the liability simultaneously; and
• New disclosure requirements of items reported on and the nature and extent of risks arising
from financial instruments.
The new requirements are to be applied at the same time as PS 2601, Foreign Currency Translation
and for government organizations are effective for fiscal years beginning on or after April 1, 2012. In
the case of governments, the new requirements have been delayed, mainly due to concerns of the
senior government, and are effective for fiscal years beginning on or after April 1, 2019. For entities
with a December year end this means 2020 is the first year that the standard must be followed.
However, we expect that this Standard will be further deferred. Earlier adoption is permitted. This
Standard should be adopted with prospective application except for an accounting policy related to
embedded derivatives within contracts, which can be applied retroactively or prospectively.
Note also the exposure draft “Financial Instruments: Transition” (discussed below) that proposed
clarification of some detailed aspects of the Financial Instruments standard.
EXPOSURE DRAFTS – PSAS
Financial Instruments: Transition (Closed for comment)
This exposure draft deals with technical details related to the standard by providing two amendments
and a few clarifications.
The first amendment proposed definitively states that unless a contractual right or contractual
obligation underlies a receivable or a payable, the Financial Instruments standard does not apply.
There must be a contract for there to be a financial instrument.
The second amendment removes a correct, but redundant, paragraph that notes the Financial
Instrument Standard does not apply to a receivable under a lease.
Clarifications are made in areas related to transfer of collateral pursuant to a credit risk management
mechanism in a derivative contract, treatment of unamortized discounts or premiums related to debt
buy-backs, associated unamortized discount or premium on initial adoption, and derivatives not
recognized or recorded at fair value on initial adoption.
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These detailed technical changes will likely have most impact to senior governments and it is not
expected that many local governments will be affected.
PSAB has deferred considering amendments proposed in the October 2014 Exposure Draft until a later
date.
Withdrawal of Disclosure of Related Party Transactions by Not-for-Profit Organizations, Section
PS 4260 (Closed for comment)
In January 2016, PSAB proposed, subject to comments received following exposure, to withdraw
Section PS 4260 from the CPA Canada Public Sector Accounting Handbook and to add a transitional
provision to Section PS 2200, Related Party Disclosures. PSAB is currently deliberating comments
received on its Exposure Draft and final Handbook material is expected to be approved later in the
fall of 2016.
CONSULTATION PAPERS - PSAB
Concepts Underlying Financial Performance
This project considers the concepts underlying the measure of financial performance. It may result
in amendments to the conceptual framework and could also affect Section PS 1201, Financial
Statement Presentation. Three different consultation papers have been issued on this project with
the last one, Conceptual Framework Fundamentals and the Reporting Model, having closed for
comment on August 31, 2015. In the third consultation paper, there has been about face on concepts
stated in the second consultation in regards to having financial statements that did not clearly
articulate. Main features of this consultation paper suggest removing the Statement of
Remeasurement Gains and Losses, separating capital grants and other unusual items out of the main
revenue and expenses to a separate category (below the net result of services) on the Statement of
Operations, revisions of assets and liabilities definitions, required use of historical cost except in rare
cases and allows the use of an amended approved budget if the government has changed. PSAB is
deliberating comments received.
INVITATIONS TO COMMENT - PSAB
2013-2016 Strategic Plan: Proposed one-year Extension to the Term of the Plan
PSAB proposes to extend the term of its existing three-year strategic plan by one year. By this
proposal, the broad policy objectives set out in PSAB’s 2013-2016 Strategic Plan would continue to
guide the Board in carrying out its standard-setting mandate until March 2017.
PSAB intends to publish a draft 2017-2020 strategic plan to obtain input through comment letters and
consultations with interested parties. After analyzing the input received, PSAB will develop any
necessary modifications to the draft 2017-2020 strategic plan and review a revised draft with the
Accounting Standards Oversight Council in October 2016. The Board expects to approve the final
2017-2020 strategic plan in December 2016.
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STATEMENTS OF PRINCIPLES - PSAB
Asset Retirement Obligations (Exposure Draft is being developed)
In 2014, PSAB issued a Statement of Principles called “Retirement Obligations”. This caused some
confusion to readers as the title sounded as if it might relate to employee retirement obligations. To
clarify the project is now called Asset Retirement Obligations. This statement of principles proposes
a new section on retirement obligations associated with tangible capital assets controlled by a public
sector entity. The statement includes retirement obligations associated with tangible capital assets
resulting from legal, constructive and equitable obligations which include post-retirement operation,
maintenance and monitoring. Retirement costs would increase the carrying amount of the related
tangible capital asset or a component thereof and would be expensed in a rational and systematic
manner. The subsequent remeasurement of the liability can result in either a change in the carrying
amount of the related tangible assets or a component thereof, or an expense, depending on the
nature of the remeasurement or whether the asset remains in productive use. Often the best method
with which to estimate the liability is a present value technique.
In June 2016, PSAB received an update on the project and considered the inclusion of solid waste
closure and post-closure costs within the scope of the project. An exposure draft is currently being
developed and is to be approved in December 2016.
