Financial Reporting Regulation: The Case of Converging Canadian and International Accounting and Auditing Standards

This paper provides a descriptive analysis of the differences between existing Canadian accounting and auditing standards and the corresponding international standards that Canadian standard-setters have decided to converge them with, at the time of the decisions to converge. The descriptive analysis is based on two reconciliation documents published by the standard-setting boards of the Canadian Institute of Chartered Accountants. The main contributions of the paper are to outline and analyze the differences systematically in the context of prior research on financial reporting regulation and the impact of internationalization of accounting and auditing standards, and to identify key areas of difference that are likely to have the greatest impact on preparers, auditors, and users of Canadian financial statements. The results do not indicate that Canada is moving to a significantly more or less restrictive accounting measurement regime, but it appears that there will be greater disclosure detail required under international accounting standards than under existing Canadian standards. The key accounting difference relates to appraisal values for tangible and intangible assets that are permitted in international standards but not currently in their Canadian counterparts. The findings for auditing standards suggest that international and Canadian auditing standards impose a similar set of requirements on the audit function, and provide a similar degree of detailed application guidance. Differences in standards for the auditor's report and for management's written representations to the auditor are the most significant changes for audit practice in Canada.