Sunday News Roundup 24.08.18: Audit watchdog raises the bar, duelling tax tales, and more Canadian accounting news

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

Aug 18, 2024 Author: Canadian Accountant

Subscribe to our weekly newsletter and get all the week’s stories. Click here to sign up.

TORONTO, Aug. 18, 2024 – This past week, the Public Company Accounting Oversight Board in the United States posted inspection reports for all the accounting firms it inspected in 2023. The list included six global network firms, including the Big Four, as well as two Canadian firms. The audit inspection reports were released months sooner than in recent years, which the PCAOB credited to ongoing efforts to speed the release of reports.

Typically, in both Canada and the United States, there is a two-year delay between the year that an audit engagement is inspected, and the publication of the report. In April of this year, when the Canadian Public Accountability Board published its 2023 annual inspections report, the results were based on audits inspected in 2022. The American audit watchdog has now reduced the publication delay by a year.

The PCAOB, under the stewardship of Chair Erica Y. Williams, has increased its transparency as well. Its inspection reports are accompanied by a new staff Spotlight publication, which provides an overview of staff observations from the 2023 inspections. It is an insightful document that delves into audit defiency rates and the effects on audit engagements of the pandemic and remote work.

Audit regulation in Canada has come under scrutiny from the media in recent years, most recently in criticism of the Chartered Professional Accountants of British Columbia by Glacier Media, but also the lack of audit inspection transparency from CPAB by the Globe and Mail. According to CPAB, which has undertaken a transparency review, it requires legislative amendments to make some transparency changes.

“Making inspection information accessible and actionable for PCAOB stakeholders is a top priority and a means to improve audit quality,” said the PCAOB’s Christine Gunia when the new efficiency and transparency measures were released this week. “We will continue to search for new ways to bring our insights to investors, audit committees, and others.”

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

Duelling Narratives: Taxation and the economy in Canada

There are days when it seems like Canadians are living in two different visions of Canada. In one narrative, we are taxed to the hilt, the economy sucks, and Canada is “broken.” In the other, we are an egalitarian society, in which the wealthy pay their “fair share” to fund social programs, with a stable economy and strong social safety net.

But a growing number of voices, perhaps inspired by the success of Pierre Poilievre’s “axe the [carbon] tax” message, are voicing their displeasure with taxation in general, and the increase to capital gains in particular. The conservative think tank, the Fraser Institute, got the ball rolling when it claimed that the average Canadian family now spends more of its income on taxes than it does on all basic necessities combined. The report, which claimed the average tax bill has increased 2,705% since 1961, was amplified by chartered professional accountant Kim Moody in the Financial Post. But the numbers have been ridiculed by Linda McQuaig in the Toronto Star, the Canadian Centre for Policy Alternatives and others.

Allan Lanthier, another CPA, provided some balance to the tax debate at the end of July in the Financial Post, noting that “taxes are not particularly high in Canada,” and slightly below the OECD average. (They only seem high when compared to the "tax-averse" United States.) Meanwhile, in the Globe and Mail, economist Kevin Milligan dismissed capital gains opposition, while Tim Cestnick, still another CPA, warned of the dangers of “overtaxing the rich.”

All healthy debate, of course. But two quick observations from us, and make of them what you will. One, it appears that the Postmedia chain, to which the National Post, Financial Post, and Sun tabloids belong, are the only outlets focused regularly on the narrative that taxation is too high in Canada. And two, the Globe and Mail, which is hardly a left-wing publication, rarely (and we do mean rarely) cites data from either the Fraser Institute or, for that matter, the Canadian Taxpayers Federation. Why? Talk amongst yourselves.

Ineffective defence leads to retrial of tax preparer

Very few Canadians are sent to jail because of the Canada Revenue Agency. (Out of the 31 convictions for tax evasion in 2023, just 13 individuals were sent to jail.) So when a tax preparer is sent to jail for alleged tax fraud, one would expect a rather open-and-shut case.

But in a bizarre legal twist, the Ontario Court of Appeal ordered the retrial of George Nnane, owner of a tax preparation business called Golden Capital Management Inc., based on an “ineffective” defence. According to the Toronto Star, the accused’s lawyer, Ari Goldkind, expressed that he was disappointed but respects the court and its decision. The Law Times also covered the decision, which is considered “exceedingly rare.”

Accounting Dealbook

Homegrown national accounting firm MNP has picked up another firm in British Columbia. This time it’s KCS Inc. Chartered Professional Accountants, which is located in White Rock, south of Vancouver and a stones throw away from the border with the United States. The firm is run by Kevin Schindler, a former tax partner at KPMG, and will now join MNP as a partner on October 1, 2024.

Software News: Sage, Xero and more

Sage Intacct has rolled out a number of product enhancements in Canada and globally, including AP Automation, which uses AI to reduce the time taken for accounts payable processes. Sage Intacct has also boosted insights in revenue recognition, and introduced a new feature called Sage Intelligent Time, with enhanced AI assistance.

And Xero has expanded its integration with Caseware, offering shared customers a solution in which they can import trial balances and general ledger data from Xero into Caseware Working Papers. The two accounting software platforms already offer integration between cloud apps. This expands the existing integration between Xero and Caseware’s cloud apps. And this new integration will be available to accountants and bookkeepers in Canada later this year, just in time to speed up year-end compliance requirements.