HomeMy WebLinkAboutFIN-2023-413 - External Audit Planning Report for Fiscal Year 2023Staff Report
Financial Services Department www.kitchener.co
REPORT TO: Audit Committee
DATE OF MEETING: September 25, 2023
SUBMITTED BY: Katie Fischer, Director, Financial Reporting and ERP Solutions, 519-741-
2200 ext. 4630
PREPARED BY: Greg Demacio, Manager, Financial Reporting and Analysis, 519-741-
2200 ext. 7895
WARD(S) INVOLVED: All
DATE OF REPORT: September 15, 2023
REPORT NO.: FIN -2023-413
SUBJECT: External Audit Planning Report for Fiscal Year 2023
RECOMMENDATION:
That the Audit Planning Report for the year ended December 31, 2023 prepared by KPMG,
attached as Attachment A to report FIN -2023-413 be approved.
REPORT HIGHLIGHTS:
The purpose of this report is to approve the 2023 audit plan, prepared by the City's external
auditors (KPMG).
The approach being proposed is consistent with previous years.
This report supports the delivery of core services.
BACKGROUND:
Item 4 (d) of the Audit Committee Terms of Reference states that one of the responsibilities of
the audit committee is to "approve external audit plans". It is important to have open
communication between the external auditor and the Audit Committee to ensure that both groups
are kept up to date on changes in the organization, changes in the accounting/regulatory
environment and their related risks.
In KPMG's proposal to serve as the External Auditor, they committed to meeting with the Audit
Committee twice annually. This is the first of those meetings for the 2023 fiscal year. A second
meeting will be held once their audit is complete to present results and offer an opportunity for
questions.
REPORT:
KPMG will present their Audit Planning Report. Please see attached document titled "The
Corporation of the City of Kitchener Audit Planning Report for the year ended December 31,
2023".
STRATEGIC PLAN ALIGNMENT:
This report supports the delivery of core services.
*** This information is available in accessible formats upon request. ***
Please call 519-741-2345 or TTY 1-866-969-9994 for assistance.
Page 3 of 66
FINANCIAL IMPLICATIONS:
None.
COMMUNITY ENGAGEMENT:
INFORM — This report has been posted to the City's website with the agenda in advance of the
council / committee meeting. It will provide the public with information to assist them in
understanding the scope of the external audit to take place in the spring of 2024. The City's
consolidated financial statements for the year ended December 31, 2023, will be the subject of
this audit.
The 2023 audited consolidated financial statements, once completed and approved, will be
posted on the City website and notice will be provided to all residents through a widely distributed
newspaper in accordance with Section 295 (1) of the Municipal Act, 2001.
PREVIOUS REPORTS/AUTHORITIES:
• Municipal Act, 2001
APPROVED BY: Jonathan Lautenbach, Chief Financial Officer, Financial Services
ATTACHMENTS:
Attachment A — The Corporation of the City of Kitchener Audit Planning Report for the
year ended December 31, 2023
Page 4 of 66
WI
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Key contacts in connection with this engagement
WIT I I
Matthew Betik
I ead AUdit Engagement IPairtineir
519-747-8245
iii
Courtney Cheal
Lead Senior Manager
519-747-8884
E� a
4ulffm'�uniE
Highlights
Risk assessment
Audit strategy
12 Key milestones and
deliverables
7 Audit strategy -
Group audit
13 Appendices
The purpose of this report is to assist you, as a member of the Audit Committee, in your review of the plan for our audit of the financial statements. This report
is intended solely for the information and use of Management, the Audit Committee, and the Board of Directors and should not be used for any other purpose
or any other party. KPMG shall have no responsibility or liability for loss or damages or claims, if any, to or by any third party as this report to the Audit
Committee has not been prepared for, and is not intended for, and should not be used by, any third party or for any other purpose.
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Page 7 of 66
�M "! E fl, 11 ri 11
CMNo matters to report 411JU Matters to report — see link for details
Our audit of the consolidated financial statements ("financial statements") of The Corporation of the City of Kitchener and its subsidiaries ("the Company") as of
and for the year, ended December 31, 2023, will be performed in accordance with Canadian generally accepted auditing standards.
cmInvolvement of others
cmUpdates to our prior year audit plan
nn
Total work performed 100% 100%
Involvement of other KPMG member firms
cmInvolvement of non -KPMG firms
Other risks of material misstatement 6 )
• Post employment benefits
• Tangible capital assets
• Obligatory reserve fund revenue and deferred revenue
• Asset retirement obligation
4
Page 8 of 66
We initially determine materiality at a level at which we consider that
misstatements could reasonably be expected to influence the
economic decisions of users. Determining materiality is a matter of
l°ri°°o( 7°riir rll i1in„/lu,y irrrr iir considering both quantitative and qualitative
factors, and is affected by our perception of the common financial
information needs of users of the financial statements as a group. We
do not consider the possible effect of misstatements on specific
individual users, whose needs may vary widely.
We reassess materiality throughout the audit and revise materiality if
we become aware of information that would have caused us to
determine a different materiality level initially.
We initially determine materiality to I irovlide a Ibasis For:
• Determining the nature, timing and extent of risk assessment procedures;
• Identifying and assessing the risks of material misstatement; and
• Determining the nature, timing, and extent of further audit procedures.
We design our procedures to detect misstatements at a level less than
materiality in individual accounts and disclosures, to reduce to an
appropriately low level the probability that the aggregate of uncorrected and
undetected misstatements exceeds materiality for the financial statements as
a whole.
We also use materiality to evaluate the effect of:
• Identified misstatements on our audit; and
• Uncorrected misstatements, if any, on the financial statements and in
forming our opinion.
5
Page 9 of 66
1�;IBE aim
EiIE' 0 M Em flE R
6
Page 10 of 66
0
Materiality
$12M
�ID
6
Page 10 of 66
Total full -scope audits due to size (City of Kitchener)
Tested through stand-alone audits (Enova Energy Corporation, Centre in the Square, Kitchener Public Library,
Kitchener Downtown BIA, Belmont BIA, and Kitchener Generation Corporation)
Total work performed on consolidated financial statements
85%
AW
97% AW
15%
1W
3% "pllllllllu""
100%
100%
7
Page 11 of 66
II'
Corporation of the City of Kitchener
City of Kitchener Gasworks Enterprise (special audit, not considered a component)
Kitchener Public Library
The Centre in the Square Inc.
Kitchener Downtown Improvement Area
Belmont Improvement Area
Enova Energy Corporation
The Trust Funds of the Corporation of the City of Kitchener (special audit, not consolidated within the City of Kitchener financial
statements
Consolidated Audit
Stand-alone Audit
Stand-alone Audit
Stand-alone Audit
Stand-alone Audit
Stand-alone Audit
Stand-alone Audit
Stand-alone Audit
8
Page 12 of 66
Our planning begins with an assessment of risks of material misstatement in your financial statements.
We draw upon our understanding of the Company and its environment (e.g. the industry, the wider
economic environment in which the business operates, etc.), our understanding of the Company's
components of its system of internal control, including our business process understanding.
I�''i'I'I�iil�i'�4V Ii'�il �II �jl'1jl I III III III III III III III III III III III III III III III III III III III III III III III III III III III III III III Ir
Management Override of Controls
0 Post employment benefits
Dose Tangible capital assets
Dose Obligatory reserve funds and deferred revenue
0 Asset retirement obligations
Significant
Elevated
✓ Base
✓ Elevated
✓ Elevated
II IM1 if FI C/t N � IFR I S K IFR I S IK O IF:IM/tFl .:A:R IVt ll... I II "'�'Yt"'�"Ilii:f llMI lf:::f IN "'� 0 0"'� 11 1 lf.DR FRISK 01F: IMA "'�"Ili.DFR 11 /t ll... IM II S"'�"/t"'�"IE.::IMl lE.::IN
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Page 13 of 66
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F11119 M01 IPLE
RISK OF
I Management Override of Controls (non -rebuttable significant risk of material misstatement) L
FRAUD
Management is in a unique position to perpetrate
fraud because of its ability to manipulate accounting
records and prepare fraudulent financial statements
by overriding controls that otherwise appear to be
operating effectively. Although the level of risk of
management override of controls will vary from entity
to entity, the risk nevertheless is present in all entities
As this presumed risk of material misstatement due to
fraud is not rebuttable, our audit methodology
incorporates the required procedures in professional
standards to address this risk. These procedures include:
• testing of journal entries and other adjustments,
• performing a retrospective review of estimates
• evaluating the business rationale of significant
unusual transactions.
