Improving Financial Accounting and Reporting Standards

Our Office is committed to ensuring that appropriate

accounting and reporting standards are established for the public sector.

As part of this effort, the Office responds to pronouncements on emerging standards and changes in current standards. During the past year we have provided input to the following areas:

• Defining the Government Financial Reporting Entity—which

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organizations should be included in a government’s financial statements and how these organizations should be accounted for

• Proposed Revision to Introduction to Public Sector Accounting and Auditing Recommendations—

definition of “public sector” for the purposes of Public Sector Accounting and Auditing Board recommendations

• Guidance for Directors –

Governance Processes for Control—

guidance on how a board of directors can discharge its responsibilities for designing, assessing, and reporting on control systems in their organizations

• Proposed Statement of Principles on the Auditors’ Report on Financial Statements Prepared using an Appropriate Disclosed Basis of Accounting—principles to

determine what is the appropriate standards for public sector financial statement reporting

• Restricted Assets and Revenue—

principles to account for and report restricted assets and revenues in government financial statements

• Disclosure of Related Party Transactions by Not–for–profit Organizations—new disclosure requirements for recognizing related party transactions in the financial statements

• Communication of Matters Identified During the Financial Statement Audit—guidance on what, when, and how matters identified in the financial

statement audit should be communicated

• Tangible Capital Assets—accounting principles regarding recognition, measurement, and disclosure requirements for governments’

tangible capital assets

• Forthcoming implementation guidance from the Canadian Institute of Chartered Accountants on the new standards for not–

for–profit organizations—detailed discussion on the meaning of the new not–for–profit standards

In addition, members of the Office have participated directly in the process of setting accounting standards by sitting on several boards. George Morfitt, Auditor General, chaired the Public Sector Accounting and Auditing Board.

Frank Barr, an Assistant Auditor General, is a member of the Government Organization Task Force and serves on an advisory committee to advise on the applicability of recommendations for not–for–profit organizations.

Also, as a member of the Public Sector Constituency Network of the International Federation of Accountants, we make this Office’s views and comments known to the Public Sector Committee of the Federation about programs developed by that committee aiming at improving public

sector’s financial management and accountability.

This Office participates in all discussions, studies, and annual meetings of the Western Canadian Conference of Legislative Auditors (WCOLA) and the Legislative Auditors Practice Committee

(LAPC). WCOLA focuses on financial accounting and auditing issues of significant interest to the legislative auditing community.

LAPC establishes guidelines of best practice for its member offices across Canada, including practices aimed to improve

financial accounting and auditing standards ranging from human resource management, training, and audit methodology to financial statement presentation and

adherence to recommendations

of the Institute of Chartered Accountants’ Public Sector Accounting and Auditing Board.

We recognize that stating its accounting policy is the Government’s prerogative. Our responsibility is to evaluate and report on such policy. We have established a cordial working relationship with the Comptroller General and staff that allows us to offer our constructive criticism and research assistance when significant accounting policies are being

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In Canada, a key role of the Canadian Institute of Chartered Accountants (CICA) is the setting of accounting and auditing standards. Financial reporting, accounting and auditing provide

information essential to economic decision–making and accountability in both the private and public sectors. To be useful, this information must be understandable, comparable, relevant, reliable, and credible.

In discharging its standard–setting function, the CICA has established a number of boards:

• Accounting Standards Board (AcSB)

• Auditing Standards Board (AuSB)

• Criteria of Control Board (CoCo)

• Public Sector Accounting and Auditing Board (PSAAB)

These boards follow a rigorous process that gives those affected by pronouncements an opportunity to express their views while issues are being considered and recommendations developed. Four main steps are followed:

• project scoping and approval;

• formulation and agreement on basic principles (associates draft);

• preparation and issue of an exposure draft for public comment (public exposure draft); and

• approval and issue of the final recommendations.

The Public Sector Accounting and Auditing Board’s objective is to recommend standards to improve and harmonize public sector financial reporting, accounting, and auditing so that the best interests of the public—users, preparers, and auditors of financial information—are met.

In formulating appropriate accounting policies and financial reporting practices for government, PSAAB draws on expertise from every segment of the community. Senior officials of government, other public sector organizations, and academics sit on the board and its various task forces.

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developed. We believe this is an effective process, as Treasury Board benefits from our views about matters of accounting before finalizing its decision on them.

To assess where the risk of errors is most likely for each organization we audit, we have developed a comprehensive understanding of the entity, the environment in which it operates, the impact of economic conditions, and the effectiveness of the systems of internal control. The knowledge we obtain this way helps us

plan the most efficient audit and determine what advanced audit tools and computer assisted audit techniques should be used during the testing and evaluation phases of the audit. These tools enable us to interrogate, analyze, and extract data, and simulate or project the

information obtained for comparison with the actual amounts audited to determine whether error is likely to exist.

Assessing Financial Information

Audits and Reviews