On October 3, 2019, the Canadian Securities Administrators (CSA) published for comment proposed amendments to National Instrument 52-108 Auditor Oversight (the Notice) intended to provide the Canadian Public Accountability Board (CPAB) with improved ability to perform audit inspections.
The proposed amendments (the Proposed Amendments) specifically relate to the audit work done for reporting issuers with operations in foreign jurisdictions. Currently, Participating Audit Firms (PAFs) under Canadian Public Accountability Board (CPAB) oversight often utilize the services of audit firms in foreign jurisdictions (referred to as as component auditors) to support the auditor’s report issued by the PAF.
Because these component auditors are not under CPAB’s jurisdiction, CSA members have experienced difficulty in obtaining the audit records from some firms. If approved, the Proposed Amendments will enable CPAB to perform audit inspections of the work of those component auditors who are employed by PAFs at a significant level (referred to as significant component auditors).
If a given significant component auditor did not voluntarily agree to an inspection, under the Proposed Amendments, reporting issuers will be required to direct them to enter into an agreement with CPAB permitting access to the audit files which gives CPAB the ability, upon request, to inspect the audit work. If the component auditor refuses to enter into a CPAB access agreement, a PAF after a transition period would not be permitted to use the audit firm as a significant component auditor.
You can download the Notice here.
DISCLAIMER: This post is intended to convey general information about legal issues and developments as of the date above. It does not constitute legal advice and must not be treated or relied on as such.