10
Page 14 of 66
Lliff WRq �Ml F1 MI! up, F 1'1161
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We afire
I
footiicn orthis:due to this
Assess
the reasonableness of ass ii ; used;
d,bcestimate with siiifiont
j reicnt used �mnenertrd - . est
the reasonableness of the undeirlying data, including euTnllallo ee populations; and
manageiment's specialhists, Addifioirn lllly - We will also use the work of 1Moirndelllis Aoltnoiriioll (ooltnoiriioll consultant) In ouir audit of the
thein lis coimpllexfty of the aCCOU111fillIg Elevated accounts and disclosures
guidance,
capital assets - C:ilisotuss calm pollliolies and their o a allica lioirn with uTnoirno eu�neirn�;
sire �ooas�f this ire. pato ��o �Ih�. ��� �� _ �I. � II r�o u�ouoirn
Tangible ca � I"' II"' II'.
g cn e
"Fest o sail lalle of capital additions �to earns uire existence and accuracyof oddlil�lioirns; and
uicnlifGoicnoe of the aCCOU111t Ibllicnoes and
thein lis a risk of eriroir in liirn 1ppirolpirii telly �� - "Fest. liteul irecoirded as irepairs and uTnoliirnteirnoirnoe oar otlheir sliurrolillor accounts to earns uire
recognizing costs as elitlheir o 1plit ll oar oouTnllalleteirness of capital additions
olpeir tliirn , Base
Obligatory reserve fund revenue and - 1:::'eirfoirul stull�stoirn�live Iesfin ve olhoir e Dire allocated I liz.ed as II Ileveirnie�eue l and sIheliirn the
f�... e ouairg s �euirn reoo irn
iii o�reir
deferred revenue / airo�ea^°L� which �I�Ihe �e�rell � o Dire o:a:airo:airi�
We afire fooa Slum on this ire due to related expenditure uire Ihos Incurred; uirired; and
oh r . reeeo recognized from devellolpmeirnt _ ' � �.
� fund IS Subject to Elevated deferred ireveirn�ue account
o�reir the oolllleollioirns of de�rellollau�neirn� charges ireooirded liirn the
�.t of oru�n ,�tt �,�loirn�uve Ie,�l
judgment c ° lu 11 aro eats u�ntu�� Ilbe �
aro tlh hell ted in nature
Asset retirement li i - Review uTnoirno eul accounting Iposlillioirn oveir the inew stoirndoird and earns uire If lis
iicn on thus ire. Aero to the o a acro iri
We sire �ooat� :� :� :� � II II II 1ete and liirn oouTnllalllioirnoe with If 3tull�lllio Seoloir Accounting Stoirn�loir�ls;
new ooanicn�i . w�ellll tIhe
iicn �icn�lir�l
e�� olioicn aticnoeirluicn�� u�hliicn ��Ih�. i - �' �ou�nllalle of oll�llliol�lioirns �I�o eirns�uire �I�Ihe 000tuiroo and existence of the oll�llliol�lioirn lig
iurrnt:� "Fest o ,�
oll�llucgtioirn. ollllirollariiote;
Elevated - "Fest o soul of assets Uhot Ihave irno obllli ofloirn offoolhed to theuI to earns uire the
oouTnllalleteirness of the oveirollll obllli ofloirn; and
- Review journal eirntiriies to irecoird Initial obllli ofloirn as of tiroirnslillioirn dote
11
Page 15 of 66
0 Olif 0 0=1 IEM,111EE
Debrief prior year with management
Kick-off with management
Planning and initial risk assessment
procedures, including:
• Involvement of others
• Identification and assessment of
risks of misstatements and
planned audit response for
certain processes
Inquire of the Audit Committee,
management and others within the
Company about risks of material
misstatement
Complete group audit scoping
[IRSONY
i4l
• Obtain and update an understanding
of the Company and its environment
• Evaluate the Entity's components of
internal control, other than the
control activities component
• Perform process walkthroughs for
applicable business processes
• Identify process risk points for
applicable business processes
• Evaluate D&I of controls for business
processes (control activity
component)
• Perform interim substantive audit
procedures
• Perform site visits
• Provide update on audit: progress
• Complete year-end data extraction
and processing activities
• Perform remaining substantive audit
procedures
• Evaluate results of audit procedures,
including control deficiencies and
audit misstatements identified
• Review financial statement
disclosures
• Present audit results to the Audit
Committee and perform required
communications
• Issue audit report on financial
statements
• Closing meeting with management
• Filing date: Issue audit reports on
financial statements
1
Page 16 of 66
L I il U A q I
1
Page 18 of 66
KPMG LLP
120 Victoria Street South
Suite 600
Kitchener ON N2G OE1
Canada
Tel 519-747-8800
Fax 519-747-8811
PRIVATE & CONFIDENTIAL
Mr. Ryan Scott
Chief Procurement Officer
City of Kitchener
200 King Street West
P.O. Box 1118
Kitchener, ON N2G 4G7
December 20, 2022
The purpose of this letter is to outline the terms of our engagement for the City of
Kitchener (the "Entity"), commencing for the periods ending December 31, 2022. We
will issue reports on the financial statements of the Entity as follows:
This letter supersedes our previous letter to the Entity dated March 27, 2020.
The terms of the engagement outlined in this letter will continue in effect from period to
period, unless amended or terminated in writing. The attached Assurance Terms and
Conditions and any exhibits, attachments and appendices hereto and subsequent
amendments form an integral part of the terms of this engagement and are
incorporated herein by reference (collectively the "Engagement Letter").
Page 19 of 66
Entity
Report
Basis of
Financial
Statements
1
The Corporation of the City of
Audit
Consolidated
Kitchener
2
Kitchener Gasworks Enterprise
Audit
3
The Corporation of the City of
Audit
Kitchener Trust Funds
4
Belmont Improvement Area Board of
Audit
Management
5
Kitchener Downtown Improvement
Audit
Area Board of Management
This letter supersedes our previous letter to the Entity dated March 27, 2020.
The terms of the engagement outlined in this letter will continue in effect from period to
period, unless amended or terminated in writing. The attached Assurance Terms and
Conditions and any exhibits, attachments and appendices hereto and subsequent
amendments form an integral part of the terms of this engagement and are
incorporated herein by reference (collectively the "Engagement Letter").
Page 19 of 66
The Corporation of the City of Kitchener
kk�& December 20, 2022
FINANCIAL REPORTING FRAMEWORK FOR THE FINANCIAL STATEMENTS
The annual financial statements will be prepared and presented in accordance with
Canadian public sector accounting standards (hereinafter referred to as the "financial
reporting framework").
The annual financial statements will include an adequate description of the financial
reporting framework.
MANAGEMENT'S RESPONSIBILITIES
Management responsibilities are described in Appendix — Management's
Responsibilities.
An audit of the annual financial statements does not relieve management or those
charged with governance of their responsibilities.
AUDITOR'S RESPONSIBILITIES
Our responsibilities are described in Appendix — Auditor's Responsibilities.
If management does not fulfill the responsibilities above, we cannot complete our audit.
