In an effort to boost oversight of industry gatekeepers, Canadian securities regulators are demanding more information about audit firms that run into regulatory trouble of their own.
The Canadian Securities Administrators (CSA) Thursday proposed changes to auditor oversight rules that would change the triggers that require audit firms to report to the securities regulators when the regulator for those firms, the Canadian Public Accountability Board (CPAB), has imposed significant remedial actions on a firm. It is also proposing amendments concerning the content of the CPAB notices.
The CSA says that this will likely result in more issues with audit firms being brought to their attention, thereby improving their ability to prevent problems with financial reporting, and improve investor protection.
Additionally, among other changes, issuers would be required to disclose in a prospectus when they use an audit firm that is not subject to CPAB oversight; and, foreign issuers would be required to comply with the rule too.
The CSA is not, however, proposing changes to the existing requirements for when an audit firm must alert the audit committees of its clients about remedial actions imposed by CPAB. “We propose to defer consideration of this issue until further developments are made on a recommendation by the enhancing audit quality (EAQ) initiative that more information on CPAB inspection results be made available to audit committees,” it notes in the proposals.
“Auditors are key gatekeepers, so it is important to improve the extent of information securities regulators receive when the Canadian Public Accountability Board identifies significant audit quality issues,” said Bill Rice, chair of the CSA and chair and CEO of the Alberta Securities Commission (ASC).
“Receiving information about audit firms enables securities regulators to better assess systemic issues and consider, in a timely manner, whether regulatory action is needed. This in turn will increase investor confidence in the quality of financial reporting in Canada,” he added.
The proposals are out for comment until January 15, 2014.