Second American accounting firm penalized by CPA Ontario over unlicensed audit work

TORONTO, Sept. 8, 2024 – One year after reaching a $1.2M settlement with American accounting firm Marcum LLP over unlicensed work, CPA Ontario has prosecuted an American firm, BF Borgers CPA PC, and its principal, Ben Borgers, of Lakewood, Colorado, for offences under the Chartered Professional Accountants of Ontario Act, 2017, and the Public Accounting Act, 2004. 

Borgers and the Firm pleaded guilty to engaging in public accounting work in Ontario, including performing the audit of a reporting issuer, without registering with the Chartered Professional Accountants of Ontario or holding a Public Accounting License in Ontario. 

"We continue to take action against accounting firms and CPAs who fail to comply with our requirements to practice in the province, in accordance with our mandate to protect the public and uphold the high standards of the CPA profession," said Janet Gillies, CPA, CA, executive vice-president, Regulatory and Standards, CPA Ontario. "Unregistered and unlicensed firms and CPAs operating in Ontario bypass essential regulatory oversight, undermining public protection and confidence in public accounting." 

American accounting firms profited from unlicensed Canadian audit work

In 2022, as reported by Canadian Accountant, foreign accounting firms were dominating Canadian mid-tier accounting firms in terms of new audit engagements and audit fees. Using data provided to Canadian Accountant from Audit Analytics Ideagen, Canadian Accountant reported that BF Borgers scored the highest number of net new audit engagements. 

The success of BF Borgers coincided with an acquisition by homegrown national accounting firm MNP LLP. In August 2022, MNP added three partners from Harbourside LLP, which was based in Vancouver, and the firm permanently closed. According to data provided by Audit Analytics, of the 21 clients acquired by BF Borgers, eight were former clients of Harbourside. Just one client of BF Borgers was traded on the Toronto Stock Exchange, with the rest trading on venture exchanges. Several of its audit clients include cannabis companies and reverse takeovers. 

Marcum LLP, which would ultimately be censured by the Canadian Public Accountability Board, topped all mid-tier firms in net new audit fees in 2022. The firm made $6.3 million in net new audit fees, based largely on two companies, SNDL (formerly SunDial Growers) and TCPO Holding, both cannabis companies. Marcum had the distinction of being the first auditor to be sanctioned under CPAB’s new transparency rules, and was barred from accepting new “high risk” reporting issuers in Canada. 

Another chapter closed in the Canadian cannabis story

The order of the Ontario Court of Justice requires the firm and Borgers to pay total fines of $50,000 to the Government of Ontario and $15,000 to CPA Ontario in respect of its costs of the investigation and prosecution. The order also places the firm and Borgers on probation for two years. BF Borgers CPA PC and Ben Borgers continue to be unauthorized and unlicensed to practise public accounting in Ontario. 

The decision ends another chapter in the Canadian cannabis story. In 2022, both Borgers and Marcum were doing unlicensed audit work for several Canadian cannabis companies, at a time when the sector was collapsing. According to data collected by law firm Miller Thomson, Canadians who invested in cannabis companies lost more than $131 billion. Critics called out accounting standards that allowed for “audited hallucinations” of inflated valuations and, by 2023, the CBC had announced that “the razzle-dazzle days of Canada's cannabis industry were over. Earlier this year, Canadian Accountant declared the Mystery solved: How foreign accounting firms won big in new audit client gains and losses. 

Colin Ellis is a contributing editor to Canadian Accountant. Title image: iStock (Ontario Court of Justice).