ADDITIONAL RESPONSIBILITIES REGARDING "OTHER INFORMATION"
"Other information" is defined in professional standards to be the financial or non-
financial information (other than the financial statements and the auditors' report
thereon) included in the "annual report". An "annual report" is defined in professional
standards to comprise a document or combination of documents. Professional
standards also indicate that:
• an annual report is prepared typically on an annual basis in accordance with law,
regulation or custom (i.e., is reoccurring)
• an annual report contains or accompanies the financial statements and the auditors
report thereon
• an annual report's purpose is to provide owners (or similar stakeholders) with
information on the Entity's:
—operations; and/or
—financial results and financial position as set out in the financial statements.
Based on discussions with management, the following are expected to meet the
definition of an "annual report" under professional standards:
• The document likely to be entitled Annual Report
Management agrees, when possible, to provide us with the final versions of the
document(s) comprising the "annual report" prior to the date of our auditors' report on
the financial statements. If that timing is not possible, management agrees to provide
us with the final versions of the document(s) comprising the "annual report" prior to the
entity's issuance so that we can complete our responsibilities required under
professional standards.
Page 20 of 66
The Corporation of the City of Kitchener
kk�& December 20, 2022
Management is responsible for the "other information". Our responsibility is to read the
"other information" and, in doing so, consider whether such information is materially
inconsistent with:
• the financial statements; or
• our knowledge obtained in the audit.
Our responsibility is also to remain alert for indications that the "other information"
appears to be materially misstated.
Our auditors' report on the financial statements, when applicable under professional
standards, will contain a separate section where we will report on this "other
information".
AUDITOR'S DELIVERABLES
Unless otherwise specified, our report(s) will be in writing and the expected content of
our report(s) are provided in Appendix — Expected Form of Report. However, there
may be circumstances in which a report may differ from its expected form and content.
In addition, if we become aware of information that relates to the information we
reported on after we have issued our report, but which was not known to us at the date
of our report, and which is of such a nature and from such a source that we would have
investigated that information had it come to our attention during the course of our
engagement, we will, as soon as practicable: (1) communicate such an occurrence to
those charged with governance; and (2) undertake an investigation to determine
whether the information is reliable and whether the facts existed at the date of our
report. Further, management agrees that in conducting that investigation, we will have
the full cooperation of the Entity's personnel. If the subsequently discovered
information is found to be of such a nature that: (a) our report would have been
affected if the information had been known as of the date of our report; and (b) we
believe that the report may have been distributed to someone who would attach
importance to the information, appropriate steps will be taken by KPMG, and
appropriate steps will also be taken by the Entity, to advise of the newly discovered
facts and the impact to the information we reported on.
INCOME TAX COMPLIANCE AND ADVISORY SERVICES
Tax compliance and advisory services are outside the scope of this letter. These
services will be subject to the terms and conditions of a separate engagement letter.
USE OF KPMG CLARA FOR CLIENTS
The terms and conditions for use of KPMG Clara for clients apply to the use of the
collaboration tool and available at
https://kcfcdocumeritstoire.blob.coire.wiridows.riet/documerits/KCfc...:teirms and condltlo
ris%20Cariada%20Jurie%2024.pdf.
FEES
The Entity and KPMG agree to a fee based on actual hours incurred at mutually
agreed-upon rates for the audit as described in our amended pricing proposal dated
November 28, 2022.
Page 21 of 66
The Corporation of the City of Kitchener
kk�& December 20, 2022
Our fees will be billed as the work progresses.
Interest on overdue invoices as described in the terms and conditions ("Fee
Arrangements") shall be 1% per month, calculated and compounded monthly (effective
annual rate of 12.683%).
We are available to provide a wide range of services beyond those outlined above
Additional services are subject to separate terms and arrangements.
We are proud to provide you with the services outlined above and we appreciate your
confidence in our work. We shall be pleased to discuss this letter with you at any time.
If the arrangements and terms are acceptable to the Entity, please sign the duplicate of
this letter in the space provided and return it to us.
Yours very truly,
4ywz�r Z,4,
Matthew Betik, CPA, CA
Partner, responsible for the engagement and its performance, and for the report that is
issued on behalf of KPMG LLP, and who, where required, has the appropriate authority
from a professional, legal or regulatory body
519-747-8245
Enclosure
cc: Audit Committee
Jonathan Lautenbach, CFO
The terms of the engagement set out are as agreed:
Ryan Scott, Chief Procurement Officer
(having the appropriate authority to engage the Entity as defined above)
22/12/22
Date (DD/MM/YY)
Page 22 of 66
The Corporation of the City of Kitchener
kk�& December 20, 2022
Appendix - Management's Responsibilities
Management acknowledges and understands that they are responsible for:
(a) the preparation and fair presentation of the financial statements in accordance with
the financial reporting framework referred to above.
(b) providing us with all information of which management is aware that is relevant to
the preparation of the financial statements ("relevant information") such as
financial records, documentation and other matters, including:
— the names of all related parties and information regarding all relationships and
transactions with related parties
—complete minutes of meetings, or summaries of actions of recent meetings for
which minutes have not yet been prepared, of shareholders, board of directors,
and committees of the board of directors that may affect the financial statements.
All significant actions are to be included in such summaries.
(c) providing us with unrestricted access to such relevant information.
(d) providing us with complete responses to all enquiries made by us during the
engagement.
(e) providing us with additional information that we may request from management for
the purpose of the engagement.
(f) providing us with unrestricted access to persons within the Entity from whom we
determine it necessary to obtain evidence.
(g) such internal control as management determines is necessary to enable the
preparation of financial statements that are free from material misstatement,
whether due to fraud or error. Management also acknowledges and understands
that they are responsible for the design, implementation and maintenance of
internal control to prevent and detect fraud.
(h) ensuring that all transactions have been recorded and are reflected in the financial
statements.
(i) providing us with written representations required to be obtained under
professional standards and written representations that we determine are
necessary. Management also acknowledges and understands that, as required by
professional standards, we may disclaim an audit opinion when management does
not provide certain written representations required.
(j) ensuring that internal auditors providing direct assistance to us, if any, will be
instructed to follow our instructions and that management, and others within the
entity, will not intervene in the work the internal auditors perform for us.
Page 23 of 66
The Corporation of the City of Kitchener
kk�& December 20, 2022
Appendix - Auditor's Responsibilities
Our function as auditors of the Entity is:
• to express an opinion on whether the Entity's annual financial statements, prepared
by management with the oversight of those charged with governance, are, in all
material respects, in accordance with the financial reporting framework referred to
above
• to report on the annual financial statements
We will conduct the audit of the Entity's annual financial statements in accordance with
Canadian generally accepted auditing standards and relevant ethical requirements,
including those pertaining to independence (hereinafter referred to as applicable
"professional standards").
We will plan and perform the audit to obtain reasonable assurance about whether the
annual financial statements as a whole are free from material misstatement, whether
due to fraud or error. Accordingly, we will, among other things:
• identify and assess risks of material misstatement, whether due to fraud or error,
based on an understanding of the Entity and its environment, including the Entity's
internal control. In making those risk assessments, we consider internal control
relevant to the Entity's preparation of the annual financial statements in order to
design audit procedures that are appropriate in the circumstances, but not for the
purpose of expressing an opinion on the effectiveness of the Entity's internal control
• obtain sufficient appropriate audit evidence about whether material misstatements
exist, through designing and implementing appropriate responses to the assessed
risks
• form an opinion on the Entity's annual financial statements based on conclusions
drawn from the audit evidence obtained
• communicate matters required by professional standards, to the extent that such
matters come to our attention, to the appropriate level of management, those charged
with governance and/or the board of directors. The form (oral or in writing) and the
timing will depend on the importance of the matter and the requirements under
professional standards
Page 24 of 66
The Corporation of the City of Kitchener
kk�& December 20, 2022
Appendix - Expected Form of Report
INDEPENDENT AUDITOR'S REPORT
To Council, inhabitants and ratepayers of The Corporation of the City of Kitchener
Opinion
We have audited the consolidated financial statements of The Corporation of the City
of Kitchener (the Entity), which comprise:
• the consolidated statement of financial position as at December 31, 2022
• the consolidated statement of operations for the year then ended
• the consolidated statement of changes in net financial assets for the year then ended
• the consolidated statement of cash flows for the year then ended
• and notes to the consolidated financial statements, including a summary of significant
accounting policies
(Hereinafter referred to as the "financial statements").