Revenue (Exposure Draft is being developed)
In this Statement of Principles, PSAB proposes to focus on two areas of revenue which are exchange
and unilateral (non-exchange) transactions with the presence of performance obligations being the
distinguishing feature. Developments in this area will be worth following as there could be significant
changes from current practice.
Performance obligations are enforceable promises to provide goods or services. Revenue from an
exchange transaction is recognized as the performance obligation is satisfied whereas unilateral
transactions are recognized when there is the authority and past event that gives rise to a claim of
economic recourses. Examples of unilateral revenue are fines and business licenses. In these
examples the payer receives no direct economic benefit in return. However, some revenues (for
example, dog licenses) will not be as clear cut. Using the dog license example, there could be a
question about whether a service is provided, as most local governments would have a dog catcher,
a response for barking dogs, and would fund the local SPCA. A question arises as to whether these
services are provided to the person paying the license or the public at large.
The goal of this project is to enhance consistency of revenue recognition among public sector entities.
An exposure draft is currently being developed and is to be approved in December 2016.
PROJECTS - PSAB
Employment Benefits
PSAB approved an Employment Benefits project. The objective is to review Section PS 3250,
Retirement Benefits, and Section PS 3255, Post-employment Benefits, Compensated Absences and
Termination Benefits. Key issues include, but are not limited to, deferral of experience gains and
losses, discount rate, shared risk plans, multi-employer defined benefit plans and vested sick leave
benefits.
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Impairment of Non-Financial Assets
PSAB approved an Impairment of Non-Financial Assets project. The objective of the project is to
issue a standard that address the impairment of tangible capital assets that have service potential.
The objective is to define impairment as well as providing guidance on assessment, recognition,
measurement and disclosure of impairment losses. PSAB has deferred this project until a later date.
Public Private Partnerships
PSAB approved a project proposal to develop a standard on public private partnerships as it was
identified as a priority in PSAB’s 2014 Project Priority Survey. A statement of principles is being
developed and is expected to be completed in December 2016.
POST IMPLEMENTATION REVIEW - PSAB
Government Transfers
PSAB conducted its first post-implementation review to determine whether the standard, Section PS
3410, Government Transfers, has been implemented and achieved the intended objectives. The
review provided PSAB with insightful information about how the standard was received across
Canada. After considerable deliberation, PSAB concluded that the standard meets its original public
interest objectives. This means that no further guidance is expected.
STATUS OF CURRENT PROJECTS – PSAB
Standards for public sector organizations 2016 2016 2017 2017
Q3 Q4 Q1 Q2
Asset Retirement Obligations Exposure
Draft
Concepts Underlying Financial Performance
Employment Benefits
Invitation
to
Comment
Financial Instruments – Subsequent Issues
PSAB Strategic Initiative Strategic
Plan
Public Private Initiative
Statement
of
Principles
Revenue Exposure
Draft
Impairment of Non-Financial Assets Project
Deferred
PSA Handbook Terminology Project
Deferred
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NEW STANDARDS - AUDITING AND ASSURANCE STANDARDS BOARD (AASB)
CSRS 4460, Reports on Supplementary Matters Arising from an Audit or Review Engagement
This new Related Services Standard establishes the various types of information reported to a third
party (for example, regulators or funding bodies). It is common in this sector for funders,
regulators, or other governments to require specific reporting from the auditor or accountant
(known as “derivative reports”). This standard requires the auditor or accountant to expand the
level of work required in many cases. Many of the existing types of reports requested by funders,
regulators or other governments would not be able to be signed under these new proposals.
Instead, a more fully explained report using standard wording would be issued in its place.
This standard is effective for reports dated on or after April 1, 2016.
CSAE 3000 Attestation Engagement other than Audits or Reviews of Historical Financial
Information and CSAE 3001 Direct Engagements
CSAE 3000 and CSAE 3001 replaces Sections 5025 Standards for Assurance Engagements Other than
Audits of Financial Statements and Other Historical Financial Information, Section 5030 Quality
Control Procedures for Assurance Engagement Other than Audits of Financial Statements and
Other Historical Financial Information, Section 5049 Use of Specialists in Assurance Engagements
Other than Audits of Financial Statements and Other Historical Financial Information and Section
5050 Using the Work of Internal Audit in Assurance Engagements Other than Audits of Financial
Statements and Other Historical Financial Information. CSAE 3000 is adopted from ISAE 3000
however the Canadian Standards have some differences including:
• narrowing the scope of CSAE 3000 to address attestation engagements only;
• references to relevant ethical requirements; and
• terminology.
Canadian Standard on Assurance Engagements (“CSAE”) 3001 is based on CSAE 3000 but is revised,
as necessary, to reflect the differences between attestation engagements and direct engagements.
CSAE 3000 and 3001 are effective for attestation engagements where the assurance report is dated
on or after June 30, 2017.
