Canada

Member Organizations

Member Organization Associate Other PAOs

  Chartered Professional Accountants Canada

Legal and Regulatory Environment

  • Overview of Statuatory Framework for Accounting and Auditing

    The corporate financial reporting framework in Canada is established under the Canada Business Corporations Act and the provincial Business Corporations Acts.

    The Accounting Standards Board of Canada (AcSB), an independent body, sets accounting standards for all private sector entities, which includes separate accounting standards for publicly accountable enterprises (PAE), private enterprises, not-for-profit organizations, and pension plans. AcSB has adopted IFRS, as issued by the IASB, to be applied for PAEs, which are defined as entities, other than not-for-profit organizations, that have issued, or are in the process of issuing, debt or equity instruments that are, or will be, outstanding and traded in a public market or hold assets in a fiduciary capacity for a broad group of outsiders as one of their primary businesses. The IFRS are in Part I of the CPA Canada Handbook.

    Accounting standards for non-PAEs are stipulated in the CPA Canada Handbook. Accounting Standards for Private Enterprises (Part II), the Accounting Standards for Not-for-profit organizations (Part III), and the CPA Canada Handbook on Pension Plans (Part IV), represent the accounting framework for non-PAEs. These standards differ from IFRS; however, private enterprises and not-for-profit organizations may choose to apply IFRS.

    The Canada Business Corporations Act and the provincial Business Corporations Acts establish mandatory audit requirements for all companies. Under the Acts, the audit requirement can be waived if all of the shareholders consent in writing to the exemption for that year. Canadian GAAS means generally accepted auditing standards as set out in the CPA Canada Handbook – Assurance, as amended from time to time. The Auditing and Assurance Standards Board (AASB) sets Canadian Auditing Standards (CAS) for all audits of financial statements. The AASB has adopted ISA as issued by the IAASB as the CAS on an ongoing basis since 2010.

    The Public Sector Accounting Board (PSAB) establishes accounting and reporting standards for the public sector. The CPA Canada Public Sector Accounting Handbook contains accounting standards that apply to all public sector entities (governments, government components, government organizations, certain government partnerships and government not-for-profit organizations) that issue general purpose financial statements unless specifically directed or permitted to use alternative standards by PSAB.

  • Regulation of Accountancy Profession

    The Canadian accountancy profession is regulated by the provincial accounting bodies of Chartered Professional Accountants (CPAs) and the Canadian Public Accountability Board (CPAB), which is responsible for regulating auditors of publicly listed entities.

    In accordance with each provincial Chartered Professional Accountants Act, each provincial body has the authority to: (i) maintain a registry of CPAs in each of their respective jurisdictions; (ii) set initial professional development and continuing professional development requirements; (iii) set ethical requirements; (iv) carry out investigative and disciplinary processes; and (v) conduct inspections for quality control of assurance. The provincial bodies collaborate through the CPA Canada to set ethical requirements, a harmonized quality assurance program and investigative and disciplinary processes that are recommended for adoption in each province.

    In 2012, the three professional accountancy organizations, Canadian Institute of Chartered Accountants (CICA); the Certified General Accountants Association of Canada (CGA-Canada); and the Society of Management Accountants of Canada (CMA Canada) developed a framework to unite Canada’s accounting profession under one umbrella organization. In January 2013, CICA and CMA Canada established the CPA Canada. In October 2013, the CPA Canada signed an agreement to merge with the CGA-Canada. The merger became effective on October 1, 2014, completing the integration of the country’s national accounting bodies.

    To qualify for the CPA designation, candidates are required to have an undergraduate degree and complete the CPA Professional Education Program. In addition, candidates must complete relevant practical experience and the Common Final Examination.

    The CPAB is responsible for (i) registration of audit firms that audit reporting issuers; (ii) inspection of registered public accounting firms; (iii) investigation and discipline of registered audit firms; and (iv) providing comments and recommendations on accounting and auditing standards to relevant standard-setting bodies.

    The Canadian Securities Administrators, empowered by the National Instrument 52-108 on Auditor Oversight, requires auditors of reporting issuers to be registered with the CPAB as CPAB participants, and requires reporting issuers to issue financial statements audited only by CPAB participating firms.

  • Audit Oversight Arrangements

    The audit oversight function in Canada is performed by the Canadian Public Accountability Board (CPAB), which was established on April 14, 2003 under the Canada Corporations Act by the Canadian Securities Administrators, the Canadian Office of the Superintendent of Financial Institutions, and the CPA Canada as part of a regulatory response to perceived deficiencies in financial reporting by reporting issuers.

    The Canadian Securities Administrators, empowered by the National Instrument 52-108 on Auditor Oversight, requires auditors of reporting issuers to be registered with the CPAB as CPAB participants, and requires reporting issuers to issue financial statements audited only by CPAB participating firms. As Canada’s audit regulator, CPAB protects the investing public’s interests through effective regulation and by promoting high-quality, independent auditing. CPAB contributes to public confidence in the integrity of financial reporting, which supports Canadian capital markets.

    CPAB fulfils its mandate in two ways: through inspections and by involving a broader range of stakeholders in a discussion about and better understanding of the audit process. This requires a multi-faceted approach to stakeholder engagement and inspection methodology, including root-cause analysis, risk assessment, and value-added recommendations.

    The mandate of the CPAB includes (i) registration of audit firms that audit reporting issuers; (ii) inspection of registered public accounting firms; (iii) investigation and discipline of registered audit firms; and (iv) providing comments and recommendations on accounting and auditing standards to relevant standard-setting bodies. The CPAB is a member of the International Forum of Independent Audit Regulators.