In our opinion, the accompanying financial statements present fairly, in all material
respects, the consolidated financial position of the Entity as at December 31, 2022, and
its consolidated results of operations, its consolidated changes in net financial assets
and its consolidated cash flows for the year then ended in accordance with Canadian
public sector accounting standards.
Basis for Opinion
We conducted our audit in accordance with Canadian generally accepted auditing
standards. Our responsibilities under those standards are further described in the
"Auditor's Responsibilities for the Audit of the Financial Statements" section of
our auditor's report.
We are independent of the Entity in accordance with the ethical requirements that are
relevant to our audit of the financial statements in Canada and we have fulfilled our
other ethical responsibilities in accordance with these requirements.
We believe that the audit evidence we have obtained is sufficient and appropriate to
provide a basis for our opinion.
Page 25 of 66
The Corporation of the City of Kitchener
kk�& December 20, 2022
AUDIT ENGAGEMENTS
Appendix - Expected Form of Report (continued)
Responsibilities of Management for the Financial Statements and
Those Charged with Governance
Management is responsible for the preparation and fair presentation of the
consolidated financial statements in accordance with Canadian public sector
accounting standards, and for such internal control as management determines is
necessary to enable the preparation of consolidated financial statements that are free
from material misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, management is responsible for
assessing the Entity's ability to continue as a going concern, disclosing, as applicable,
matters related to going concern and using the going concern basis of accounting
unless management either intends to liquidate the Entity or to cease operations, or has
no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Entity's
consolidated financial reporting process.
Auditor's Responsibilities for the Audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the financial
statements as a whole are free from material misstatement, whether due to fraud or
error, and to issue an auditor's report that includes our opinion.
Reasonable assurance is a high level of assurance, but is not a guarantee that an audit
conducted in accordance with Canadian generally accepted auditing standards will
always detect a material misstatement when it exists.
Misstatements can arise from fraud or error and are considered material if, individually
or in the aggregate, they could reasonably be expected to influence the economic
decisions of users taken on the basis of the financial statements.
As part of an audit in accordance with Canadian generally accepted auditing
standards, we exercise professional judgment and maintain professional skepticism
throughout the audit.
We also:
• Identify and assess the risks of material misstatement of the financial statements,
whether due to fraud or error, design and perform audit procedures responsive to
those risks, and obtain audit evidence that is sufficient and appropriate to provide a
basis for our opinion.
The risk of not detecting a material misstatement resulting from fraud is higher than
for one resulting from error, as fraud may involve collusion, forgery, intentional
omissions, misrepresentations, or the override of internal control.
• Obtain an understanding of internal control relevant to the audit in order to design
audit procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the Entity's internal control.
• Evaluate the appropriateness of accounting policies used and the reasonableness of
accounting estimates and related disclosures made by management.
Page 26 of 66
The Corporation of the City of Kitchener
kk�& December 20, 2022
AUDIT ENGAGEMENTS
Appendix - Expected Form of Report (continued)
• Conclude on the appropriateness of management's use of the going concern basis of
accounting and, based on the audit evidence obtained, whether a material
uncertainty exists related to events or conditions that may cast significant doubt on
the Entity's ability to continue as a going concern. If we conclude that a material
uncertainty exists, we are required to draw attention in our auditor's report to the
related disclosures in the financial statements or, if such disclosures are inadequate,
to modify our opinion. Our conclusions are based on the audit evidence obtained up
to the date of our auditor's report. However, future events or conditions may cause
the Entity's to cease to continue as a going concern.
• Evaluate the overall presentation, structure and content of the financial statements,
including the disclosures, and whether the financial statements represent the
underlying transactions and events in a manner that achieves fair presentation
• Communicate with those charged with governance regarding, among other matters,
the planned scope and timing of the audit and significant audit findings, including any
significant deficiencies in internal control that we identify during our audit.
E
Page 27 of 66
The Corporation of the City of Kitchener
kk�& December 20, 2022
Appendix - COVID-19 Rider
1. During the engagement, each party shall keep the other party reasonably informed
of any events which:
i. relate to the notifying party and the COVID-19 situation;
ii. are not existing or reasonably foreseeable at the date of this agreement; and
iii. which will materially and adversely affect the notifying party's ability to
perform its obligations under the engagement.
Each party will implement mitigation measures to enable the services to be
performed so far as reasonably practicable in the circumstances, including:
i. reducing travel (particularly international travel) and in-person meetings to the
minimum necessary level;
ii. at the party's premises, implementing such infection control procedures as
are recommended or required by official bodies in the applicable location;
iii. implementing internal corporate policies which permit and encourage
individual remote working, and technical systems to enable individual remote
working; and
iv. implementing telepresence, audio conference, video conference, and other
systems for collaborative working.
3. If, as a result of the global COVID-19 virus situation, performance by a party of its
obligations under the engagement are rendered impossible or impracticable, the
time for performance of such obligations shall be extended by such period as is
reasonable in the circumstances, PROVIDED THAT the party in question is
complying, and continues to comply, with its obligations pursuant to paragraphs 1
and 2 above.
10
Page 28 of 66
TERMS AND CONDITIONS FOR ASSURANCE ENGAGEMENTS
(PRIVATE COMPANY CLIENTS)
These Terms and Conditions are an integral part of the
accompanying engagement letter or proposal from KPMG that
identifies the engagement to which they relate (and collectively
form the "Engagement Letter"). The Engagement Letter
supersedes all written or oral representations on this matter. The
term "Entity" used herein has the meaning set out in the
accompanying engagement letter or proposal. The term
"Management" used herein means the management of Entity.
1. DOCUMENTS AND LICENSES.
a. All working papers, files and other internal materials created
or produced by KPMG in relation to this engagement and all
copyright and intellectual property rights therein are the property
of KPMG.
b. Only in connection with the services herein, Entity hereby
grants to KPMG a limited, revocable, non-exclusive, non-
transferable, paid up and royalty -free license, without right of
sublicense, to use all logos, trademarks and service marks of
Entity solely for presentations or reports to Entity or for internal
KPMG presentations and intranet sites. Further, Entity agrees
that KPMG may list Entity as a customer in KPMG's internal and
external marketing materials, including KPMG websites and
social media, indicating the general services rendered (e.g.,
"Client is an Audit, Advisory, and/or Tax client of KPMG LLP").
2. ENTITY'S RESPONSIBILITIES.
a. Entity agrees that all management responsibilities will be
performed and all management decisions will be made by Entity,
and not by KPMG.
b. Entity's provision of documents and information to KPMG on
a timely basis is an important factor in our ability to issue any
reports under this Engagement Letter. KPMG is not responsible
for any consequences arising from Entity's failure to deliver
documents and information as required.
c. To the extent that KPMG personnel are on Entity's premises,
Entity will take all reasonable precautions for their safety.
d. Entity understands and acknowledges that KPMG's
independence may be impaired if any KPMG partner, employee
or contractor accepts any offer of employment from Entity.
e. Except as required by applicable law or regulation, Entity
shall keep confidential the terms of this Engagement Letter, and
such confidential information shall not be distributed, published
or made available to any other person without KPMG's express
written permission.
f. Management agrees to promptly provide us with a copy of
any comment letter or request for information issued by any
securities or other regulatory authority in respect of information
on which KPMG reported, including without limitation any
continuous disclosure filings.
