Public Accounting Rights for Certified General Accountants in Canada Issue Brief IMPORTANT NOTE: Some information regarding Ontario is out of date pursuant to the adoption of the Public Accounting Act, 2004 in Ontario. In addition, a trade panel convened under the Agreement on Internal Trade found that Québec s measures regarding are restrictive, unfair and have caused injury and recommended reform of the public accounting regime. The government of Québec has begun a reform process. Updated May 2005
Public Accounting Rights for Certified General Accountants in Canada Issue Brief The Canadian economy depends on professional accountants engaged in the practice of who provide competent, credible and reliable audit and assurance services. Canadian businesses and individuals must have a choice in the selection of professional accountants. In turn, professional accountants must be able to provide a full range of professional services to their clients in every Canadian jurisdiction. Yet, in some provinces, not all professional accountants are permitted to provide a full range of services despite their competence, skill and knowledge. Such restriction limits choice for consumers and restricts mobility for professional accountants and impedes competition among accounting professionals. CGA-Canada believes provincial and federal governments must move quickly to resolve the limitations imposed on some qualified professional accountants. Canadians will be well served by an accounting regime that provides choice and is open to competition. The public policy context Businesses require transparent and stable structures that operate efficiently. Governments in Canada have publicly committed themselves to addressing barriers to interprovincial trade, including those existing barriers that impede labour mobility. CGA-Canada was optimistic that the Agreement on Internal Trade, which came into force in July 1995, would provide the right tools to remove barriers to trade and establish an open, efficient and stable domestic market. In summary, the Agreement on Internal Trade establishes a clear set of rules for internal trade; establishes an administrative structure for governments to manage the domestic market; and introduces mechanisms for assuring worker mobility across provincial boundaries. What is the practice of? Many professional accountants provide services to the public. There is generally no limit to the services that a professional accountant in public practice can provide, and only one aspect of public practice is regulated or restricted. This aspect is known to the public as, which is the provision of assurance and attest services services whereby the professional accountant provides an opinion on the reliability of the financial statements or other accounts. Professional accountants, like most other professionals in Canada, are self-regulated. The organizations to which they belong establish and maintain standards for education, training, service delivery, professional ethics and standards of performance. These professional organizations qualify and certify their members as professional accountants and regulate those offering services to the public. They also establish and maintain a complaints and discipline process, as well as providing continuing education programs to maintain the quality, currency, credibility and competence of those who use a professional designation. The professional regulatory organizations receive their authority through 3
provincial legislation that establishes their mandates, obligations and privileges, and protects their designations from use by non-accountants. In Canada, there are three professional accounting designations: Certified General Accountant (CGA), Certified Management Accountant (CMA) and Chartered Accountant (CA). Their members operate in all jurisdictions of Canada and are subject to consistent standards of education, training and professional competence. National standards allow complete mobility of professionals within their designation. All auditing and review engagements are performed according to the same standards. The standards are set by the Auditing and Assurance Standards Board, with input from many stakeholders, including the Certified General Accountants Association of Canada. All review engagements and audits undertaken by any public accountant in Canada are conducted to the same standard. In effect, there are national standards for audit and review engagements, and any professional accountant engaged in the practice of in Canada is trained to meet these standards. There may be different approaches to professional training and certification for accountants, but the competence and performance standards required in practice are common to all public accountants. What is the issue? Certified General Accountants are highly skilled professionals who, for years, have provided quality services to satisfied clients throughout Canada. In most Canadian provinces and territories, CGAs provide a full range of professional accounting services. Yet, there are limits to the range of services CGAs may provide in some jurisdictions despite evidence that this is unnecessary to protect consumers and that it restricts competition and choice for business operators. In January 2005, Bill 17, An Act to Amend the Public Accounting and Auditing Act, was proclaimed in Prince Edward Island. The legislation permits qualified CGAs to practice, a right previously granted only to Chartered Accountants in that province. In Ontario, once Bill 94, the Public Accounting Act 2004 is proclaimed, regulations will