International Education Standard 8

International Education Standard 8 (IES8) prescribes the professional competence that professional accountants are required to develop and maintain when performing the role of an Engagement Partner responsible for audits of financial statements.

As defined in the International Standard on Auditing (ISA) 220, an Engagement Partner is the partner or other person in the firm who is responsible for the audit engagement and its performance, and for the auditor’s report that is issued on behalf of the firm, and who, where required, has the appropriate authority from a professional, legal or regulatory body.

CPA Canada is a member of the International Federation of Accountants (IFAC). As such, CPA Alberta falls under the prescribed professional education standards issued by the International Accounting Education Standards Board (IAESB). IAESB develops the international education standards that IFAC establishes.

The complete text of IES8 as well as the IAESB Basis for Conclusions supporting the standard can be found on the IFAC website here. (Note that the IFAC website will require users to register in order to access the document.)

IES8 applies to any firm that provides audits of financial statements, and specifically to the individuals in the firm performing the role of Engagement Partner or an equivalent role on such engagements.

As stated in the standard, IES8 requires, as related to audit engagements, that:

  1. Professional accountants performing the role of an Engagement Partner or an equivalent role develop and maintain professional competence that is demonstrated by the achievement of specific learning outcomes as set forth in Table A below; and
  2. Professional accountants performing the role of an Engagement Partner undertake CPD that develops and maintains the professional competence required for this role.

Table A: Learning Outcomes for the Professional Competence of an Engagement Partner

Competence Area Learning Outcomes 
Technical Competence
(a) Audit

(i) Lead the identification and assessment of the risks of material misstatement as part of an overall audit strategy.

(ii) Evaluate responses to the risks of material misstatement.

(iii) Evaluate whether the audit was performed and documented in accordance with applicable auditing standards (e.g., ISAs) and relevant laws and regulations.

(iv) Develop an appropriate audit opinion and related audit report, including a description of key audit matters as applicable.

(b) Financial accounting and reporting

(i) Evaluate whether an entity has prepared, in all material respects, financial statements in accordance with the applicable financial reporting framework and regulatory requirements.

(ii) Evaluate the recognition, measurement, presentation, and disclosure of transactions and events within the financial statements in accordance with the applicable financial reporting framework and regulatory requirements.

(iii) Evaluate accounting judgments and estimates, including fair value estimates, made by management.

(iv) Evaluate the fair presentation of financial statements relative to the nature of the business, the operating environment, and the entity’s ability to continue as a going concern.

(c) Governance and risk management
 (i) Evaluate corporate governance structures and risk assessment processes affecting the financial statements of an entity as part of the overall audit strategy.
(d) Business environment
 (i) Analyze relevant industry, regulatory, and other external factors that are used to inform audit risk assessments including, but not limited to, market, competition, product technology, and environmental requirements.
(e) Taxation
 (i) Evaluate procedures performed to address the risks of material misstatement in the financial statements in respect of taxation, and the effect of the results of these procedures on the overall audit strategy.
(f) Information technology
 (i) Evaluate the information technology (IT) environment to identify controls that relate to the financial statements to determine the impact on the overall audit strategy.
(g) Business laws and regulations
 (i) Evaluate identified or suspected non-compliance with laws and regulations to determine the effect on the overall audit strategy and audit opinion.
(h) Finance and financial management

(i) Evaluate the various sources of financing available to, and financial instruments used by, an entity to determine the impact on the overall audit strategy.

(ii) Evaluate an entity’s cash flow, budgets, and forecasts, as well as working capital requirements to determine the impact on the overall audit strategy.

Professional Skills
(i) Intellectual
 (i) Resolve audit issues using inquiry, abstract and logical thought, and critical analysis to consider alternatives and analyze outcomes.
(j) Interpersonal and communication

(i) Communicate effectively and appropriately with the engagement team, management, and those charged with governance of the entity.

(ii) Resolve audit issues through effective consultation when necessary.

(k) Personal

(i) Promote and undertake lifelong learning.

(ii) Act as a role model to the engagement team.

(iii) Act in a mentoring or coaching capacity to the engagement team.

(l) Organizational

(i) Evaluate whether the engagement team, including auditor’s experts, collectively has the appropriate objectivity and competence to perform the audit.

(ii) Manage audit engagements by providing leadership and project management of engagement teams.
Professional Values, Ethics, and Attitudes
(m) Commitment to the public interest
 (i) Promote audit quality in all activities with a focus on protecting the public interest.
(n) Professional skepticism and professional judgment (i) Apply a skeptical mindset and professional judgment in planning and performing an audit and reaching conclusions on which to base an audit opinion.
(o) Ethical principles

(i) Apply the ethical principles of integrity, objectivity, professional competence and due care, confidentiality, and professional behavior in the context of an audit and determine an appropriate resolution to ethical dilemmas.

(ii) Evaluate and respond to threats to objectivity and independence that can occur during an audit.

(iii) Protect the confidential information of the entity in accordance with ethical responsibilities and relevant legal requirements.

During the yearly professional accounting firm (PAF) renewal, which takes place between October 1 and November 30, PAFs will be asked to declare whether all individuals in the firm performing the role of Engagement Partner or an equivalent role on audit engagements comply with the annual CPD requirement to develop and maintain professional competence in the area of audit.

It is suggested that these individuals keep track of this CPD if ever the firm is requested to provide this information to CPA Alberta. The requirement for a member to maintain his/her CPD records, and provide those records to CPA Alberta upon request, is already established under section 17 of the Chartered Professional Accountants Regulations, this is not an added requirement/obligation for the members.

In the case of most firms that provide audits of financial statements, this is already a process implemented within the firm’s existing CPD program. Provided that the individuals in the firm performing the role of Engagement Partner or an equivalent role on audit engagements is already taking yearly audit CPD that keeps them up to date on the audit standards, no additional CPD would be required as a result of IES8. Members are generally referred to Rule 203 of the CPA Alberta Rules of Professional Conduct which states “A member shall sustain professional competence by keeping informed of and complying with, developments in professional standards in all functions in which the member provides professional services or is relied upon because of the member’s calling.”

The IES8 professional competence requirements (as defined above) will be monitored through the Practice Review process. No changes to the existing procedures performed during a practice review are expected as a result of IES8.
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