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Achieving National Harmony and Global Convergence in Practice Inspection Programs Across Canada By Rachel Miller, CA, Director of Practice Review, ICAA In 2004, the CA profession identified four areas of strategic action to position Canada’s CAs as leaders of the accounting profession, with public trust emerging as a major area for strategic action. With the CA profession being self-regulating, each of the provincial Institutes/Ordre are responsible for their own province’s public protection mechanisms. As a result of the need for a harmonized approach to professional inspection (also referred to as practice review) in Canada, and to ensure that the CA profession complies with the Statement of Membership Obligations 1 of the International Federation of Accountants (IFAC) on assurance quality, the Practice Inspection Program (PIP) Working Group was formed by the Council of Senior Executives' (CSE) Public Trust Committee (PTC). The mandate of the PIP Working Group was to: - research the current PIPs across Canada;
- research the current PIPs in other jurisdictions;
- consider current requirements within the context of the IFAC standards;
- report to the Public Trust Committee and make recommendations.
Comprised of the directors of practice review/inspection from six of the PICAS/Ordre, the Working Group prepared a set of guiding principles and related recommendations in order to harmonize the various review/inspection systems of the provincial CA institutes. Because some provincial practice review/inspection programs were broader in scope than others, the recommendations were intended to develop a common Canadian base line. It was not the intention of the Working Group that the recommendations would necessarily result in any provincial institute reducing the scope of existing practice review/inspection. The harmonized program allows for flexibility and consideration of special circumstances in each province. For more information on the agreed upon guiding principles and recommendations of the working group refer to the ICANL website at http://www.icanl.ca/. Protection of the public remains the cornerstone of this harmonization initiative, while still providing an educational experience to CAs. Indeed, the public’s requirements have changed, as has the rapidly evolving market, which is why Canada must remain in a position of influence on a global scale. In order to maintain its pre-eminent status, the CA profession must continue to clearly demonstrate that it is synonymous with excellence and high standards. The following are the guiding principles and recommendations of the PIP Working Group, some of which are already in effect, while others will be implemented throughout 2011-2012. 1. Objective The objective of practice inspection is to protect the public by assessing whether firms comply with professional standards, and by taking appropriate follow-up or remedial action in instances of non-compliance. Practice inspection offers additional protection to the public by providing an educational experience to CAs. 2. Scope and Inspection Criteria All engagements addressed by standards in the CICA Handbook - Assurance are eligible for inspection. The quality control standards for firms, as well as audit, review and compilation engagements, are subject to mandatory inspection. The requirements, recommendations, application and other explanatory material contained in the Handbook are the standards against which engagements shall be inspected. 3. Inspection Cycle A risk-adjusted cycle approach that includes a fixed “standard” period of three years has been established. However, adjustments based on risk factors may be made to the cycle to determine if the inspection will be made more frequently than every three years. Basic practice profile information is gathered on an annual basis to identify risk factors and thereby assist in determining whether a inspection should occur more frequently than once every three years. 4. File Selection A uniform file selection method was created. The objective of file selection is to provide the Practice Inspection Committee with sufficient information to assess compliance with applicable standards. This approach allows for consideration of the firm’s quality control system and could result in fewer files per partner being selected. 5. Assessment of Compliance with Professional Standards An objective, structured approach to the categorization and evaluation of deficiencies has been established to assist in attaining the goal of protecting the public. This approach will achieve consistency between the provincial institutes/Ordre and assist firms in targeting the areas on which to focus. The methodology is based upon a consistent approach to: - the identification and categorization of deficiencies;
- an overall assessment of the impact of deficiencies;
- the selection of consequences and actions required.
6. Practice Inspection Report A harmonized inspection report model was created to present information required by the Practice Inspection Committee to assess compliance with professional standards and determine what actions are appropriate in light of the practice inspection results. The terminology on the reports will be changed to coincide with the terminology in the harmonized assessment of compliance with professional standards. The report will set out deficiencies identified by the inspector with the objective of having the firm respond with its comments as to how it plans to address these deficiencies. 7. Practice Inspector Committee Composition and Qualifications Criteria were established regarding the composition, competencies, quorum, role and mandate of the committee. 8. Inspector Qualifications and Competencies Criteria were established to ensure that practice inspectors have the qualifications, competencies and experience to perform practice inspections. 9. Inspection Program for CA Training Offices (CATOs) There was the establishment of a harmonized provincial CATO inspection program with respect to the objective and scope, as well as the assessment criteria and cycle, for CATOs approved in public accounting. 10. Oversight A standing sub-committee on the review/inspection program was created. It reports to the Public Trust Committee and is charged with overseeing the uniform application of key elements of the inspection program. |
