Terms of Reference

Purpose

It has been more than 20 years since a review of accounting and assurance standard setting in Canada has been conducted. The purpose of the Independent Review Committee on Standard Setting in Canada (the Committee) is to conduct a review of the current governance and structure for establishing Canadian accounting and assurance standards developed by the Accounting Standards Board (AcSB), the Auditing and Assurance Standards Board (AASB), and the Public Sector Accounting Board (PSAB) as well as what might be suitable for future standards (for example, a Canadian Sustainability Standards Board).
The review will consider what changes might be appropriate to ensure that the national standard-setting system will continue to be independent, robust, world-class, and responsive to the needs of stakeholders. In addition, the review will consider the implications for Canada of (a) the recommendations of the Monitoring Group for changes to international audit standard setting and (b) the likely establishment by the IFRS Trustees of an International Sustainability Standards Board (ISSB).

The goal of the review is to ensure that Canadian standard setting is fit for the future. The Committee’s review and recommendations should include:

The structure and governance of the standard-setting activities currently supported by CPA Canada as well as any future standard- setting activities along with the options for funding.
The potential creation of a Canadian Sustainability Standards Board to mirror the proposed establishment of the ISSB by the IFRS Trustees.

Any re-consideration of accounting and assurance frameworks used in Canada (e.g., IFRS^® Standards).
Ethics standards, which are the purview of the provincial CPA bodies. A review of auditor independence standard setting could be considered by the Public Trust Committee, the Independence Standing Committee and Auditing and Assurance Standards Oversight Council (AASOC) as a separate and distinct activity at a later date. The current oversight of auditor independence requirements is to be maintained and is not part of the scope of the review at this time.
Relevant securities and prudential legislation, which is the purview of securities and prudential regulatory authorities.

How best to be able to develop timely high-quality standards in the face of an accelerating pace of change.
Whether the current standard-setting structure and governance provide the most appropriate framework to meet future needs, including the setting of standards for and oversight of alternative performance measures/non-GAAP financial measures.
The extent of resources, human, and financial, needed to ensure that the standard-setting processes are performed in an efficient, expeditious, and responsible manner to meet the public interest.
The current funding model in the context of perceived independence concerns, and whether a separate legal structure might aid in addressing those concerns.
The continuing role of and relationships with regulatory authorities in any proposed structure.
How to enhance user involvement in the standard-setting process.

The recommendations of the Committee should adhere to the following guiding principles:

Standards must be developed in the public interest and subject to effective public interest oversight.
Standards must be developed using a robust process, with appropriate independence, that has regard for international standard-setting processes and includes public consultation with all relevant stakeholders.
The standard-setting boards must have adequate resources to fulfill their mandates and should be efficient and transparent in the use of those resources.

Consultation with key stakeholders, including standard-setting boards, oversight councils, CPA Canada, regulators, and users of financial (and sustainability) reporting.
Examination of global best practices.
The Committee may choose to propose preliminary findings/options for public consultation. In any event, key assessments and recommendations should be subject to public consultation, no later than 8 months after the inaugural meeting.
Presentation of the final report to the Accounting Standards Oversight Council (AcSOC), AASOC, and CPA Canada no later than 12 months after the first meeting.

The Committee is accountable to AcSOC and AASOC. The Committee Chair will liaise regularly with the Chairs of AcSOC and AASOC on its progress and will report back to AcSOC and AASOC prior to the release of any interim and final reports.
The Committee will strive for consensus in developing recommendations. Where there is not a consensus view the majority will be reflected, with an opportunity for dissenting views to be expressed.

The Committee will be comprised of six to eight members, a majority of whom shall be independent (i.e., they cannot be a member or employee of a public accounting practice or have been a member or employee of a public accounting practice within the past three years). The Chair will have a strong background in governance. The remaining members should have recognized business, legal or academic backgrounds, bringing diverse expertise, across the private sector and public sector.
The following organizations are invited to appoint an observer to the Committee:

The SVP Standards of CPA Canada will also be an observer to the Committee.

The Committee will be supported by an independent secretariat which will be responsible for research, logistics, and drafting. Two staff members of CPA Canada will provide technical support to the Committee and will report to the Committee Chair.
The Chair and members of the Committee will be appointed by the Nominating and Governance Committees of AcSOC and AASOC based on a skills matrix. The Committee is expected to meet at least monthly.
CPA Canada will support the costs of the review.