Canada’s securities regulators are considering whether to establish requirements that would provide audit regulators with the authority to delve into the work of foreign audit firms.
In a consultation paper published Tuesday, the Canadian Securities Administrators (CSA) asks for feedback on a proposal from the Canadian Public Accountability Board (CPAB) that would amend the CSA’s auditor oversight rule to require certain foreign audit firms to register. This would give the CPAB a legal basis to secure access to the audit work by these firms in most, but not all, countries.
The CSA paper also sets out potential disclosure to inform investors about restrictions that the CPAB has faced in inspecting audit work.
According to the paper, in recent years, “CPAB has expressed concern with the number of instances where it was denied access to inspect audit work performed in a foreign jurisdiction. CPAB is also concerned that stakeholders, including audit committees, may not be fully aware of such access restrictions for certain reporting issuer audits.”
In 2016, a foreign auditor was involved in a “significant portion” of the audits for approximately 597 reporting issuer audits in 95 foreign jurisdictions, the CSA paper notes.
The CSA indicates that it’s aware of the challenges faced by the CPAB in accessing audit work performed in certain foreign jurisdictions, and says that it “continues to consider ways to respond to these challenges.”
“Auditors are important gatekeepers in our market, and we are seeking input on our current oversight requirements to ensure there continues to be public confidence in the integrity of financial reporting,” says Louis Morisset, chairman of the CSA and president and CEO of the Autorité des marchés financiers, in a statement.
The consultation paper is out for a 60-day comment period, ending June 24.