The Canadian Public Accountability Board (CPAB) issued a supervisory communication on audits of group financial statements that sets out inspection observations on implementation of the revised Canadian Auditing Standard (CAS) 600 and highlights recurring weaknesses that can undermine audit quality in group audits. The note explains that the revised CAS 600, effective for 2024 calendar year-ends, expects a comprehensive and iterative risk-based approach, closer connectivity with foundational standards including CAS 315, and a more explicit understanding of the group’s system of internal control, consolidation process and aggregation risk, alongside an explicit requirement to assess and respond to fraud risks arising from consolidation. CPAB’s 2025 inspections of higher-risk group audit engagements, generally focused on revenue, inventory and cost of sales, identified deficiencies including insufficient understanding of the group structure and the commonality of controls, inherent risk assessments that relied heavily on inquiry, and component selection and aggregation risk analyses that left large untested balances, including cases where untested revenue and cost of sales were approximately 50 and 35 times group planning materiality. Other findings related to the consolidation process, including failure to identify consolidation-related risks and fraud risks, limited work on completeness of intercompany and related-party transactions, and reliance on consolidation controls without testing them, as well as engagement partner oversight that was too narrowly focused on significant-risk areas and did not sufficiently detect problems in component auditor work, including in foreign jurisdictions. CPAB directed audit firm leadership to distribute the communication to engagement teams and use it to support planning discussions and stand-back reassessments as group audits progress.
Canadian Public Accountability Board 2025-10-08
Canadian Public Accountability Board publishes inspection findings on applying revised group audit standard CAS 600
The Canadian Public Accountability Board issued a supervisory communication on group financial statement audits, highlighting inspection observations on the revised Canadian Auditing Standard 600. It identifies recurring weaknesses, such as insufficient understanding of group structure, inadequate risk assessments, and oversight issues, especially in high-risk areas like revenue and cost of sales. Audit firm leadership is advised to share findings with engagement teams to enhance audit quality.