Amendments have been made to the National Instrument 52-108 Auditor Oversight and its Comparison Policy granting the Canadian Public Accountability Board (CPAB) better access to audit working papers from auditors in foreign jurisdictions. If the amendments receive appropriate ministerial approvals, they will come into effect from March 30, 2022.
These changes define what a component auditor is based on the significant portion of audit work they perform that meets specified thresholds. Should the CPAB request access, the reporting issuer is required to give written notice to the significant component auditor that provides permission for the access. Written notice is also to be given, granting the significance component auditor authorisation to enter into an agreement with the CPAB that will govern this access should the CPAB not provide its own access agreement voluntarily.
The CPAB has pushed for this change to ensure that audit opinions put forward by participating audit firms is based on sufficient audit evidence. Obstacles to accessing this audit work have been brought on by differing laws, languages and business practices between jurisdictions.
According to a report from the Ontario Auditor General, Bonnie Lysyk, it was found that the CPAB reported having been denied access to component auditor working papers in several jurisdictions, including Mexico, Bermuda, Tunisia, and China. The report added that the CPAB found that the work done by component auditors in foreign jurisdictions could impact the execution of quality audits if not carried out as per the group director’s direction, evaluation, and careful supervision.
Lysyk has recommended that the Ontario Securities Commission (OSC) needs to support the CPAB and Canadian Securities Administrators (CSA) in accessing audit working papers of component auditors that are outside of Canada.
The CPAB has commended that CSA for amending National Instrument 52-108, stating it will enhance their ability to access audit work and result in more thoughtful collaboration among various regulatory and provincial parties.
The Ontario Auditor General also found that the OSC had limited power when it came to requests for formal and documented communication from the CPAB if it found incidents of audit firms contravening provincial securities laws. As per standard practice, the OSC may receive verbal information but is not provided with documented information about the potential violation.
This is due to confidentiality provisions in the CPAB Act that only allow for such formal sharing of information when all possible stakeholders provide written authorisation. Lysyk is calling for updating of the existing framework so that written yet confidential communications could be allowed to facilitate more detailed discussion on how to proceed with such cases.
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