The Canadian Public Accountability Board released its report on Canada’s four largest accounting firms today.

“Based on these inspections, we do not consider that there are systemic problems with the quality of external audits done by these four firms,” said board chairman Gordon Thiessen, a former Bank of Canada governor, in a release.

The board said it received “unconditional co-operation” from Deloitte & Touche, Ernst & Young, KPMG and PricewaterhouseCoopers, which between them conduct about 70% of the outside corporate audits in Canada.

“Their partners and staff are dedicated professionals who generally do a difficult job very well. However, as we expected, there is scope for further improvement,” Thiessen added.

The report found that responsibilities for quality control of audits “are sometimes not as well articulated as they should be.”

It also calls for individuals involved in audits to disclose more information to their firms to prevent conflicts of interest; in addition to personal investment holdings this should include “certain data from their personal tax returns.”

The board did not say which firms conduct the tightest audits, or specify which of its mandatory recommendations apply to each firm.

Among its recommendations:

  • Timelier performance assessments of auditors.
  • Better documentation on “difficult or contentious issues.”
  • Tougher requirements for documentation generally, raising standards to new U.S. and “world-class” levels.
  • More monitoring of audit quality control systems.

The board was set up two years ago by federal and provincial regulators and the chartered accountancy profession in response to Enron, WorldCom and other accounting scandals.

It has “assembled a strong team of experienced accounting professionals to carry out our work, registered over 200 public accounting firms that are now subject to our oversight, and put in place our quality inspection methodology,” Thiessen said.

Board CEO Scott said the CPAB plans to complete inspections of 13 more firms by the end of this year, and it will check the Big Four during the first quarter of 2005 for compliance with recommendations.