Third audit quality discussion paper issued for Canadian consultation

TORONTO, Feb. 5, 2013 /CNW/ - The role of audit committees is the focus of a third discussion paper produced for a consultation process seeking Canadian input on international discussions that could affect our financial system.

The Canadian Public Accountability Board (CPAB) and the Canadian Institute of Chartered Accountants (CICA) launched the Enhancing Audit Quality (EAQ) initiative to gain broad Canadian stakeholder input on international audit proposals.

Regulators, policy makers, and standard setters in Europe, the United States and other jurisdictions are considering changes to improve confidence in the financial system.  Audit quality is among the topics under review and audit committees are recognized as being integral to the audit process.

"Leveraging the existing strengths of Canadian audit committees provides significant opportunities to improve the quality of the audit process and, as a result, the reliability of financial reporting," explains David Brown, chair of the EAQ Steering Group. "It is essential that we hear from Canadians with a stake in our sound financial system."

Brown, a Canadian lawyer and former chair of the Ontario Securities Commission, heads the independent steering group overseeing the EAQ consultation process.  The steering body, made up of senior financial leaders, provides direction to three working groups focusing on the role of the audit committee, auditor reporting and auditor independence.

"We are interested in hearing from stakeholders on whether they endorse or reject the views and recommendations contained in the discussion paper," says Brown.

Recommendations include having audit committees conduct and publicly report on periodic comprehensive reviews of the auditor engaged. This would address concerns about familiarity between audit firms and companies they audit. There is a perception that audit firms could develop an overly close relationship with clients over time, which may create a threat to independence and impede the auditor from exercising an appropriate level of professional skepticism.

Another recommendation is for such reviews to assess the effectiveness of the external auditors in fulfilling their responsibilities as a basis for recommending to the board of directors whether the auditor should be put forward for reappointment.

The comprehensive reviews would be considerably more rigorous than annual assessments of the auditor's work and carried out every five years. To facilitate the process, it is recommended that CPAB, and the audit firms it regulates, develop a protocol for increasing the information made available to audit committees about CPAB inspection findings.

Previous discussion papers on auditor reporting and auditor independence were issued in 2012. A final report reflecting the results of the consultation process will be produced and made public later this year.

More information about the consultation process can be found online at www.cica.ca/enhancingauditquality

The Canadian Public Accountability Board (CPAB) is Canada's audit regulator, dedicated to protecting the investing public's interests. CPAB regulates the auditors of Canadian public companies through its national inspection program. CPAB's risk-based inspection process focuses on key audit risks that could have the greatest impact on audit quality. By promoting high-quality, independent auditing, CPAB contributes to public confidence in the integrity of financial reporting, which supports our capital markets.

Chartered Accountants (CAs) are Canada's most valued, internationally recognized profession of leaders in senior management, advisory, financial, tax and assurance roles. Through their integrity, expertise, and internationally recognized qualification standards, Canada's 83,000 CAs sustain their influence and leadership position both in Canada and globally.  As trusted business advisors to Canadian organizations of all sizes, Canada's CAs foster confidence in Canadian business and contribute to the health and sustainability of Canada's capital markets and economy.  The Canadian Institute of Chartered Accountants (CICA) represents Canada's CA profession both nationally and internationally.  The CICA is a founding member of the International Federation of Accountants (IFAC) and the Global Accounting Alliance (GAA).

SOURCE: Canadian Institute of Chartered Accountants

For further information:

Media Contacts:

Tobin Lambie, Manager, Media
CICA
(416) 204-3228
tobin.lambie@cica.ca
www.cica.ca

Rachel Dao, Manager
CPAB
(416) 913-8262
rachel.dao@cpab-ccrc.ca
www.cpab-ccrc.ca