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Differences of opinion arising during an assurance engagement shall be identified and resolved in a timely manner. The nature and scope of the difference of opinion, and resulting conclusions, are to be documented and implemented. An assurance engagement report is not dated until all differences of opinion have been resolved.
This section outlines the Office’s policies and procedures for dealing with and resolving differences of opinion within the engagement team, with those consulted, and, where applicable, between the engagement leader and the quality reviewer.
Office |
Annual Audit |
Performance Audit, Special Examination, and Other Assurance Engagements |
CSQC 1.43 The firm shall establish policies and procedures for dealing with and resolving differences of opinion within the engagement team, with those consulted and, where applicable, between the engagement partner and the engagement quality control reviewer. (Ref: Para. A52-A53) Differences of Opinion (Ref: Para. 43) CSQC 1.A52 Effective procedures encourage identification of differences of opinion at an early stage, provide clear guidelines as to the successive steps to be taken thereafter, and require documentation regarding the resolution of the differences and the implementation of the conclusions reached. CSQC 1.A53 Procedures to resolve such differences may include consulting with another practitioner or firm, or a professional or regulatory body. CSQC 1.44 Such policies and procedures shall require that: (a) Conclusions reached be documented and implemented; and (b) The report not be dated until the matter is resolved. |
CAS 220.22 If differences of opinion arise within the engagement team, with those consulted or, where applicable, between the engagement partner and the engagement quality control reviewer, the engagement team shall follow the firm's policies and procedures for dealing with and resolving differences of opinion. |
Differences of opinion shall be identified and resolved in a timely manner in accordance with the Office’s resolution process. [Nov-2011]
An assurance engagement report shall not be dated until all differences of opinion have been resolved. [Nov-2011]
The engagement leader shall ensure that the parties consulted during the resolution process are provided with all relevant facts and any previous consultative advice received. [Nov-2011]
The engagement leader shall ensure that the nature and scope of the difference of opinion and resulting conclusions are documented and implemented. [Nov-2011]
There may be times when significant disagreements arise within the engagement team, with those consulted (e.g., internal specialists) or between the engagement leader and the quality reviewer. The process for resolving differences of opinion requires consultation between individuals who have the appropriate knowledge, seniority, and experience regarding the technical, ethical, and other issues involved.
Each professional staff member of the Office has the right and obligation to form his or her own conclusions on the significant matters arising from the areas of the engagement for which he or she is responsible, and for ensuring those views receive adequate consideration.
The assurance engagement team comprises professionals with varying levels of experience and expertise, and differences in opinion between members may arise. These differences, particularly those involving personnel at senior levels, generally involve highly judgmental and technical questions. In these cases, the matter is resolved and documented according to OAG Audit 1142 Evaluating, resolving, and communicating significant matters. If the matter is not deemed significant, the rationale for the decision is nevertheless documented in the engagement file to record the reasons for the selection of a particular outcome over a different outcome, where this is necessary to understand the conclusion reached.
Areas where differences of opinion may be more likely to arise include
The engagement leader strives to identify differences of opinion as early as possible and address them on a timely basis. An engagement report cannot be dated until all differences of opinion have been resolved. At the end of each phase of the engagement (planning, examination, and reporting), the engagement leader should identify any differences of opinion and initiate resolution in a timely manner.
Disagreements involve people and personalities, and dispute resolution is not an area that can be completely addressed with specific policies and procedures.
Key success factors for dealing with differences of opinion to arrive at a satisfactory resolution are the following:
Guiding principles for the Office’s resolution process are:
The engagement leader ensures at a minimum that the resolution of the difference is documented in the audit file. The Difference of Opinion template would normally be used to ensure the completeness of documentation. It is designed to capture
For direct engagements, the audit team collaborates with the Office’s most senior executives throughout the audit process including the assistant auditors general of the practice and the Auditor General. Differences of opinion escalating beyond direct settlement may be subject to arbitration with senior executives who have not been part of direct settlement. The Auditor General has the ultimate authority in the final conclusions taken and constitutes final appeal.
For more information concerning the process of direct settlement, refer to the Annual Audit discussion below.
A flowchart of the principle activities involved in resolving a difference of opinion is presented at figure 1.1.
To help all parties reach agreement, differences of opinion should be addressed on a timely basis following the steps outlined below. Note that the resolution process may be completed at any point if all parties agree with the proposed resolution.
If the party raising a difference of opinion is willing to allow the report signatory, other than the Auditor General, to make the final conclusion, the matter is not considered a difference of opinion requiring the use of this resolution process.
