September 9, 2016 kpmg.ca

Transcription

1 IIROC 2016 Financial Administrators Section Conference September 9, 2016 kpmg.ca

2 Presenters The contacts at KPMG in connection with this presentation are: Chris Cornell KPMG Partner, Financial Services Steven Sharma KPMG Partner, Financial Services

3 Agenda Current Audit Trends Areas of Regulatory Focus Global Areas of Audit and Regulatory Focus

4 Current Audit Trends Cybersecurity In December 2015, IIROC published two resources to help IIROC broker-dealer firms protect themselves and their clients against cyber threats and attacks. The two publications included the Cybersecurity Best Practices Guide and the Cyber Incident Management Planning Guide Financial services firms are most at risk due to the processing and maintenance of client confidential data Audit committees/boards are being challenged to consider the full range of existing and emerging risks. Auditors are being challenged to assess the risk to financial reporting Challenges with cybersecurity can be broken into five granular topics: - Data protection - Social engineering - Auditing of third-parties - Cyber insurance - Remediation procedures 4

5 Current Audit Trends Other Reporting Matters In connection with the instruction letter provided by IIROC to panel auditors, IIROC requests the panel auditors to: either file with IIROC a copy of the auditor s management letter (otherwise known as an internal control letter) on any internal control weakness findings and recommendations discussed and/or issued to the Dealer Member within 90 days of the Dealer Member year-end or notify IIROC that no management letter was issued This type of reporting falls under Canadian (auditing) standard on related services ( CSRS 4460 ) which outlines the professional requirements of the auditor and reporting This will require additional terms and conditions in the audit engagement letter and possible additional representations in the management representation letter 5

6 Current Audit Trends Future Accounting Prouncements Updates IFRS 15 Revenue from contracts with customers - The IASB issued its final amendments in April No further changes are expected before the effective date - The new standards on revenue will be effective in 2018 IFRS 2 Share-based payments - In June 2016, the IASB issued amendments to IFRS 2 over three accounting areas: Measurement of cash-settled share-based payments Classification of share-based payments settled net of tax withholdings Accounting for a modification of a share-based payment from cashsettled to equity-settled 6

7 Current Audit Trends Future Accounting Prouncements New IFRS 16 Leases - In January 2016, the IASB issued IFRS 16 which eliminates the current dual model for lessees - IFRS 16 introduces a single, on-balance sheet accounting model that is similar to current finance lease accounting. - Lessor accounting will remain consistent to current practice (i.e. lessors continue to classify leases as finance and operating leases) - The expectation is that all companies that lease major assets for use in their business will see an increase in reported assets and liabilities - This new standard takes effect for annual reporting periods beginning on or after January 1, Early adoption is permitted for companies that also adopt IFRS 15 - Upon adoption, an entity will transition to this new standard by either taking a retrospective approach or a cumulative catch-up approach 7

8 Agenda Current Audit Trends Areas of Regulatory Focus Global Areas of Audit and Regulatory Focus

9 Areas of Regulatory Focus Audit focus areas Revenue recognition Auditing information produced by service organizations Auditing information produced by the broker-dealer Evaluating fair value measurements and fair value disclosures Auditing related party transactions Communicating to Audit Committees/Boards of Directors (those charged with governance) IIROC compliance priorities (FinOps) CRM pricing of stale-dated and illiquid securities held in client accounts Cybersecurity Outsourcing arrangements Custodial arrangements Debt concentration test and capital charge 9

10 Agenda Current Audit Trends Areas of Regulatory Focus Global Areas of Audit and Regulatory Focus

11 Non-IFRS reporting measures Investors demand more information IFRS or GAAP financial statements are seen as rarely telling the full financial picture of a Company, as such Companies use Non-GAAP measures to bridge this information gap. Global Regulators Assessment SEC, IOSCO, and CSA have all had this matter on their radar with recent publications from the SEC and IOSCO bringing this matter back to prominence by providing guidance on expectations for these Non- GAAP measures this summer. Impact on Canadian Companies: CSA provides guidance on Non-GAAP measures for Canadian Companies. International reporting Companies can expect greater scrutiny on Non- GAAP measures and anticipation that these disclosures will receive similar review for consistency and accuracy as IFRS financial statements. 11

12 Auditor Reporting Model - Globally Global Standard Setters are continuing to focus on new Audit Reporting Requirements International Auditing and Assurance Standards Board (IAASB) has approved their standard and the Public Company Accounting Oversight Board (PCAOB) recently re-proposed their standard in May 2016 with the comment period ending August 15, Impact on Canadian Companies: Canadian Auditing and Assurance standards Board (AASB) solicited comments on this standard which closed in October of Comments are posted on the AASB website. Indications are the AASB intends to adopt the IAASB Standard, although they continue to defer Canadian implementation until the finalization of the PCAOB standard. 12

13 Other Global Audit Matters Tax Transparency Ongoing readiness: As global standards continue to evolve, organizations need to ensure they are ready for the new and shifting tax environment, including country-by-country reporting Reputational risk and exposure: Ignoring the issue could put you at risk for negative media exposure, which could damage your reputation and brand Risk of losing government contracts: Governments will not want to hire firms with a negative tax reputation Impact on Canadian Companies: Increased CRA audit risk and exposure: A negative tax reputation puts a CRA spotlight on your company 13

14 Other Global Audit Matters EU Audit Reform Commenced 2016: Impacts Public Interest Entities (PIEs) in Europe which includes listed entities, credit institutions and/or insurance companies Restrictions on Non-Audit services: Regulation contains a list of services which the statutory auditor of a PIE and all members of the statutory auditor s network are prohibited from providing to the PIE Mandatory Firm Rotation: Every company that falls within the PIE definition is required to rotate their auditors after a ten year period The Regulation also grants Member States the option to allow PIEs to extend the rotation period to (i) a maximum of 20 years if a public tender takes place on expiry of the 10 year period or (ii) to a maximum of 24 years where a joint auditor is appointed. Impact on Canadian Companies Non-EU groups that have an EU based PIE in their group structure will be required to rotate the auditors of those subsidiaries. 14

15 Lean in Audit Lean in Audit is KPMG s new innovative idea to embed Lean methodologies in the core Audit delivery process Lean in Audit Audit Mandate to look at all financial processes Access to all parts of your business Audit teams are already skilled in process analysis KPMG s award-winning innovative audit approach Collaborative approach with cross-organization engagement Pragmatic and simple concepts to provide deep insights and understanding Drives continuous improvement Lean Focus on quality and customer value Simple, yet powerful process improvement methodology Empowers employees to make improvement Provides new mindset and capabilities QUALITY VALUE EFFICIENCY Improve audit quality through deeper business understanding New and unique experience with improved engagement, understanding and insight Execute the most efficient audit and continuously improve the delivery process 15

16 What Questions Do You Have? 16

17 Thank you

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