Public Accounts Committee on Oct. 21st, 2009

[Barbara Cass]

Hypothetically, I would say that for us as auditors, the crucial thing is to have the evidence to support the findings, the conclusions, and the recommendations. If you do not have that evidence and if the audit has not been undertaken in accordance with the auditing standards, then the credibility of the audit report is in question.

So that would be, to me, the fundamental that has to be there. The evidence has to support that and the audit has to be done in accordance with the auditing standards.

[John Weston, Conservative, West Vancouver—Sunshine Coast—Sea to Sky Country, BC]

Mr. Jarrett, would you care to add to that? I know this is the first one you've done, but you've obviously heard about other ones.

[Brandon Jarrett]

I agree with what Barbara said.

[John Weston, Conservative, West Vancouver—Sunshine Coast—Sea to Sky Country, BC]

That was quick.

What would be the consequences of a negative finding, let's say, where you weren't finding the evidence that ought to underpin the conclusions of the Auditor General?

[Barbara Cass]

We would raise the matter with the Office of the Auditor General. I can only assume--and as this is hypothetical, I will--that the way it would need to be addressed is that the office would look at that particular audit, and if there were a need to do another one or to redo some of the work to actually provide that level of assurance, I'm quite sure they would.

[John Weston, Conservative, West Vancouver—Sunshine Coast—Sea to Sky Country, BC]

Thank you.

[The Chair, Liberal, Shawn Murphy]

Thank you, Mr. Weston.

Mr. Lee, for up to five minutes.

[Derek Lee, Liberal, Scarborough—Rouge River, ON]

To the Auditor General, by corporate memory and recollection, how would this peer review differ from the last one six years ago? Are there any material differences that you have seen?

[Sheila Fraser]

Thank you, Chair.

There is quite a significant difference. The last one was only limited to the performance audit practice, whereas this one is looking at all of our practice, so it includes our financial audits, special examinations, the whole breadth of the professional practices, as well as all of the support services—which I think the last time were only touched fairly superficially. So included in this audit are such things as the training of staff, the competencies assigned, and the people who are assigned to specific audits.

[Derek Lee, Liberal, Scarborough—Rouge River, ON]

As you go into this one—and you'll certainly have had an opportunity to review this with the peer review group—are there processes in transition in your OAG now that might not be ready for prime time review, or are you in pretty static state now and all of your systems are reviewable?

[Sheila Fraser]

I would love to be able to say that all of our systems are perfect, but that's not the reality. As I mentioned earlier, we have a very significant process under way with regard to our methodology and our guides to our staff. We realize these are not as good as they should be.

There are a number of very significant changes coming to accounting and to auditing standards in Canada. We actually came to the conclusion that we could not cope with all of this ourselves—which I think I informed the committee of in our last performance report—and formed a strategic alliance with one of the major accounting firms to be able to access their training.

So there will be, over the next two years, a significant investment by us in methodology and training and in redoing the way we deliver all of our manuals, and even how we deliver our training. We're going to go to e-learning and things like that.

As we say to departments, we're not going to wait until everything's perfect before we come in to do an audit, and so I feel the same way for us.

My expectation, my hope, is that the review team will take our plans into account. I know they will flag areas where there are gaps. Hopefully they don't find anything that we haven't already identified ourselves and that we're working on to address.

[Derek Lee, Liberal, Scarborough—Rouge River, ON]

To the peer review team, there's hardly an institution in a developed country that isn't in some sort of transition somewhere: everything seems to be in motion, with institutions modernizing and updating, etc. So as you look at the Office of the Auditor General here, as was just described, there may be some things in transition, so wouldn't it be a waste of time to be looking at things in transition that you cannot actually get a snapshot of because they're in motion?

Wouldn't it be more efficient simply not to review it and to say that you're not doing this or that component because it's in transition and you can't get a good measurement of it, and so it would get a nil report? Don't you have circumstances like that? Isn't it a waste of time to look at a component of an operation if it is in transition?

[Brandon Jarrett]

I think one of the things we settled on early was the scope of the work. From our perspective, nothing being out of scope is important. I know this doesn't apply here, but the best way, the auditor always knows, for something not to be looked at is to say it's out of scope.