A difference of opinion shall be resolved following the three-step resolution process:
If the parties involved conclude that the Auditor General shall make the final decision, this may imply they are in the appeal process. The parties involved typically shall not move into the appeal process without having received a decision from the arbitration process.
Step 1—Direct Settlement
Normally, disagreements are resolved directly. This may include discussion, research, and consultation with other knowledgeable parties. Most disagreements arise from simple miscommunications that can be quickly rectified. The engagement leader typically resolves differences of opinion within the team or with parties consulted (e.g., internal specialists).
Differences of opinion within the engagement team or with those consulted. If a difference of opinion arises within the engagement team or with those consulted, team members first discuss the matter with a senior team member and/or the engagement leader. The engagement leader may choose to seek advice from others in the Office such as other functional area specialists, including the Audit Services.
When applicable, the quality reviewer may be consulted; however, this consultation cannot compromise the quality reviewer's ability to perform his or her role and to make objective evaluations OAG Audit 3063 Quality reviewer responsibilities.
If there is still a difference of opinion, the engagement leader documents the issue giving rise to the difference of opinion and the opposing positions, including their rationale.
The issue will then move into Step 2—Arbitration, and the engagement report will not be dated until all differences of opinion have been resolved.
Differences of opinion between the engagement leader and the quality reviewer. On an engagement where a quality reviewer has been appointed, differences of opinion may arise between the engagement leader and the quality reviewer. For example, the quality reviewer may make recommendations that the engagement leader does not accept and the matter is not resolved to the quality reviewer’s satisfaction. If a disagreement cannot be resolved directly, the engagement leader documents the issue giving rise to the disagreement and the alternative positions, including their rationale, in the Difference of Opinion template. The issue will then move into Step 2—Arbitration, and the engagement report will not be dated until all differences of opinion have been resolved.
Step 2—Arbitration
If a disagreement cannot be resolved directly within the engagement team, the engagement leader shall escalate the matter according to the flow chart in the Differences of Opinion—Path to Resolution diagram in Figure 1.1. The Difference of Opinion template should be used to present a complete synopsis of the issue to the arbitrator(s).
Figure 1.1 Differences of Opinion (DofO)—Path to Resolution
When arbitration is needed, it is typically performed by a panel of individuals (this does not preclude a single individual acting from as arbitrator). A panel would normally comprise the assistant auditors general of the applicable audit practice and the assistant auditor general of Audit Services. Assistant auditors general acting to arbitrate a difference of opinion shall ensure any involvement in the audit engagement prior to or during the difference of opinion resolution process has not prejudiced their objectivity. This is an important prerequisite to an effective resolution process. Where needed, a panel arbitrating the difference of opinion resolution may involve outside experts such as assistant auditors general of other practices or members of the Office’s advisory committees and panels.
The arbitrators must consider the matter on a timely basis and meet with the parties involved, giving the arbitrators an opportunity to hear all parties' positions and to state their positions prior to making a determination. If the matter is complex or highly technical, the arbitrators will seek additional input as necessary. At the discretion of the arbitrators, advice may be sought from other functional area specialists, including Audit Services and others within or external to the Office.
Principles of arbitration:
If the difference of opinion cannot be resolved or if participants are not satisfied with the decision reached from the arbitration process, then the issue will move into Step 3—Appeal, for final resolution.
Step 3—Appeal
If there is dissatisfaction with the appropriateness of the arbitrators’ decision, either of the parties can make a final appeal to the Auditor General or an individual nominated by the Auditor General to hear the appeal and make a final determination. This step should be treated seriously and taken only where there is concern about a report being inappropriate in the circumstances or where there are concerns surrounding professional standards or other ethical matters that put the Office at significant risk.
The engagement leader shall provide the party hearing the appeal with the Difference of Opinion template, providing the synopsis of the issue and updated to reflect the views of all previous consultations.
The party hearing the appeal will
The engagement leader is responsible for updating the Difference of Opinion template with the additional comments and arguments raised and the final determination made by the party hearing the appeal.
If a previous decision is overturned, the reasons will be communicated to all the parties involved and the engagement leader will update the Difference of Opinion template accordingly. The appeal process is the final recourse available within the Office.
The Office will protect employees from any form of reprisal, career limitation, or punitive actions for referring a legitimate matter of significance to the resolution of differences of opinion process in good faith and with the true interests of the public, the entity, the Office, or co-workers at heart.
1 Corporate knowledge = knowledge of past Office positions, interpretations, views, and conclusions on comparable situations.