3. FEE ARRANGEMENTS.
a. KPMG's estimated fee is based in part on the quality of
Entity's records, the agreed-upon level of preparation and
assistance from Entity's personnel, and adherence by Entity to
the agreed-upon timetable. KPMG's estimated fee also assumes
that Entity's financial statements and/or other financial
information, as applicable, are prepared in accordance with the
relevant financial reporting framework or the relevant criteria, as
applicable, and that there are no significant changes to the
relevant financial reporting framework or the relevant criteria, as
applicable; no significant new or changed accounting policies; no
significant changes to internal control; and no other significant
issues.
b. Additional time may be incurred for such matters as
significant issues, significant unusual and/or complex
transactions, informing management about new professional
standards, and any related accounting advice. Where these
matters arise and require research, consultation and work
beyond that included in the estimated fee, Entity and KPMG
agree to revise the estimated fee. Our professional fees are also
subject to an additional charge to cover information technology
infrastructure costs and administrative support of our client
service personnel. Disbursements for items such as travel,
accommodation and meals will be charged based on KPMG's
actual disbursements.
c. KPMG's invoices are due and payable upon receipt.
Amounts overdue are subject to interest. In order to avoid the
possible implication that unpaid fees might be viewed as creating
a threat to KPMG's independence, it is important that KPMG's
bills be paid promptly when rendered. If a situation arises in
which it may appear that KPMG's independence is threatened
because of significant unpaid bills, KPMG may be prohibited
from signing any applicable report and/or consent.
d. Fees for any other services will be billed separately from the
services described in this Engagement Letter and may be
subject to written terms and conditions supplemental to those in
the Engagement Letter.
e. Canadian Public Accountability Board ("CPAB") participation
fees, when applicable, are charged to Entity based on the annual
fees levied by CPAB.
4. USE OF MEMBER FIRMS AND THIRD PARTY SERVICE
PROVIDERS; STORAGE AND USE OF INFORMATION.
a. KPMG is a member firm of the KPMG International
Cooperative ("KPMG International"). Entity acknowledges that in
connection with the provision of services hereunder, KPMG may
use the services of KPMG International member firms, as well as
other third party service providers or subcontractors, and KPMG
shall be entitled to share with them all documentation and
information related to the engagement, including Entity's
confidential information and personal information ("information").
KPMG may also: (i) directly, or using such aforementioned
KPMG International member firms, third party service providers
or subcontractors, perform data analytics in respect of the
information; and (ii) retain and disclose to KPMG International
member firms the information to share best practices or for
knowledge sharing purposes. In all such cases, such information
may be used, retained, processed, or stored outside of Canada
by such KPMG International member firms, other third party
service providers or subcontractors, and may be subject to
disclosure in accordance with the laws applicable in the
jurisdiction in which the information is used, retained, processed
or stored, which laws may not provide the same level of
protection for such information as will Canadian laws. KPMG
represents that such KPMG International member firms, other
third party service providers or subcontractors have agreed or
shall agree to conditions of confidentiality with respect to Entity's
confidential information, and that KPMG is responsible to ensure
their compliance with those conditions. Any services performed
by KPMG International member firms or other third party service
providers or subcontractors shall be performed in accordance
with the terms of this Engagement Letter, but KPMG remains
TERMS AND CONDITIONS FOR ASSURANCE ENGAGEMENTS - PRIVATE COMPANY CLIENTS
MAY 2018
11
Page 29 of 66
TERMS AND CONDITIONS FOR ASSURANCE ENGAGEMENTS
(PRIVATE COMPANY CLIENTS)
solely responsible to Entity for the delivery of the services
hereunder. Entity agrees that any claims that may arise out of
the engagement will be brought solely against KPMG, the
contracting party, and not against any other KPMG International
member firms or other third party service providers or
subcontractors referred to above.
b. Certain information (including information relating to time,
billing and conflicts) collected by KPMG during the course of the
engagement may be used, retained, processed and stored
outside of Canada by KPMG, KPMG International member firms
or third party service providers or subcontractors providing
support services to KPMG for administrative, technological and
clerical/organizational purposes, including in respect of client
engagement acceptance procedures and maintaining
engagement profiles; and to comply with applicable law,
regulation or professional standards (including for quality
performance reviews). Such information may be subject to
disclosure in accordance with the laws applicable in the
jurisdiction in which the information is used, retained, processed
or stored, which laws may not provide the same level of
protection for such information as will Canadian laws. KPMG
may also share information with its legal advisers and insurers
for the purposes of obtaining advice.
c. Entity acknowledges that KPMG aggregates anonymous
information from sources including the Entity for various
purposes, including to monitor quality of service, and Entity
consents to such use. KPMG may also use Entity's information
to offer services that may be of interest to Entity.
5. PERSONAL INFORMATION CONSENTS AND NOTICES.
KPMG may be required to collect, use and disclose personal
information about individuals during the course of the
engagement. Any collection, use or disclosure of personal
information is subject to KPMG's Privacy Policy available at
�N,ynur ,,,,.Lr�,in ¢1,,.22.. Entity represents and warrants that (i) it will
obtain any consents required to allow KPMG to collect, use and
disclose personal information in the course of the engagement,
and (ii) it has provided notice to those individuals whose
personal information may be collected, used and disclosed by
KPMG hereunder of the potential processing of such personal
information outside of Canada (as described in Section 4 above).
KPMG's Privacy Officer noted in KPMG's privacy policy is able to
answer any individual's questions about the collection of
personal information required for KPMG to deliver services
hereunder.
6. THIRD PARTY DEMANDS FOR DOCUMENTATION AND
INFORMATION / LEGAL AND REGULATORY
PROCESSES.
a. Entity on its own behalf hereby acknowledges and agrees to
cause its subsidiaries and affiliates to acknowledge that KPMG
or a foreign component auditor which has been engaged in
connection with an assurance engagement ("component
auditor") may from time to time receive demands from a third
party (each, a "third party demand"), including without limitation
(i) from CPAB or from professional, securities or other regulatory,
taxation, judicial or governmental authorities (both in Canada
and abroad), to provide them with information and copies of
documents in KPMG's or the component auditor's files including
(without limitation) working papers and other work -product
relating to the affairs of Entity, its subsidiaries and affiliates, and
(ii) summons for production of documents or information related
to the services provided hereunder; which information and
documents may contain confidential information of Entity, its
subsidiaries or affiliates. Except where prohibited by law, KPMG
or its component auditor, as applicable, will advise Entity or its
affiliate or subsidiary of the third party demand. Entity
acknowledges, and agrees to cause its subsidiaries and affiliates
to acknowledge, that KPMG or its component auditor, as
applicable, will produce documents and provide information in
response to the third party demand, without further authority from
Entity, its subsidiaries or affiliates.
b. KPMG will use reasonable efforts to withhold from
production any documentation or information over which Entity
asserts privilege. Entity must identify any such documentation or
information at the time of its provision to KPMG by marking it as
"privileged". Notwithstanding the foregoing, where disclosure of
such privileged documents is required by law, KPMG will
disclose such privileged documents. If and only if the authority
requires such access to such privileged documents pursuant to
the laws of a jurisdiction in which express consent of Entity is
required for such disclosure, then Entity hereby provides its
consent.
c. Entity agrees to reimburse KPMG for its professional time
and any disbursements, including reasonable legal fees and
taxes, in responding to third party demands.
d. Entity waives and releases KPMG from any and all claims
that it may have against KPMG as a result of any disclosure or
production by KPMG of documents or information as
contemplated herein.
e. Entity agrees to notify KPMG promptly of any request
received by Entity from any third party with respect to the
services hereunder, KPMG's confidential information, KPMG's
advice or report or any related document.
7. CONNECTING TO THE ENTITY'S IT NETWORK; EMAIL
AND ONLINE FILE SHARING AND STORAGE TOOLS.
a. Entity authorizes KPMG personnel to connect their
computers to Entity's IT Network and the Internet via the Network
while at the Entity's premises for the purpose of conducting
normal business activities.
b. Entity recognizes and accepts the risks associated with
communicating electronically, and using online file sharing,
storage, collaboration and other similar online tools to transmit
information to or sharing information with KPMG, including (but
without limitation) the lack of security, unreliability of delivery and
possible loss of confidentiality and privilege. Entity assumes all
responsibility or liability in respect of the risk associated with the
use of the foregoing, and agrees that KPMG is not responsible
for any issues that might arise (including loss of data) as a result
of Entity using the foregoing to transmit information to or
otherwise share information with KPMG and, in the case of
online tools other than email, KPMG's access to and use of the
same in connection with obtaining Entity information and
documents.