be issued and a reconstituted Public Accountants Council (the Council ) will be established. The Council will oversee the regulation of public accounting by developing and maintaining standards that the licensing bodies must meet. Under the legislation, CGA Ontario is one of three professional accounting organizations authorized to license and govern the activities of its members as public accountants. It is expected the complete regulatory framework will be in place in 2006. The new framework replaces a 40-year-old regime that had given one accounting designation the Chartered Accountants a monopoly over the provision of services. Similarly, in Nova Scotia and Newfoundland, councils or boards operating under legislative authority issue licences to practice. These bodies have a limited regulatory function and rely on professional accounting organizations to set and apply educational standards and to qualify, monitor and discipline their members and maintain qualifications. 4
CGA-Canada believes that the structure of these councils and boards must reflect the public interest their membership must be representative of all professional accounting designations and the public; their deliberations must be transparent; and their actions must be accountable. In Québec, legislation limits to Chartered Accountants. The province is the only jurisdiction in Canada that does not recognize CGAs as competent to practice. This is unfair and puts CGAs at a competitive disadvantage for no apparent or good reason. It also limits choice for businesses and individuals and is a barrier to mobility according to Canada s Agreement on Internal Trade (the AIT ). CGA New Brunswick has instituted proceedings under the AIT to ensure access for its members to in Québec. It has requested that a Trade Panel consider the issue. A Panel decision should be rendered in late 2005. A Panel established under the same AIT provisions in 2001 examined Ontario s existing licensing regime. The panel concluded that the monopoly in in Ontario was a barrier to labour mobility and was not necessary to protect consumers or Ontario s financial markets. What do others say? In a March 2005 paper published by the Organization for Economic Co-Operation and Development, the authors noted that barriers to trade restricted competition. Canada s regulated conduct doctrine exempts anti competitive behaviour when required by regulation, and thus significant parts of the economy remain shielded from the competition law. This is a particular problem with provincial government regulation. Restrictions on internal trade also continue to exist, and implementation of the Agreement on Internal Trade is less effective than it could be. More attention needs to be focused on removing those regulations that restrain competition, particularly in professional services. What needs to happen? By signing the Agreement on Internal Trade, all Canadian governments accepted the principle of national mobility for professionals, including accountants engaged in the practice of. As signatories to the AIT, all jurisdictions must ensure their licensing regimes are impartial and that they assess the competence of all applicants to perform in the same way regardless of their training and experience. Québec needs to change its legislation to accommodate accounting professionals, other than Chartered Accountants, who are trained and certified to practice in other provinces. And the federal government must review its legislation to ensure that no provisions limit to members of a particular professional accounting body or exclude those who are qualified to practice in any Canadian jurisdiction. The accounting profession cannot solve this problem alone. Governments must work with the profession. There is no reason for further delay. Canadians will be well served by an accounting regime that provides the choice and competition essential to ensure quality and reasonable prices in Canadian markets. 5
For further information, see the following: CGA-Canada Discussion Paper, May 2001, Canada s Agreement on Internal Trade: It Can Work If We Want It To (http://www.cga-canada.org/eng/news/pdf_ait_e.htm) The Red Tape Commission Report on Public Accounting (http://www.redtape.gov.on.ca/userfiles/page_attachments/ library/1/2156418_public_accounting_attachment_1.pdf) Agreement on Internal Trade Dispute Resolution Panel Report (http://www.intrasec.mb.ca/index_en/dispute.htm) Please visit www.cga-online.org/canada or telephone Carole Presseault, Vice-President, Government and Regulatory Affairs, CGA-Canada, at 613 789-7771, extension 222. Appendix: Overview of Public Accounting Regimes in Canada 6
Certified General Accountants Association of Canada Access to Public Accounting in Canada Provincial and territorial governments are responsible for professional and occupational standards. Professionals operate under provincial legislation that establishes their rights and obligations. In every Canadian province and territory, CGA associations qualify and regulate their members. Certified General Accountants are highly skilled, highly educated professionals, who for years have provided quality accounting services to satisfied clients everywhere in Canada. Jurisdiction Status of Access Regulatory Authority Additional Authority Found in the Following Statutes to Public Accounting Canada accorded in certain statutes. Bank Act, Canada Elections Act, Canada Post Corporation Act, Investment Companies Act, Cooperative Credit Associations Act, Trust Companies Act, Canada Mortgage and Housing Corporation Act, Federal-Provincial Fiscal Arrangements