TORONTO, June 18, 2013 /CNW/ - How best to maintain auditor independence
and enhance professional skepticism are among the key recommendations
emerging from a Canadian consultation effort that examined proposed
international reforms aimed at adding value to financial reporting.
The Chartered Professional Accountants of Canada (CPA Canada) and the
Canadian Public Accountability Board (CPAB) launched the Enhancing
Audit Quality (EAQ) initiative to gain stakeholder input on
developments taking place in jurisdictions hardest hit by the financial
crisis, such as Europe and the United States.
The goal of the proposed reforms is to improve the relevance and quality
of the audit function.
Three working groups of prominent Canadian business people carried out
the EAQ effort examining questions about enhancing audit quality,
developing consultation papers and inviting comments on their analysis
and conclusions. A steering group provided oversight.
"All of the issues that the working groups examined were through the
lens of how they would affect audit quality in Canada," explained David
Brown, chair of the EAQ Steering Group. "Generally, the international
proposals have triggered timely and thoughtful analysis and debate
among investors, auditors, regulators and standards setters globally."
The three working groups each addressed a specific focus area: the
auditor reporting model, auditor independence and the role of audit
committees in external auditor oversight.
"The single most contentious issue addressed in the report is the
potential threat of a lack of audit firm independence from an
institutional perspective," said Brown, a Canadian lawyer and former
chair of the Ontario Securities Commission. International regulators
have suggested a number of remedies ranging from subjecting audit firms
to term limits to calling for mandatory retendering of audits.
"The conclusions of the EAQ initiative are that mandatory audit firm
rotation or mandatory retendering are not the best approaches," noted
Brown. "The preferred approach is having audit committees perform a
periodic review of their audit firm at least every five years,
resulting in a recommendation to retain or replace the audit firm. A
report summarizing the results of the comprehensive review should then
be included in an entity's public disclosures which would strengthen
It is noteworthy that other jurisdictions are now beginning to explore
the benefits of the Canadian suggested comprehensive review. Such
reviews would go beyond assessing independence threats to also focus on
issues such as the application of auditor skepticism with the aim of
enhancing audit quality. The overriding benefit is that audit
committees can use the comprehensive review to support their ongoing
oversight of the external auditor with the best interest of
shareholders in mind.
It was also felt that the audit committee's evaluation of auditors would
benefit from having increased information about CPAB's inspection
findings. CPAB's current annual report includes summary information
about the results of audit firm inspections. Providing access to
relevant CPAB inspection findings will support audit committee
oversight and evaluation of auditors.
The final EAQ report with its conclusions and recommendations, along
with additional materials, are available on online (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.
About CPA Canada
CPA Canada is the national organization representing the Chartered
Professional Accountant (CPA) profession in Canada. The Canadian
Institute of Chartered Accountants (CICA) and The Society of Management
Accountants of Canada (CMA Canada) created the organization on January
1, 2013, to support unification of the Canadian accounting profession
under the CPA banner. CPA Canada is responsible for providing services
to CAs and CMAs on behalf of CICA and CMA Canada as well as to CPAs and
CGAs participating in the unification effort. CPAs will serve the
public interest across all sectors of the economy with integrity, sound
ethical practices, disciplined regulation and proven strategic
management and financial expertise. Accounting bodies representing
almost 90 per cent of Canada's professional accountants are committed
to unification or have already merged under the CPA banner.
Image with caption: "A final report has been issued as part of the Enhancing Audit Quality initiative launched by the Chartered Professional Accountants of Canada and the Canadian Public Accountability Board. The consultation process led to a number of conclusions and recommendations relating to international audit reform proposals. (CNW Group/CPA Canada)". Image available at: http://photos.newswire.ca/images/download/20130618_C8867_PHOTO_EN_28097.jpg
Image with caption: "David Brown chaired the steering group that oversaw the Enhancing Audit Quality (EAQ) initiative launched by the Chartered Professional Accountants of Canada and the Canadian Public Accountability Board. Brown is a Canadian lawyer and former chair of the Ontario Securities Commission. The EAQ consultation process led to a number of conclusions and recommendations relating to international audit reform proposals. (CNW Group/CPA Canada)". Image available at: http://photos.newswire.ca/images/download/20130618_C8867_PHOTO_EN_28095.jpg
SOURCE: CPA Canada
For further information:
Tobin Lambie, Principal, Media
Rachel Dao, Manager