8. LIMITATION ON WARRANTIES.
THIS IS A SERVICES ENGAGEMENT. KPMG WARRANTS
THAT IT WILL PERFORM SERVICES HEREUNDER IN GOOD
FAITH WITH QUALIFIED PERSONNEL IN A COMPETENT
AND WORKMANLIKE MANNER IN ACCORDANCE WITH
APPLICABLE INDUSTRY STANDARDS. SUBJECT TO
TERMS AND CONDITIONS FOR ASSURANCE ENGAGEMENTS - PRIVATE COMPANY CLIENTS
MAY 2018
12
Page 30 of 66
TERMS AND CONDITIONS FOR ASSURANCE ENGAGEMENTS
(PRIVATE COMPANY CLIENTS)
SECTION 14, KPMG DISCLAIMS ALL OTHER WARRANTIES,
REPRESENTATIONS OR CONDITIONS, EITHER EXPRESS
OR IMPLIED, INCLUDING, WITHOUT LIMITATION,
WARRANTIES, REPRESENTATIONS OR CONDITIONS OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR
PURPOSE.
9. LIMITATION ON LIABILITY AND INDEMNIFICATION
a. Subject to Section 14: (i) Entity agrees that KPMG shall not
be liable to Entity for any actions, damages, claims, fines,
penalties, complaints, demands, suits, proceedings, liabilities,
costs, expenses, or losses (collectively, "Claims") in any way
arising out of or relating to the services performed hereunder for
an aggregate amount in excess of the lesser of one million
dollars ($1,000,000) or two times the fees paid by Entity to
KPMG under the engagement; and (ii) on a multi -phase
engagement, KPMG's liability shall be based on the amount
actually paid to KPMG for the particular phase that gives rise to
the liability.
b. Subject to Section 14, in the event of a Claim by any third
party against KPMG that arises out of or relates to the services
performed hereunder, Entity will indemnify and hold harmless
KPMG from all such Claims, including, without limitation,
reasonable legal fees, except to the extent finally determined to
have resulted from the intentional, deliberate or fraudulent
misconduct of KPMG.
c. Subject to Section 14: (i) in no event shall KPMG be liable
for consequential, special, indirect, incidental, punitive or
exemplary damages, liabilities, costs, expenses, or losses
(including, without limitation, lost profits and opportunity costs);
(ii) in any Claim arising out of the engagement, Entity agrees that
KPMG's liability will be several and not joint and several; and (iii)
Entity may only claim payment from KPMG of KPMG's
proportionate share of the total liability based on degree of fault.
d. For purposes of this Section 9, the term KPMG shall include
its subsidiaries, its associated and affiliated entities and their
respective current and former partners, directors, officers,
employees, agents and representatives. The provisions of this
Section 9 shall apply regardless of the form of Claim, whether in
contract, statute, tort (including, without limitation, negligence) or
otherwise.
10. CONSENT TO THE USE OF THE KPMG NAME OR KPMG
REPORT.
Except as otherwise specifically agreed in this Engagement
Letter, KPMG does not consent to:
i. the use of our name or our report in connection with
information, other than what we have reported on as part of this
engagement letter or our report thereon, that contains,
incorporates by reference, or otherwise accompanies our report
or our name;
ii. the use of our report in another language, or the use of our
report in connection with information that we reported on that has
been translated into another language, or the use of our name in
connection with information that we reported on that has been
translated into another language;
iii. the use of our report in connection with an offering
document or other securities filing, including continuous
disclosure filings; or
iv. the use of our name or our report in connection with the
interim financial statements (or other interim financial
information) to any statement by the Entity regarding the services
that we provided on the interim financial statements or other
interim financial information.
Any communication, report, statement or conclusion on the
interim financial statements may not be included in, or otherwise
referred to in any public document or public oral statements
except when the interim review conclusion contains a modified
conclusion, in which case our interim review report will
accompany the interim financial statements.
If the Entity wishes to obtain KPMG's consent regarding the
matters above or other matters not otherwise specifically
covered by this Engagement Letter, we will be required to
perform procedures as required by applicable professional
standards, and such procedures would be a separate
engagement and subject to separate engagement terms.
11. ALTERNATIVE DISPUTE RESOLUTION.
Any dispute or claim between the parties arising under or relating
to this Engagement Letter or the services provided hereunder
(the "Dispute") shall be submitted to non-binding mediation. If
mediation is not successful within 90 days after the issuance by
a party of a request for mediation, then the Dispute shall be
referred to and finally resolved by arbitration under the Arbitration
Rules of the ADR Institute of Canada in force at that time. The
Seat of Arbitration shall be the province where KPMG's principal
office performing this engagement is located. The language of
the arbitration shall be English. The Arbitral Tribunal shall be
made up of a single Arbitrator. The arbitration award shall be
final, conclusive and binding upon the parties, and not subject to
appeal.
12. POTENTIAL CONFLICTS OF INTEREST.
a. KPMG is or may be engaged by entities and individuals
who have potentially conflicting legal and business interests to
Entity. Entity agrees that, without further notice or disclosure to
Entity, KPMG may: (i) accept or continue such engagements on
matters unrelated to KPMG's engagement for Entity; and (ii)
provide advice or services to any other person or entity making a
competing bid or proposal to that of Entity whether or not KPMG
is providing advice or services to Entity in respect of Entity's
competing bid or proposal.
b. In accordance with professional standards, KPMG will not
use any confidential information regarding Entity in connection
with its engagements with other clients, and will establish
confidentiality and other safeguards to manage conflicts, which
may include, in KPMG's sole discretion, the use of separate
engagement teams and data access controls.
C. In no event shall KPMG be liable to Entity, or shall Entity be
entitled to a return of fees or disbursements, or any other
compensation whatsoever as a result of KPMG accepting or
continuing a conflicting engagement in accordance with the
terms of this Engagement Letter.
d. Entity agrees that KPMG may, in its sole discretion,
disclose the fact and nature of its engagement for Entity to (i)
KPMG International member firms to inform conflict searches,
and (ii) to the extent reasonably required in order to obtain the
consent of another entity or individual in order to permit KPMG to
act for such entity or individual, or for Entity, in connection with
the engagement or any future engagement.
e. In the event that circumstances arise that place KPMG into
a conflict of interest as between Entity and a pre-existing client,
TERMS AND CONDITIONS FOR ASSURANCE ENGAGEMENTS - PRIVATE COMPANY CLIENTS
MAY 2018
13
Page 31 of 66
NDITIONS FOR ASSURANCE
TERMS AND CORIVATE COMPANY CLNTS) ENGAGEMENTS
which in KPMG's sole opinion cannot be adequately addressed
through the use of confidentiality and other safeguards, KPMG
shall be entitled to immediately terminate the engagement with
Entity, without liability.
f. Other KPMG International member firms are or may be
engaged by entities and individuals who have potentially
conflicting legal and business interests to Entity. Entity agrees
that (i) it will not assert that other KPMG International member
firms are precluded from being engaged by those other entities
or individuals, and (ii) those engagements of other KPMG
International member firms do not conflict with KPMG's
engagement for Entity.
13. LOBBYING.
Unless expressly stated in this Engagement Letter, KPMG will
not undertake any lobbying activity, as that term is defined in all
applicable federal, provincial and municipal lobbyist registration
statutes and regulations, in connection with the engagement. In
the event that KPMG and Entity agree that KPMG will undertake
lobbying activity in connection with the engagement, such
agreement shall be set out in an amendment to this Engagement
Letter.
