CPA Ontario scores two rare regulatory wins against large accounting firms

TORONTO, November 5, 2023 – Two recent settlements by major accounting firms made business headlines but are a rare occurrence in Ontario. The two firms, Deloitte Canada and Marcum LLP, a large American accounting firm, recently agreed to pay more than a million dollars each to the Chartered Professional Accountants of Ontario. The settlements have occurred at a time when CPA Ontario, a provincial regulator, is embroiled in a public rift with the national association of chartered professional accountants.

Discipline charges against firms, rather than individual members, are exceedingly rare. According to its online database, CPA Ontario last reached a settlement with a firm in 2014, the same year that three legacy accounting designations unified to create the CPA profession in Canada. Discipline charges against two firms, Mintz & Partners, and Wm. J. Trotter & Associates, concluded that year.

Allegations against Deloitte Canada and Marcum LLP

In 2021, as reported by Canadian Accountant, the Public Company Accounting Oversight Board in the United States censured Deloitte Canada over the backdating of audit working papers. The PCAOB imposed a fine of $350,000 on the firm and stated that the penalty would have been higher if not for the “extraordinary cooperation” of the firm with the audit watchdog.

The working paper backdating, together with a professional development cheating scandal at another Big Four firm, PwC Canada, led the Ontario Securities Commission to question the ethical standards at public accounting firms in Ontario. That investigation ended earlier this year.

According to CPA Ontario, “a number of Deloitte auditors in Ontario changed the date and time settings on their computer clocks to manually override controls in Deloitte's audit software and backdate audit working paper signoffs between November 2016 and May 2018. During this period over 930 audit working papers were backdated in at least 39 audit engagements.”

As part of a settlement, Deloitte admitted to breaches of the Code of Professional Conduct, and paid $1.59M in fines and costs to CPA Ontario. The Deloitte settlement exceeds the $1.2M settlement with Marcum LLP that was concluded this past September.

According to CPA Ontario, “The settlement resolves allegations of multiple instances of partners at US-based Marcum LLP engaging in public accounting work in Ontario, including performing audits of reporting issuers, without being members of CPA Ontario or holding Public Accounting Licenses [sic] in Ontario.”

The Marcum settlement, through which the American firm will pay CDN $1 million to the Ontario Government and CDN $200,000 to CPA Ontario, follows a similar action by the Canadian Public Accountability Board. Marcum became the first accounting firm to be censured publicly under new disclosure rules designed to increase transparency at CPAB. Its enforcement action detailed breaches of Canadian accounting standards but did state the firm was operating without a provincial licence.

Settlements reached during regulatory rift with CPA Canada

CPA Ontario is embroiled currently in a rift over its partnership with Chartered Professional Accountants of Canada. The partnership agreement between the provinces and national accounting body, which is called the Collaboration Accord, is a confidential document that defines the jurisdictions and resources of the organizations. As reported in our five-part series, CPA Standoff, the two largest provincial accounting bodies, CPA Ontario and CPA Quebec, have points of contention with the agreement.

Both sides have framed their positions during the dispute in terms of regulatory roles such as licensure and a mandate to protect the public interest. One of the core principles of self-regulation is the protection of the public interest by setting standards of competency and conduct and the discipline of members that fail to meet them.    

By Canadian Accountant staff.