Industry Committee on April 21st, 2009

[Coleen Kirby]

Under provincial law, there are two different regimes generally that affect an accountant. One is the recognition of their provincial association, whether it's the CICA, CMAs, or CGAs. The second regime regulates who can actually do audits or review engagements. That second regime varies in each province. Each province has some form of provincial association of the national guide, but the regime concerning who can conduct audits and review engagements changes.

For example, P.E.I. and Nova Scotia legislate who can conduct an audit; they do not legislate who can conduct a review engagement. The other provinces regulate both. Somebody who has the requisite university degree can become a member of the provincial association, but they may not have ever had the educational requirements needed to conduct the reviews, whether an audit or a review engagement.

That second provincial regime, which is what we're referring to in paragraph 181(1)(b), is that not only do you have to be a member of that provincial association; you must have had the education and passed the test required to actually conduct a review. There are often people in all three accounting organizations who are members of the organization but have never done the financial review aspects of the program.

For example, a CGA may be a fully qualified member of the association but not be qualified to do the review. What we've tried to do is say that you have to be recognized by your association, but you also must have whatever the qualifications are to actually conduct the financial review. If you have done the courses and passed and have become a member of an accounting board but you are qualified only to prepare financial statements, not review them, you can't do the second test, because you haven't passed the test of paragraph 181(1)(b). That's what we're trying to get at with paragraph 181(1)(b).

Part of the issue is that because two of the provinces only regulate audits, not review engagements, it had to be drafted this way. It's also why we don't use the word “auditor”: because those provincial governments have determined that for their provinces there isn't a need, under their provincial power, to step in with respect to review engagements.

[The Chair, Conservative, Michael Chong]

Thank you, Madam Kirby.

Mr. Vincent.

[Robert Vincent, Bloc, Shefford, QC]

Even if I understood your comment, I do not find it plausible. Public accountants are recognized by their provinces. You are meddling in provincial jurisdiction if you say that you are going to review the accounts.

Why would the federal government nor recognize public accountants, given that the provinces recognize them?

You are taking over the province's role by saying that you are not sure that they are public accountants and so you have to decide how things will be done.

We believe that, if professionals are recognized by a province, we should trust that province. We think things should stop there.

[The Chair, Conservative, Michael Chong]

Thank you, Mr. Vincent.

Mr. Charland.

[Roger Charland]

Thank you.

I just wanted to emphasize that the intention of the provision is the opposite. We are saying that the person must be a member of an institute incorporated under a provincial act and must meet the qualifications required by the provincial act.

Basically, this provision says that the provinces are going to make regulations specifying the qualifications required—whether they do it one way or another way. This provision requires people, such as the public accountants we are discussing, to comply with provincial legislation. So it is left up to the provinces.

[Robert Vincent, Bloc, Shefford, QC]

That is exactly what we are saying in our proposed subsection 181(1):

In order to be a public accountant of a corporation, a person shall be a member in good standing of an Institute or association of accountants [CGA, or whatever designation they like, it makes no difference] incorporated by or under an act of the legislature of a province...

That reflects what you have just said, but instead of giving quite a long explanation, we say more concisely that if he is a member of an institute and recognized as a public accountant by a provincial organization, we should recognize him too.

That is what you told me.

[Roger Charland]

Except that, in paragraph b, it also says that if the province decides to require qualifications, accreditation courses, the person must comply with provincial legislation.

Without that, we do not feel that the objective is achieved.

[Robert Vincent, Bloc, Shefford, QC]

So, for public accountants of a corporation, who are members in good standing of an institute or association of accountants incorporated by or under an act of the legislature of a province, you are telling me that the province could require additional courses at some stage, or that accountants have to have different training.

[Roger Charland]

And paragraph b tries to accommodate that.

[Robert Vincent, Bloc, Shefford, QC]

That is what the original form of the four first lines means.

Is that not clear enough for you?

[Roger Charland]

Our position is that paragraph a alone does not achieve that objective. We need paragraph b.

[The Chair, Conservative, Michael Chong]

Thank you.

