Housekeeping amendments related to the auditor’s report and agreed-upon procedures report

1. Background

In 2021, the Auditing and Assurance Standards Board approved the Canadian Standard on Quality Management (CSQM 1), Quality Management for Firms that Perform Audits or Reviews of Financial Statements or Other Assurance or Related Services Engagements. CSQM 1 requires all audit firms to design and implement a system of quality management for audits or reviews of financial statements or other assurance or related services engagements. This standard now extends to related service engagements, which were not subject to the previous standard.

The Auditing and Assurance Standards Board required audit firms to have their system of quality management in place for related service engagements (such as the agreed-upon procedures report) by December 15, 2023. In addition to the CSQM 1 requirements, paragraph 30(m) of the Canadian Standard on Related Services (CSRS) 4400 – Agreed-upon Procedures Engagements requires the auditors to include a statement in the Agreed-upon procedures report that the audit firm applies CSQM 1.

CIRO previously published housekeeping amendments to the IDPC Form 1 and MFD Form 1 to comply with the CSRS 4400 standards. At the time, CSQM 1 was not in effect so the amendments did not include compliance with paragraph 30(m) of CSRS 4400.

Also, narrow-scope amendments to International Accounting Standard (IAS) 1 which impacts the Canadian Auditing Standards (CASs) became effective for annual reporting periods beginning on or after January 1, 2023. The narrow-scope amendments to IAS 1 require entities to disclose their ‘material accounting policy information’ instead of ‘significant accounting policies’. As a result, the standard auditor’s reports within the CASs have been updated.

2. Housekeeping Amendments

The Housekeeping Amendments include:

• amending language related to accounting policies in the auditor’s reports in the MFD Form 1 and IDPC Form 1 to comply with the standard auditor’s reports under CASs,
• adding a paragraph in the preamble of the agreed-upon procedures reports in MFD Form 1 and IDPC Form 1 to comply with paragraph 30(m) of CSRS 4400,
• moving the requirement for auditors to perform the insurance procedures to the same section of the MFD Rules as segregation of cash and securities procedures,
• renaming the report to the ‘Agreed-upon Procedures Report on Compliance for Insurance and Segregation of Cash and Securities’ in MFD Rule 3.6.3(b)(ix) to align with MFD Form 1, and
• renaming the report to the ‘Agreed-upon Procedures Report on compliance for insurance, segregation of securities, and guarantee/guarantor relationships relied upon to reduce margin requirements during the year,’ in IDPC Rule section 4190 to align with IDPC Form 1.

The clean copy of the Housekeeping Amendments to MFD Rules and IDPC Rules are set out in Appendix A and a blackline of the changes is set out in Appendix B. The clean copy of the Housekeeping Amendments to the auditor’s reports and agreed-upon procedures reports in MFD Form 1 and IDPC Form 1 are set out in Appendix C and a blackline of the changes is set out in Appendix D.

3. Classification of the Housekeeping Amendments

We have classified the Housekeeping Amendments as housekeeping because they are necessary to conform to applicable securities legislation, statutory or legal requirements, accounting or auditing standards, or to other CIRO Rules. Specifically, the Housekeeping Amendments are required to conform to Canadian Auditing Standards including CSRS 4400 and to conform CIRO’s rules with the current name of the Form 1 agreed-upon procedure report.

4. Approval and Implementation

On January 24, 2024, CIRO’s Board of Directors approved the Housekeeping Amendments.

The Housekeeping Amendments are effective immediately.

5. Appendices

Appendix A - Clean copy of the Housekeeping Amendments

Appendix B - Blackline comparison of the Housekeeping Amendments to current rules

Appendix C - Clean copy of MFD Form 1 and IDPC Form 1 auditor’s reports and agreed-upon procedure reports

Appendix D - Blackline comparison of Housekeeping Amendments to MFD Form 1 and IDPC Form 1 auditor’s reports and agreed-upon procedure reports