EXPOSURE DRAFTS – AASB
Reports on Compliance with Agreements, Statutes and Regulations (Closed for comment)
The AASB issued an exposure draft that proposes to issue a CSAE 3530 Reports on Compliance with
Agreements, Statutes and Regulations, which would replace 5800, Special Reports — Introduction,
5815, Special Reports — Audit Reports on Compliance with Agreements, Statutes and Regulations,
8600 Reviews of Compliance with Agreements and Regulations. The standard would not be a
“standalone” section, but rather provide additional requirements and application material to assist
practitioners in the application of CSAE 3000 or CSAE 3001.
The AASB is deliberating comments received on its Exposure Draft and a Re-Exposure draft will be
developed.
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Association / Use of the Practitioner’s Communication or Name (Closed for comment)
In March 2015, the AASB issued an exposure draft for comments with CSOA 5000 replacing Section
5020, Association, which addressed the following issues:
• which circumstances would be scoped into the proposed standard and in which
circumstances the practitioner would refer to other standards;
• how the practitioner’s consent to the use of the practitioner’s name or report is defined;
and
• what the practitioner’s responsibilities would be when information on which the
practitioner reported is issued in more than one language.
In March 2016, the AASB issued a re-exposure draft to outline changes to the scope of the proposed
CSOA 5000 to improve the understandability and clarity of the requirements of this CSOA in
response to stakeholders’ comments. One of the proposed changes is to rename the standard from
“Association” to “Use of the Practitioner’s Communication or Name” to avoid giving the impression
that proposed CSOA 5000 deals with all aspects of association.
The AASB is deliberating comments received on its Re-Exposure Draft and final handbook material
is expected to be approved later in the fall of 2016.
PROJECTS - AASB
Agreed-Upon Procedures
An invitation to comment is being developed on this project to update Section 9011, Reports on
the Results of Applying Specified Auditing Procedures to Financial Information Other than
Financial Statements. The project will address:
• whether an umbrella standard is needed for agreed-upon procedures engagements;
• whether the concept that an agreed-upon procedures engagement does not result in the
provision of assurance is still appropriate;
• whether a practitioner should be required to use professional judgment when determining
or modifying the procedures to be performed;
• whether the practitioner should apply materiality to design procedures or assess factual
findings; and
• the form and content of the practitioner’s report.
It is expected that the invitation to comment document will be approved later in the fall of 2016.
Future-Oriented Financial Information
A project proposal has been approved to determine what authoritative guidance, if any, is needed
in the Handbook to address assurance matters pertaining to future-oriented information.
Reports on the Application of Accounting Principles
A project proposal has been approved to determine what the appropriate course of action for
Section 760, Reports on the Application of Accounting Principles, as opinion shopping services, as
described in the section, are rarely performed in practice today.
Public Sector Auditing Standards
The AASB discussed issues related to compliance audits in the public sector and has agreed to
develop a new assurance and related services guideline to address material contained in Section
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PS 5300, Auditing for Compliance with Legislative and Related Authorities in the Public Sector. An
exposure draft is being developed and is expected to be approved later in the fall of 2016.
Communications with Law Firms (Closed for comment)
The AASB conducted a project to revise the “Joint Policy Statement Concerning Communications
with Law Firms Regarding Claims and Possible Claims in Connection with the Preparation and Audit
of Financial Statements” appended to CAS 501, Audit Evidence — Specific Considerations for
Selected Items, including:
• whether the revised Joint Policy Statement should include illustrations of how the
evaluation of claims and possible claims under different financial reporting frameworks
could be described in the inquiry letter or whether such illustrations should be issued
separately as non-authoritative guidance;
• whether any consequential amendments would be necessary to CAS 501; and
• what the effective date of the revised Joint Policy Statement should be and whether early
implementation should be permitted.
The responses to the AASB exposure draft indicated strong support for the revised Joint Policy
Statement. The AASB discussed issues including:
• how to provide greater clarity in CAS 501 that the revised Joint Policy Statement applies
to communications with in-house legal counsel acting in a legal capacity;
• whether amendments should be made to address respondents’ concerns that it is not clear
what the auditor’s work effort should be when using evidence provided by in-house legal
counsel acting in a legal capacity; and
• how to appropriately reflect in CAS 501 and the revised Joint Policy Statement the
circumstances when an auditor may request communication with legal counsel in situations
when there are no claims or possible claims.
The AASB approved the revised Joint Policy Statement in February 2016.
AASB Strategic Initiative
The strategic initiative was a project to develop the AASB’s next strategic plan. In determining its
future activities, the AASB reviewed the outcome of its previous strategic plan, as well as global
and domestic developments affecting standard setting, and sought input on how to increase the
engagement of stakeholders in the standard-setting process.
The Five-year Strategic Plan, which took effect on April 1, 2016 was released, along with a Basis
for Conclusions in August 2016.
Compilation Engagements
In June 2016, the AASB discussed issues related to its project to revise Section 9200, Compilation
Engagements, including:
• the definition of a compilation engagement;
• the intended scope of the standard;
• whether there is a need for requirements dealing with quality control;
• work effort; and
• reporting requirements.
The AASB also considered a preliminary plan to consult with stakeholders as the project develops,
emphasizing the need for focused discussions with affected practitioners as the AASB develops an
exposure draft. An exposure draft is being developed and is expected to be approved late in 2016.
I BDO