Sunday News Roundup 22.10.02: Audit regulation, the power to compel, and more Canadian accounting news

Wrapping up the odds and ends from the past week in Canadian accounting news

Oct 2, 2022 Author: Canadian Accountant

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TORONTO, October 2, 2022 – Last week we looked at the Ontario Securities Commission and its plan to make “targeted inquiries” to public accounting firms about their ethics. This past Wednesday, Ontario’s accounting regulator issued a press release, CPA Ontario Addressing Audit Quality Concerns. The statement refers to actions taken by regulators both inside and outside Canada.

The press release is short on detail. CPA Ontario notified accounting firms “earlier this month” (September) that it was undertaking a national review following a “recommendation” for a national assessment of quality management systems. There’s a reference to CPA Ontario’s practice inspection report (which refers to ethics once), its continuing professional development program, and some boilerplate key messaging around audit quality.

When the Public Accountants Council was disbanded in 2021, following the national merger of the three accounting designations, its functions were transferred to Chartered Professional Accountants of Ontario. The provincial regulator is an outlier in the regulatory world, as the trend both globally and provincially has been a gradual shift away from the self-regulatory model of professions, which many experts say lost the trust of the public.

Most provincial regulatory bodies focus on standards enforcement and do not provide professional development nor advocacy on behalf of their profession or registrants. (Even the word “member” has fallen out of favour in the regulatory world and is being replaced by “registrant.”) Those functions are typically seen as the purview of associations.

Further, Ontario has undertaken a “governance modernization” drive, that intends to eliminate the election of registrants to councils. A seat at the governance table will be based on the competencies of appointees in the future. Bottom line, CPA Ontario is an outlier in the regulatory world, when compared to other professions such as doctors, lawyers and teachers.

And now, on to the rest of the news from the past week in Canadian accounting.

Court upholds CRA’s power to compel audit information

Everyone knows that accountants don’t have the same client privilege of confidentiality as lawyers. But that doesn’t stop firms from occasionally testing the limits. Zeifmans LLP, an Ontario accounting firm working for the wealthy Ghermezian family of Alberta mega mall fame, lost a decision this past week in the Federal Court of Appeal.

The firm basically argued that the Canada Revenue Agency needed judicial authorization to compel information related to its clients. (A simplification, to be sure, but David Rotfleisch provides the details here.) The FCA rejected the argument “substantialy” and dismissed the appeal with costs. We predict that, since the battle between the two sides have been going on for years, this will not be the last we hear of legal action.

Meanwhile, according to Canadian Lawyer, two dual citizens of Canada and the US lost an FCA tax decision, in FCA upholds validity of provisions implementing Foreign Account Tax Compliance Act in Canada.

BC Supreme Court dismisses accountant’s wrongful dismissal suit

A BC accountant’s fight against wrongful dismissal has come to end. The provincial Supreme Court ruled this past week that the senior manager of a property management firm, who had declined to get vaccinated against COVID-19, did not have a case against her employer’s mandatory vaccination policy. The accountant was not an anti-vaxxer and was apparently a good employee but disagreed with the mandatory unpaid leave of absence for non-compliance.

Retired accountant loses life in tropical storm Fiona

Condolences to the family of Larry Smith, 81, who was likely swept out to sea during the tropical storm Fiona. Smith was a chartered professional accountant and a former associate professor at Dalhousie University. He lived alone on Hennesseys Island, off the coast of Newfoundland, where he had lived for 30 years, and was experiencing dementia.

Meanwhile, the CRA is extending the due date for corporate tax returns, trust income tax returns and GST and HST returns by a month in the Atlantic provinces and Quebec's Iles-de-la-Madeleine, according to the National Observer.

The China Files: US audit regulators arrive in Hong Kong

It’s been fun watching China and the US fight over audit regulation. The South China Morning Post had the best coverage in US inspectors arrive in PwC, KPMG offices in Hong Kong to review Chinese companies’ audit records, sources say. And last week, Reuters reported on China sending regulators to Hong Kong to “assist” with US audit inspection. And this week, the US SEC fined Deloitte China $20 million for a “lazy audit effort” that allowed its clients to do their own audit work.

More on the Ernst & Young split

We’re happy to announce that we will be running a series this coming week on the EY split of its audit and consulting lines. But in the meantime, we recommend listening to EY Faces Headwinds as Firm Leaders Push for Split, the latest episode from the Talking Tax podcast from Bloomberg. And for a legal perspective, read EY’s Auditing and Consulting Split Is an Investor Protection Win, also from Bloomberg.

CRA workers want more money in contract demands

The Globe and Mail reported this week that Ottawa’s bargaining with CRA employees could start a wage-spiral spinning. While the article is complicated, suffice it to say that CRA workers want a 33 per cent increase over three years, or at least that’s the opening gambit of the bargaining unit representing CRA employees.

The workers belong to a weird subset of the Public Sector Alliance of Canada, which represents 120,000 workers, and used to be grouped with border guards and customs agents, who have leapt ahead in salary. One could argue that the tight labour market for accounting professionals is a factor for the CRA to consider, although another union, PIPSC, is the largest union in Canada representing public sector accounting and finance professionals.