While international financial reporting in Canada is completing its first year, auditing under International Financial Reporting Standards, or IFRS, is in its infancy, so we thought we would highlight 10 key IFRS transitional issues facing junior issuers to assist you, as audit committee members, in fulfilling your responsibilities. In no particular order, they are:

Auditing comparative figures

As a result of the transition to IFRS, the comparative figures in the upcoming 2011 financial statements need to be re-audited. Despite the fact that all issuers would already possess audit reports for 2010, those reports refer to Canadian generally accepted accounting principles rather than IFRS. Assuming a December 31, 2011 year end, issuers will have to obtain audit opinions as at January 1, 2010 and December 31, 2010 and for the year ended December 31, 2010 (for December year ends under IFRS).

Timing of the 2011 audit

The preparation of 2011's reporting package will take longer as a result of the added requirements described above and the transition to IFRS itself. Unlike the first interim filings under IFRS, there is no extension with respect to the due date of the year-end filings. Therefore, it is important to start early and develop timelines.

Change of auditor for 2011

The normal change in auditor process has been complicated by the complexities in the reporting requirements for the comparative figures described above.  Auditor cooperation will be required to achieve efficient comparative reporting under IFRS.

Changes to comparative figures

As a result of the transition to IFRS, the comparative figures may change, resulting in the need for revisions to MD&A and other filings. It is important to understand the nature of the IFRS transition adjustments and how they may impact previously filed documents issued by the issuer.

Functional currency

There is a significant change in accounting for foreign currencies on adoption of IFRS that may result in substantial changes to accounting for foreign subsidiaries and foreign transactions and operations.  Foreign currency policies under IFRS should be discussed with the auditors and the audit committee and all various alternatives should be flushed out.

Required disclosures

Be aware of the required disclosures and ensure they are met, as the regulators have been forcing issuers who are deficient to restate and refile. Such deficiencies will also potentially impede other filings such as prospectuses and financing-related documents.

Management's discussion & analysis

The transition to IFRSs brings required disclosures in a company's MD&A. Many issuers have been forced to revise their MD&A as a result of deficiencies in required MD&A disclosures. Further, MD&A disclosures may require a blend of IFRS and Canadian GAAP results to be included in the quarterly financial information, which should be adequately explained.

Dating of audit reports

Recent changes to Canadian Auditing Standards (International Auditing Standards) require the dating of the auditor's report to coincide with a company's board approval of the related financial statements after the auditors have completed their work, including approval  by the firm's independent quality-control reviewers. This has resulted in the audit firm having to perform audit work up to that date. Planning and adhering to timelines helps keep this part of the audit process efficient.

Prospectus and other such filings

The transitional issues impact prospectus and other filings in terms of dealing with historical financial statements contained within and with the transition. Many issues in this area are unprecedented and may require consultation with applicable regulators in advance of filing.

Policies and procedures Internal policies and procedures surrounding financial reporting may have changed as a result of the adoption of IFRS.  Such changes need to be understood by the audit committee, documented in the company's control systems and appropriately disclosed.

Octavio Cabral, CA, is an Audit and Assurance Partner (Public Markets) in the Toronto office of Collins Barrow.