Mr. Thibeault.

Mr. Bouchard will be next.

[Glenn Thibeault, NDP, Sudbury, ON]

Merci.

I just need, first of all, a clarification. What we're asking for is removing everything underneath paragraph 181(1)(b), so where it says “that the person is required to perform under sections 189 and 192”--is that correct?

[The Chair, Conservative, Michael Chong]

That is correct.

[Glenn Thibeault, NDP, Sudbury, ON]

I have some serious concerns with removing paragraph 181(1)(c), as an individual who ran not-for-profit corporations for ten years. Paragraph 181(1)(c) was indicative of what we had to do to ensure our audits were effective. By removing this, are we tying the hands of not-for-profits when they are trying to recruit an accountant?

[Wayne Lennon]

As I said, the objective standards here are clear, understood, and common in federal corporate law. They are like a baseline for the accounting profession.

If, as has been argued by the accounting profession, their individual independent standards are more strict than this, then there is nothing stopping them from utilizing those standards as well.

[Coleen Kirby]

If an accounting association decides to have a lower standard of independence, then that would be sufficient. There's nothing we could do if paragraph 181(1)(c) were gone.

[Glenn Thibeault, NDP, Sudbury, ON]

This is the guidance for the agency. It's not guiding the accountants.

[Coleen Kirby]

Correct.

[The Chair, Conservative, Michael Chong]

Thank you, Mr. Thibeault and Madam Kirby.

Monsieur Bouchard.

Do you have a question?

[Robert Bouchard, Bloc, Chicoutimi—Le Fjord, QC]

We took this position because the accountants' association came to meet with us and made the recommendation. We found that it made good sense. It just removes all the details from the section.

Did you meet with accountants' associations? What did you tell them? Did you tell them that you would not make any changes and that you would stick by your position?

I would like to know that.

[Coleen Kirby]

We have been meeting with the Canadian General Accountants and the Canadian Institute of Chartered Accountants on this issue with respect to the Canada Business Corporations Act, which has had a similar provision for well on ten years. The two groups have been fighting about this for probably longer than that. That's as far back as I've heard their presentation.

The Canadian General Accountants want to be able to do audits nationally; the Canadian Institute of Chartered Accountants don't want them to. Since it is a professional issue, it is generally fought out at the provincial level. The Canadian General Accountants are slowly getting each province.... Quebec recently went to court against the Canadian General Accountants over whether their provincial standards for who is licensed to do audits and review engagements is justified or not. This is not a simple discussion. We have certainly heard from them multiple times on this particular bill.

The federal approach in the corporate statutes has been that this is a provincial jurisdiction. All we want to do is recognize provincial jurisdiction.

The objective behind paragraph 181(1)(b) is that whatever the provincial standards are for who can conduct financial reviews we will respect. If there is no reference at all, you simply have to be a member of the association. Somebody who does not have the educational standards, who is not licensed in meeting the provincial requirement, would be authorized to do the financial review of a federal corporation. That is exactly what the Canadian General Accountants want. It would mean that for a federal corporation in a province where they are not recognized provincially as being qualified to do financial reviews, they would still be allowed to do them. It's essentially overriding whatever the provincial law is.

Our argument is we don't want to get into the middle of this fight. We will let the provinces settle because the provinces are the best place to settle this issue.

[Wayne Lennon]

The practical upshot would be that in provinces that do regulate the profession, by removing paragraph 181(1)(b), accountants who may not have the qualifications would be allowed to audit or do review engagements of federal corporations but they would not be allowed to do audits or review engagements of provincial corporations, thereby setting up a two-tier system.

[The Chair, Conservative, Michael Chong]

Thank you, Mr. Lennon.

Monsieur Bouchard.

[Robert Bouchard, Bloc, Chicoutimi—Le Fjord, QC]

I am not going to talk about the amendment that we put forward, but I have a question for you.

In your view, if the text of clause 181 is passed in its entirety, as you have written it in the bill, without amendment, and, since we know that there are two accountants' groups in Canada, does one benefit from the way in which the text is written?