Act, Pension Benefits Standards Act, Competition Act, Loan Companies Act and Québec Savings Banks Act. British Columbia Accountants (Certified General) Act The Company Act provides that a member of CGA-BC or any CA or anyone who has been granted a license may perform audits of public companies. Other statutes specifying CGAs or CAs as qualified auditors include: Financial Institutions Act, International Financial Business Act, Legal Profession Act, Real Estate Act, School Act, Society Act and the Securities Act. Alberta The Regulated Accounting Profession Act ensures consistent regulations for all three accounting bodies in Alberta. The Securities Act requires that a CGA, CA or CMA sign any auditor s report filed under its provisions. Saskatchewan The Certified General Accountants Act. Under the Securities Act, the Saskatchewan Securities Commission has ruled that a CGA, CA or CMA must sign any auditor s report filed under its provisions. In 2001, the provincial government passed amendments to the Urban Municipalities Act, The Rural Municipalities Act and the Northern Municipalities Act as follows: Every council shall appoint an auditor who is a member in good standing of an accounting profession recognized pursuant to one of the following Acts: (a) The Management Accountants Act; (b) The Certified General Accountants Act, 1994; (c) The Chartered Accountants Act, 1986. 7
Jurisdiction Status of Access Regulatory Authority Additional Authority Found in the Following Statutes to Public Accounting Manitoba The Certified General Accountants Act. Under the Securities Act, the Manitoba Securities Commission has ruled that a CGA, CA or CMA must sign any auditor s report filed under its provisions. CGAs, CMAs or CAs are also recognized as qualified auditors in the following legislation: Municipal Act, Regional Waste Management Authorities Act, Election Finances Act, Securities Act, Public Schools Act, City of Winnipeg Act, Labour Relations Act, Law Society Act. Ontario Bill 94, the Public Accounting Act, 2004, received Royal Assent on June 17, 2004. The Act is currently awaiting proclamation Provincial associations/ institutes will become directly responsible for licensing and regulating individual public accountants. They will assume these responsibilities when their own rules meet the required standards set by a newly reconstituted Public Accountants Council (PAC). After setting standards in each of fourteen areas, the PAC will begin sufficiency testing to determine if the three professional associations meet those standards. The associations will be able to start issuing licenses once standards are met. Québec Auditing is restricted to CAs. However, there are significant exceptions. The Chartered Accountants Act and the Québec Professional Code regulate public accounting. A judicial ruling and various statutes specify the rights of Certified General Accountants to provide full audit services. These include Acts respecting School Boards, Insurance Companies, Co-operatives, Municipalities, Real Estate Brokers and CEGEPS. The Certified General Accountants Association of New Brunswick has launched a complaint under the Agreement on Internal Trade (AIT) against the government of Québec. The basis of the complaint is that the provisions of s. 24 of the Chartered Accountants Act, which establishes that only a Chartered Accountant can practice, is inconsistent with the AIT. New Brunswick is The Certified General Accountants Act establishes the right of CGAs to practice the full range of professional accounting servicess The following statutes also identify CGAs as qualified auditors: Auditor General Act, Credit Unions Act, Municipalities Act, Municipal Debentures Act, Loan and Trust Companies Act and the Workplace Health, Safety and Compensation Commission Act. 8
Jurisdiction Status of Access Regulatory Authority Additional Authority Found in the Following Statutes to Public Accounting Nova Scotia Auditing is restricted to individuals who are licensed by the Public Accountants Board. The Public Accountants Act regulates the licensing of through the Public Accountants Board. The Board updated its existing licensing standards in December 2002 and issues licenses to applicants who meet these new standards. About 20 CGAs are currently licensed. Prince Edward Island is Bill 17, An Act to Amend the Public Accounting and Auditing Act was proclaimed in January 2005. When passed, the Act will allow unimpeded access to public accounting to qualified CGAs. Newfoundland The Public Accountancy Act regulates the licensing of public accountants through the Public Accountants Licensing Board with equal representation from all three professional accounting groups and three members of the public one of whom is the chair. The following statutes also identify CGAs as qualified auditors, including: the City of Mount Pearl Act, the City of Cornerbrook Act, the Law Society Act, the Real Estate Trading Act, and the Act to Remove Anomalies and Errors in the Statute Law. NWT/ Nunavut The Certified General Accountants Association Act establishes the right of CGAs to practice the full range of professional accounting services including audits. Yukon The Certified General Accountants Association Act establishes the right of CGAs to practice the full range of professional accounting services including audits. The following statutes also specify CGAs as qualified auditors: the Education Act, the Societies Act and the Legal Professions Act. For further information, please contact CGA-Canada s Government Relations Office 613 789-7771, extension 222 Updated May 2005 9