So everything's in scope. We'll put it in context and it'll be worked through.

[Derek Lee, Liberal, Scarborough—Rouge River, ON]

I guess that's experience talking.

Thank you, Mr. Chairman.

[The Chair, Liberal, Shawn Murphy]

Thank you, Mr. Lee.

Mr. Kramp, you have up to five minutes.

[Daryl Kramp, Conservative, Prince Edward—Hastings, ON]

Thank you, Mr. Chair.

Certainly, welcome to all. It's been a pleasure to meet you personally.

Those of you who I haven't met from the international community, thank you so kindly. I trust that your time spent in Canada will be amenable, friendly, and hopefully very rewarding for us.

My first question is to Ms. Cass.

While you will operate here under the terms of the Canadian accounting standards, can you describe the similarities and/or differences in the accountability process or standards between Australia and Canada?

[Barbara Cass]

Basically we have assurance standards as well. They're not dissimilar to the ones Canada uses. The international accounting standards are also quite similar. We will be using the Canadian auditing standards, because the audits are being done under those standards. Equally we'll be using the OAG's quality management systems, because that is the way the work is being done under those processes. But the standards we will be using are well recognized.

[Daryl Kramp, Conservative, Prince Edward—Hastings, ON]

Thank you.

Madam Fraser, you mentioned that some further attention will be given to past recommendations and/or some evolving standard changes that will be coming to your office. Can you elaborate further and give us an indication of exactly what you're talking about, and give us an implementation date as well?

[Sheila Fraser]

I'd be glad to.

Until just recently, Canada has always set its own accounting and auditing standards through the Canadian Institute of Chartered Accountants. There are boards that develop these standards. The decision has been made to move to international auditing standards. That will come into effect in 2010. So modifications will have to be made to our methodology. In fact, we are holding the first pilot training course today. We will have to train all of our staff in these new standards and adapt all of our manuals, guides, and everything to the new standards. The differences are not enormous, but there are some pretty significant differences that have to be taken into account.

On the accounting standards, it's largely the same thing for publicly accountable enterprises, which would include crown corporations, for example. Canada has also gone to international financial reporting standards, IFRS, which will be coming into effect in 2011. There are some significant challenges there for the preparers of the financial statements as well as the auditors, because there are changes there.

Again, we have to go through and identify what the differences are, train our people--which we've already started--and put those differences into our audit program so we pick them up. There is a lot of work that has to be done. Some of it has started already, but it has to continue over the next year.

[Daryl Kramp, Conservative, Prince Edward—Hastings, ON]

We can understand that from your perspective, but of course this could translate into significantly different methodologies that departments might have to use to accommodate that reporting demand.

Could that put a different onus on these departments that we're not familiar with? What timeframe might that take for them to get up to snuff to meet this new standard?

[Sheila Fraser]

At the moment the public sector accounting standards have not changed. The accounting within departments remains as is. The only difference that's happening in departments, which is an issue we're dealing with, is in audits of departmental financial statements. We've had one and we may have another one this year, so that might change.

But the big impact will be on the accounting in certain crown corporations. Crown corporations like Canada Post and CBC will have to change the way they account for certain transactions.

[Daryl Kramp, Conservative, Prince Edward—Hastings, ON]

That's a concern for us as well, because if they're operating under one process and have to modify or amend it, who will prepare that plan? Will it come from you with a sense of direction, or will they be preparing information that they think might be accountable but you might expect more? Is there communication taking place between your office and the departments?

[Sheila Fraser]

Yes. In fact, about a year and a half ago we began discussing with the entities that would be affected by the coming changes how they were going to move to this. The problem is that even if it comes into effect in 2011, they have to have the comparative figures. It means they have to be ready a year earlier. The Comptroller General has also been quite active in this. We do have some discussion on that in our observations on the public accounts. Perhaps when we have that hearing, we can get into more detail about that.

[Daryl Kramp, Conservative, Prince Edward—Hastings, ON]

Thank you so kindly.

[The Chair, Liberal, Shawn Murphy]

To you, Ms. Fraser, can you take us through the tabling process? Ms. Cass indicated that the mandate, the report, should be completed by the end of June 2010. Is that delivered to you or is it tabled in Parliament? And will Ms. Cass be here for the tabling?