The new auditing protocol in Canada is concerned with advancing auditing; it will improve sharing amongst audit firms in Canada via greater transparency and improved consistency due to making sharing of information easier and more straightforward.
New guidance resources created by the Chartered Professional Accountants of Canada, the Institute of Corporate Directors and the Canadian Public Accountability Board strive for improved audit quality in order to improve public trust, especially with regard to external auditors.
The new protocol means that audit firms will be required to inform audit committees regarding the outcome of their audit inspection by the Canadian Public Accountability Board (CPAB) so that decisions regarding their performance can be easily seen.
This will allow for greater transparency of the way in which the auditors work so that decisions can be made regarding their audit quality. Allowing inspection reports from audit firms to be monitored more closely allows the auditor committees to clearly see the integrity and effectiveness of the external audit firms they work with, by showing clearly the methodologies, policies and quality control processes the audit firm’s use.
The CPAB inspections may highlight areas where the audit firms need to make amendments particularly with recourse to audit quality issues.
Taking part in this scheme is not mandatory, but it is hoped more firms will join up. At present (2014) there are 165 Canadian audit firms and 135 foreign audit firms who have decided to participate in this scheme. Regardless how much much does a cpa make, or the firm itself, it’s important to take part in arrangements like these.
The CPAB considers that encouraging inspection reports from audit firms to be seen by the audit committees will allow the committees to evaluate the firms easier and enable them to offer more support where needed, leading to an improvement in auditing quality due to opening up discussions between the firms and committees. Alongside the CPAB’s inspection findings the viewpoint and response from the audit firm will also be available for the audit committee to see, this allows for a balanced view of the information presented. The audit committee will also be able to see where the audit firms have addressed any problems highlighted. As such this new protocol should not be seen as a draconian measure, but instead a tool to enable communication about audit quality.