Profession Practice Standards

BC accounting firm De Visser Gray censured and fined by US audit watchdog

Public Company Accounting Oversight Board notes repeated use of Canadian Professional Engagement Guide (PEG) audit programs for US audits

Author: Colin Ellis

TORONTO, June 21, 2024 – The Public Company Accounting Oversight Board in the United States has censured and fined a Vancouver accounting firm for not addressing audit issues first identified in 2019. Among the issues described in the disciplinary order was the use of Canadian audit guidance programs in an American context. In a press release, PCAOB Chair Erica Y. Williams stated: “No matter where they are located, PCAOB-registered firms must follow PCAOB rules and standards. Failing to do so puts the investing public at risk and will not be tolerated.” 

De Visser Gray LLP is the first Canadian firm to be sanctioned this year by the US audit watchdog. In 2023, three Canadian firms were sanctioned by the PCAOB, all three of which were headquarted in British Columbia. Without admitting or denying the Board’s findings, the firm settled with the PCAOB and consented to a disciplinary order that imposed a civil penalty of $60k, as well as remedial action. 

Erica Williams
In 2022, PCAOB Chair Erica Williams promised enforcement with "renewed vigilance" at the 14th International Institute on Audit Regulation. The audit watchdog imposed record civil penalties for three years in a row.

US audit watchdog bristles at Canadian use of PEGs 

According to the disciplinary order, PCAOB inspection staff conducted an inspection of the firm in 2019. In what they considered to be a significant deficiency in the firm’s system of quality control, De Visser Gray was using audit methodology and audit practice materials (from “external service providers”), used only in accordance with Canadian Auditing Standards rather than PCAOB (or American) auditing standards. 

The same issue occurred again in 2022, during which the firm was found to be using Professional Engagement Guide audit programs, commonly referred to as “PEG” within the profession. While CPA Canada sells PEG resources available for download, other external service providers produce similar forms, such as checklists and templates. 

In comparing compliance in American versus Canadian engagements, GreenGrowth CPAs, an American firm, notes on its website: 

For engagements under Canadian Auditing Standards, the approach remains largely the same, with specific documentation, such as PEG forms, required. 

In our Canadian audit engagements, PEG (Professional Engagement Guide) forms are essential. These forms, tailored for the Canadian market and mandated by CAS, are crucial for documenting key audit activities, from audit plans to independence confirmations and governance communications. 

In short, DeVisser Gray used audit methodology that failed to consider the requirements of PCAOB standards, “despite being on notice of these deficiencies.” The PCAOB alos noted that the firm system of quality control failed to provide reasonable assurance with respect to critical audit matters (CAMs). The firm also failed to file necessary forms and comply with rules around communications with audit committees.

The firm has 90 days from the date of the order to comply with remedial actions. In general, these include the establishing of new policies, training on PCAOB rules and standards, and written evidence, signed by the firm’s managing partner, as to how the firm is in compliance. 

Colin Ellis is a contributing editor to Canadian Accountant. Images courtesy the Public Company Accounting Oversight Board.

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