Sunday News Roundup 24.02.25: Manning Elliott, Aphria ruling, sustainability standards and more Canadian accounting news

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TORONTO, Feb. 25, 2024 – After a horrible regulatory year for BC audit firms in general and Manning Elliott LLP in particular, the US Public Company Accounting Oversight Board recently delivered some good news. The PCAOB published an inspection report of Manning Elliott and the firm received a clean bill of health for three audits conducted in 2022. While the firm had not complied with some rules regarding reporting, there were no deficiencies listed in its report. 

In 2023, Manning Elliott was prohibited from accepting new high and medium risk reporting issuer clients by PCAOB counterpart the Canadian Public Accountability Board. Then the firm was fined by the PCAOB for not disclosing the censure by CPAB. A clean inspection report from PCAOB is a pretty rare occurrence for audit firms these days. Things are looking up for Manning Elliott. 

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

Cannabis company internal investigation protected

The long, sad collapse of the cannabis market in Canada has yielded a veritable greenhouse of hazy financial stories. But there was an interesting development recently in the Ontario Superior Court of Justice involving Aphria, once one of the world’s largest cannabis companies, and a class action lawsuit. 

Following allegations regarding material misstatements, a Special Committee of the company retained a legal firm (which hired Deloitte) to launch an internal investigation. (The company’s auditor was PwC Canada.) The class action lawsuit filed a motion to acquire the report and the court ruled that the report was protected by solicitor-client privilege. 

According to McCarthy Tétrault, which represented the defendants on this motion, “This Decision closes a long overdue gap in the law on privilege. There was a surprising prior lack of jurisprudence on how the law of privilege applied to Special Committee reports. The Decision supports the ability of companies, faced with serious allegations, to appoint a Special Committee to conduct a proper investigation while maintaining privilege over its work.” In other words, class action plaintiffs will not be able to see the forensic work of accounting firms, at least under these special conditions.

What’s taking the CSA so long on sustainability standards?

This past week, the Globe and Mail published an article that not-so-subtly pressured Canada’s securities regulators to adopt sustainability standards without delay. The Canadian Sustainability Standards Board will begin a public consultation on its draft sustainability standards in March. The article included quotes from sustainability experts warning of the risk to Canadian business if the CSA delayed on accepting new standards. 

CPAs across Canada may want to pay special attention to this story. As we reported recently, one of the reasons why CPA Canada ran a multi-million dollar deficit last year was because of sustainability initiatives like the CSSB. Member dues, in other words, helped to pay for the new standards. Given that so many of the directors on the CSSB represent companies related to resource sectors — or companies that invest heavily in those industries — one wonders what’s taking the CSA so long. 

Quick Hits: Articles of Interest 

Canadian

Why good governance is greener: Fresh eyes on corporate boards tend to see environmental risks and opportunities in a new light (ROB Magazine)
We no longer believe inflation will come down any more, and that’s dangerous (Globe and Mail)
B.C. announces tax on homes sold 2 years or less after purchase (CBC)
Federal government scales back carbon tax rebates for small businesses (CBC)
GST, HST on carbon price could raise billions over next seven years: budget watchdog (CBC)
Canada names Saskatchewan as gas distributor in province's fight against carbon tax (Reuters)
Taxability of Phoenix damages: Victory for members across the country (PSAC) 

International

Inside the IRS unit taking on America’s millionaires and billionaires (ICIJ)
Lendlease reveals liability risk from PwC-advised $260m tax scheme (Australian Financial Review)
Some Top Midtier Audit Firms Felt the Wrath of the PCAOB This Week (CPA Practice Advisor)
Taxation: Bahamas, Belize, Seychelles and Turks and Caicos Islands removed from the EU list of non-cooperative jurisdictions for tax purposes (ECCEU)

By Canadian Accountant staff.