14. SEVERABILITY.
The provisions of these Terms and Conditions and the
accompanying proposal or engagement letter shall only apply to
the extent that they are not prohibited by a mandatory provision
of applicable law, regulation or professional standards. If any of
the provisions of these Terms and Conditions or the
accompanying proposal or engagement letter are determined to
be invalid, void or unenforceable, the remaining provisions of
these Terms and Conditions or the accompanying proposal or
engagement letter, as the case may be, shall not be affected,
impaired or invalidated, and each such provision shall remain
valid and in effect and be enforceable and binding on the parties
to the fullest extent permitted by law.
15. GOVERNING LAW.
This Engagement Letter shall be subject to and governed by the
laws of the province where KPMG's principal office performing
this engagement is located (without regard to such province's
rules on conflicts of law).
16. LLP STATUS.
KPMG is a registered limited liability partnership ("LLP")
established under the laws of the Province of Ontario and, where
applicable, has been registered extra -provincially under
provincial LLP legislation.
17. INDEPENDENT LEGAL ADVICE
Entity agrees that it been advised to retain independent legal
advice at its own expense prior to signing this Engagement
Letter (including without limitation with respect to Entity's rights in
connection with potential future conflicts) and agrees that any
failure on its part to retain such independent legal counsel shall
not affect (and it shall not assert that the same affects) the
validity of the provisions of this Engagement Letter.
18. SURVIVAL.
All sections hereof other than Section 7(a) shall survive the
expiration or termination of the engagement.
TERMS AND CONDITIONS FOR ASSURANCE ENGAGEMENTS - PRIVATE COMPANY CLIENTS
MAY 2018
14
Page 32 of 66
L,10=111'I ;'I, I M,15n
The reports available through the following links were published by the Canadian Public Accountability Board to inform Audit Committees and other stakeholders about the
results of quality inspections conducted over the past year:
• CIPAB Audit Quality_Ilii iii ha � I����i $ Q� �_�imimuu��ll_Ilim ���a aii�im � Ike su�ullt s
• CIPAI Au.udiit Qu.ualliit l insic Ilhts IPe ort: 2022 Ilinteriiinn Ilns eGtiions lResu.ullts
• CIPAB Audit Quality_Ilii iii ha � I����i $ Q� �imimuu��ll_Ilim ���a aii�im � Ike su�ullt s
15
Page 33 of 66
Streamlined client experience
te And deeper insights into your business, translating
to a better audit experience.
S e Cf, ,,,,,III III''e
nn A secure client portal provides centralized, efficient
coordination with your audit team.
Ill 11 teIII III iii II t work-fillow
An intelligent workflow guides audit teams through
the audit.
o06 increased rIN IN I
Advanced data analytics and automation facilitate a
risk-based audit approach, increasing precision and
reducing your burden.
1
Page 34 of 66
�il I RM I I' a EM
Quality essentially means doing the right thing and remains our highest
priority. Our Global Quality Framework outlines how we deliver quality
and how every partner and staff member contributes to its delivery.
iIt4IIlliii ylingag&iii °iiciiin sits at the core along with our commitment
to continually monitor and remediate to fulfil on our quality drivers.
Our quaIIIIII-ty vallle dirliveirs are the cornerstones to our approach
underpinned by the sulp1poirtiling dirliveirs and give clear direction to
encourage the right behaviours in delivering audit quality.
ILII2 0 � � � A � f � � � i ����� l � f ���� ,� � ' �d II ...
I1- •',- • • •- �• • w
audits are executed consistently, in line with the requirements and intent of
applicable professional stan•. • • • system of quality management;
'W
all of our related activities are undertaken in an environment of the utmost level of
objectivity, independence, ethics and integrity.
17
Page 35 of 66
The objective of these measures is to provide more in-depth information about factors that influence audit quality within an audit process. Below are the AQIs that we have agreed
with management are relevant for the audit. We would like to obtain agreement of the Audit Committee that these are the relevant AQIs.
We ill communicate a status of the below AQlsannual basis.
K Team composition
ILxlpeiriience of the teairn
• Role — number of years experience in the
industry, number of years on this
engagement
EKTechnology in the audit 0 WE Engagement hours
Ilirmlpllerneintatiion of Techinollo y in the Audiit
• Increase in use of technology in the audit
year over year
Timing of prepared by Quality reviews
client (PBC) items FA
Tiiirmelliiness of II3II C iterns;
• Number of timely and overdue items received
by the audit team.
Results of iinteirinall aind external ireviiews
• Number and nature of findings specific to the
audit engagement
Hours spent by Ilevell aind (phase
of tlhne and it
Number and percentage of hours incurred by
Partner by significant risk
Number and percentage of hours incurred by
Senior Managers and Managers by significant
risk
Number and percentage of hours incurred by
audit staff and seniors by significant risk
• Number and percentage of hours incurred by
professionals with specialized skills by
significant risk
Nothing to report ° ,� Some matters to report Specific matters to report
18
Page 36 of 66
(F:Zevr ed) Quality
ImaIC'nageIC1CneIC'n$ for an
audit of fiilrn lrncu 11
statements
ISA 600/CAS 600
'1111M] i
:u°ug ug eii"ung^uu� giii..0 ullli y
reviews
19
Page 37 of 66
L I fl 0 ft 1?01 1L11*1 I 1FOIKKII! I al I 1LIEsleol 11i rol tip
Asset retirement . The new standard IPS 3280 Asset retirement obligations lis effective for fiscal) years Ibeglirnrnlirng on oir after Apirill 'I , 2022,
obligations . The new standard addiresses the irecogrnlitliorn, meaSUireiment, presentation and diSdIOSUire of Ilegall oUligations associated with iretliiremeirnt oftangiUle capitall
assets. IRetliiremeirnt costs wil1l1 Ibe irecogrnlized as an lirntegirall cost of owning and opeirating tangiUle capitall assets,
. The asset iretliiremeirnt oUligations ("ARO") standard Ml1l1 iregUiire the IPaublllic sector entity to irecoird a tiabillity irellated to future costs ofany Ilegall oUligations to
�be liicncUrred UlPOIII reflireiment of any contir6llled tangiUle capitall assets ("TCA"). The alMOL1111t of the lirnlitliall tiabillitywil1l1 Ibe added to the Ilnlistoiriicall cost of tune
asset and aimoirtized over litS Usefdl tife lif the asset lis lirn Iproductlive Use,
. As a iresullt of the new standard, the IPLIUllic sector entity will[:
• Consider Ihow the addifioii4l tiabillity wil1l1 limlpact net debt, as a new tiabillity wil1l1 Ibe irecogrnlized with no corresponding lirncirease lirn a finainciall asset;
• Cairefdllly ireviiew Ilegall agireeiments, senioir government directives and Ileglisllatliorn lirn irellatliorn to altl contir6llled TCA to determine lif any Ilegall oUligations
exist with ireslpect to asset reflireiments;
• Begin considering the Ipoterntliall effects on the organization as soon as Ipossliblle to coordinate with resources Outside the finance depairtiment to liderntlify
ARO and obtain lirnformatliorn to estimate the vakie of Ipoterntliall ARO to avoid Unexpected lissUes.
Financial . The new standards PS 3450 Financial instruments, PS 2601 Foreign currency translation, PS 1201 Financial statement presentation and PS 3041
instruments and Portfolio investments are effective for fiscal years beginning on or after April 1, 2022.
foreign currency . Equity instruments quoted in an active market and free-standing derivatives are to be carried at fair value. All other financial instruments, including bonds,
translation can be carried at cost or fair value depending on the public sector entity's choice and this choice must be made on initial recognition of the financial
instrument and is irrevocable.
. Hedge accounting is not permitted.
. A new statement, the Statement of Remeasurement Gains and Losses, will be included in the financial statements. Unrealized gains and losses incurred
on fair value accounted financial instruments will be presented in this statement. Realized gains and losses will continue to be presented in the statement
of operations.
. PS 3450 Financial instruments was amended subsequent to its initial release to include various federal government narrow -scope amendments.
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Revenue • The new standard PS 3400 Revenue is effective for fiscal years beginning on or after April 1, 2023.
• The new standard establishes a single framework to categorize revenue to enhance the consistency of revenue recognition and its measurement.
• The standard notes that in the case of revenue arising from an exchange transaction, a public sector entity must ensure the recognition of revenue aligns
with the satisfaction of related performance obligations.
• The standard notes that unilateral revenue arises when no performance obligations are present, and recognition occurs when there is authority to record
the revenue and an event has happened that gives the public sector entity the right to the revenue.
Purchased • The new Public Sector Guideline 8 Purchased intangibles is effective for fiscal years beginning on or after April 1, 2023 with earlier adoption permitted.
Intangibles • The guideline allows public sector entities to recognize intangibles purchased through an exchange transaction. The definition of an asset, the general
recognition criteria and GAAP hierarchy are used to account for purchased intangibles.
• Narrow scope amendments weire made to IPS °1000 Financial staterrnent concepts to remove the Ipirolhlilbitliorn to recognize IpUrchased lirntarngliblles and to IPS
°1201 Financial staterrnent presentation to remove the irerlauliirerrnernt to dliscllose IpUrchased lirntarngliblles not recognized,
• The gL lidelllirne can lite aplpallied iretiroactlivelly oir Ipiroslpectlivelly.
Public Private • Fhe knew staicndaird ICPS 3°180 Public private partner"stnips lis ettectlive Moir fiscal) yeairs libegliicnicnliicng oicn oir afteir Al airiill °1, 2023..
Partnerships • The starndaird liicnclludes new irerluliire meirnts for the irecogirnlitlioirn, measuire men t and cllasslificatliorn of lirntrastrauctuire (procured through a IPublllic I airiivate
painirneirsIhlilp.
• The standard motes that recognition of lirntrastructuire liby the IPaublllic sector entity wound occur when lit corntrolls the IpUrlpose and use of the lirntrastrUCtUire,
when lit corntirolls access and the Ipiriice, lit any, charged for use, and lit corntirolls any significant lirnteirest accumullated in the liirntlrastirUCtUire when the IPaublllic
piriivate Ipairtirneirslhlilp ends,
• The IPaublllic sector entity recognizes a Illialbilllity when lit needs to Ipay cash or non-cash consideration to the Ipriivate sector Ipairtrner for the lirntrastructuire,
• The lirntrastrnuctUre wound lite vallued at cost, which represents fair vallue at the date of recognition with a Illialbilllity of the same amouicnt lit one exlists. Cost
wound lite rrneasured in reference to the IPaublllic Ipiriivate Ipairtirneirslhlilp I airocess and agreement, oir liby dliscouicntliicng the expected cash flows liby a dliscouirnt irate
that reflects the time vallue of money and irisks slpeclific to the Iproject.
• The starndaird can lite aplpallied iretiroactlivelly oir Ipiroslpectlivelly.
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Concepts . The Trevised concelPtL41 fraimework lis effective for fisc ll year beginning on oir afteirApirill '1, 2026 with eaiHier adoption permitted,
Underlying . The fraimework Ipirovides the coin concepts and objectives UndeiHying Canadian IPaulWlllic sector aCCOL1111fillIg standards,
Financial . The ten chapteir conce�PtL41 fraimework defines and 61aboirates on the characteristics Of PdWhic sector enfifies and their finandia�l repoirting objectives,
Performance Addifioii4l liirnformation lis Ipirovided abOLA finandiall statement objectives, qL41hitafive chair acteirisdice and 61eiments, Gene14l irecognition and meaSUireiment
ciriteiria, and presentation concepts acre liirntrodUced.
Financial Statement - The Ipirolposed section IPS '1202 Financial staternent presentation wilH irepllace the CUrrent section IPS '1201 Financial staternent presentation, IPS '1202
Presentation Financial staternent presentation wilH applly to fisc ll ye ar lbeginning on oirafteir Apirill '1, 2026 to coindide with the adoption of the Trevised concepft4l
framework, IEaiHy adoption wilH lbe permitted,
. The Ipirolposed section liicncllaudes the f6lHowiling:
• RebcaIlio n of the net debt liirndlicatoir to lits own statement calHed the statement of net fin anbiall asset sAhiabilhifies, with the calICLflailio n of net debt refined to
eI[ISUire lits oirigiii4l meaning lis iretaiirned,
• Selpar tiirn Illiabilhifies liirnto fin anbiall Illiabilhifies and non-finanbiall Illiabilhifies,
• RestialCtUiring the statement of fin anbiall Iposition to Ipireseirnt totall assets f6lbwed lby totall Illiabilhifies,
• Changes to comimon teirminobgy Used liirn the finand4l statements, liicncllaudliirng re-naiming aCCU( MUlated SUirpklS (defidit) to net assets (Ihiabilhifies),
• �Reimova�l of the statement of ireimeaSUireiment gains (losses) with the liirnfoirmation liirnstead liirnclkided on a new statement calHed the statement ofthainges
in net assets (Ihiabilhifies), This new statement WOUld Ipireseirnt the changes liirn eadh component of net assets (Ihiabilhifies), liicnallaudliirng a new component calHed
"aCCUIMUlated otheir",
• A new Ipirovislioirn wheireby an entity cal[I Use an aimended lbUdget liirn ceirtain dirCUimstances,
• ll[IClILISli0111ofpili SClIOSaures irellatedtoiriislksaiiidLliiiceirtaliiiitliestIhatCOLIlidaffccttIheeiiitlity'sfiiiiaiiicliallIposlitlioiii,
. The IPaulWhia SeatoirACCaauicnfiicn IBoaird liS CUrrenfly d6hibeirating on feedback irecelived on exlPOSUire dirafts r6lated to the irelpoirtliirng modeL
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Employee benefits - The IPaulWlllic Sector ACCOUicnfiicn 1Board Ih iiirniifited a review of sections IPS 3250 Retif"ernent benefits and IPS 3255 Post-ernployrnent benefits, corripensated
absences and ten,nination benefits,
. The liirntention liS to Use Ipiriiirndliplles from Ilirnteirirnatior4l IPLIUllic Sector ACCOU111fillig Standard 39 Ernployee benefits tairtiirn Ipoiirnt to dev6lop the Canadian
standard,
•Given the coiiy Of liSSUes liirnwrdived andpotenfiall liirrnplllicafions of any changes that imay aii from the review of the existinUidance, the new
standards MlH Ike liirrnplleirrneirnted liirn a Mdlfi-ir6lease strategy, The furst standaird wilH Ipirovide fOiLlndafior4l gUidance, SUbseqUent standards wilH Ipirovide
addifior4l gUidance on CUirirent and eirrneir liirn iiSSUes.
• Thepiroposed section IPS 3251 Ernployee benefits wiUl irepllace the CUirirent sections IPS 3250 Retif"ernent benefits and IPS 3255 Post-ernployrnent benefits,
corripensated absences and teffTlination benefits, IIt wilH applly to fuse ll ye ar Ibegiirnirnliirng on oirafteir Apirill 'I , 2026, IEaidy adoption wiUl Ike Ipeirurrnlitted and
gUidance appIhied iretiroacfiv6ly,
• This piroposed section WOUld ireSdIt liicn IPaulUlllic sector enfifies recognizing theimpact of irevakuaIlio ns of the net defined Ibenefit Illiabilhity (asset) liirrnirrnediatelly on
the statement of film andiall Iposition, Organizations WOUld aIlso assess the fUnding statUS Of their Ipost-eirnp�loyirnent Ibenefit Ipllans to deteirimine the appiropiriate
irate for diSCOUicnfiicn Ipost-eirnp�loyirnent Ibenefit oUlhigaIlio ns,
. The IPaulWlllic Sector ACCO U111fillig Board lis liirn the Ipirocess of evakiating comments received from stakehdideirs on the expOSUire diraft,
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M I , iN it 0 1 1 ;N�
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SII' E, I 0 I 11 f!]L, I 11FJ
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