  • Professional Accountancy Organizations

    The CPA Canada represents the CPA profession nationally, with international chapters in Asia and the Caribbean. The CPA Canada contributes to national and international accounting standard setting, and serves as an advocate before legislative bodies and public interest groups. The CPA Canada sets educational standards, provides educational guidance materials to its members, develops the Common Final Examination, and promotes the monitoring and enforcement of compliance with the profession’s technical and ethical standards amongst its members.

    In addition to being a member of IFAC, the CPA Canada is a member of the Confederation of Asian and Pacific Accountants, the Institute of Chartered Accountants of the Caribbean, the Global Accounting Alliance and the International Federation of Francophone Accountants (Federation Internationale des Experts-Comptables Francophone, or FIDEF).

Adoption of International Standards

  • Quality Assurance

    The Canadian Public Accountability Board (CPAB), under the Canada Corporations Act, is responsible for conducting quality assurance (QA) reviews through the inspection of selected high-risk sections of audit files of reporting issuers (RI) and by an evaluation of the elements of quality control of the firms who audit them.

    Firms are subject to inspection by the CPAB depending upon their number of RI clients. Generally, firms with more than 100 RI clients are subject to annual inspection; those with between 50 and 100 clients are subject to inspection every two years; and other firms are subject to inspection every three years. The CPA Canada states in its 2018 SMO Action Plan that the CPAB’s QA system fulfills all the requirements of SMO 1.

    Pursuant to a memorandum of understanding with the CPAB, the provincial bodies share the responsibility for inspecting CPAs that perform audits of public companies.  The provincial accounting bodies of CPAs conduct inspections with respect to quality control and assurance work not covered by the CPAB. The provincial bodies collaborate through the CPA Canada to harmonized quality assurance program.

    The CPA Canada states in its 2018 SMO Action Plan that the provincial bodies have fully operational QA review systems in place, and that the QA review systems adhere to the requirements of SMO 1.

    Current Status: Adopted

  • International Education Standards

    The CPA Canada shares responsibility for establishing initial and continuing professional education development (IPD and CPD) requirements; collaborating with the provincial accounting bodies of CPAs to set requirements in each province.

    The Common Final Examination, developed and administered by CPA Canada, and professional experience are required by all the provincial bodies. CPAs must adhere to CPD requirements set forth by the provincial bodies of the jurisdiction where a CPA designation is held.

    The CPA Canada states in its 2018 SMO Action Plan that the education requirements in place for Canadian CPAs meet or exceed the IES with the most recent changes to IES 8 recommended for adoption by the provincial bodies before January 1, 2019.

    Current Status: Adopted

  • International Standards on Auditing

    The Canada Business Corporations Act and the provincial Business Corporations Acts establish mandatory audit requirements for all companies. Under the Acts, the audit requirement can be waived if all of the shareholders consent in writing to the exemption for that year. Canadian GAAS means generally accepted auditing standards as set out in the CPA Canada Handbook – Assurance, as amended from time to time The Auditing and Assurance Standards Board (AASB) sets Canadian Auditing Standards (CAS) for all audits of financial statements. The AASB has adopted ISA as issued by the IAASB as the CAS on an ongoing basis since 2010.

    The CPA Canada states in its 2018 SMO Action Plan that the AASB has approved the new auditor reporting standards and these have been included in the CPA Canada Handbook – Assurance. The only exception is that key audit matters (KAM) will be reported only if required by law or regulation or the auditor voluntarily reports KAM as part of the audit. The auditor reporting standards are applicable December 15, 2018.

    The CAS are issued in English and French. The CPA Canada provides the translation into French.

    Current Status: Adopted

  • Code of Ethics for Professional Accountants

    The provincial accounting bodies of CPAs have the authority to set ethical requirements for their members in accordance with each provincial Chartered Professional Accountants Act. The provincial bodies collaborate through the CPA Canada to set standards that are recommended for adoption in each province.

    The CPA Canada reports in its 2018 SMO Action Plan that the ethical requirements of the Canadian CPA Code of Professional Conduct (CPA Code) are essentially converged with the IESBA Code of Ethics noting that recent changes such as NOCLAR are being considered and states that other than recent changes, the requirements are no less stringent than those of the IESBA Code unless required in regards to Canadian laws, regulations or public interest.

    Current Status: Partially Adopted

  • International Public Sector Accounting Standards

    The Public Sector Accounting Board (PSAB) establishes accounting and reporting standards and other guidance for use by governments and other public sector entities in Canada.

    PSAB’s standards are on a full accrual basis many of which are similar to IPSAS. The federal government and all provinces, municipalities and government not-for-profit organizations apply these standards.

    A key objective of the 2017-2020 PSAB Strategic Plan is to consider whether the IPSAS should be adopted in Canada in the future, and if so, how this could be achieved.

    Current Status: Partially Adopted

  • Investigation and Discipline

    The provincial accounting bodies of CPAs have the authority to carry out investigative and disciplinary (I&D) processes for their members in accordance with the respective provincial Chartered Professional Accountants Acts. The provincial bodies collaborate through the CPA Canada to develop I&D processes that are as harmonized as possible and recommended for adoption in each province.

    The CPA Canada states in its 2018 SMO Action Plan that the provincial bodies have demonstrated their commitment to support and adhere to the requirements of SMO 6. The CPA Canada has developed a comparison of the provincial bodies’ I&D systems and processes against the requirements of SMO 6. Through this assessment it has concluded that two areas of the SMO 6 requirements—independent reviews and reporting to outside entities—have not been incorporated due to legislative requirements in various jurisdictions.

    In addition, auditors providing services to reporting issuers are subject to regulation of the Canadian Public Accountability Board (CPAB), which was established on April 14, 2003 under the Canada Corporations Act. The CPAB is empowered to investigate and discipline registered audit firms. The extent of alignment of the CPAB’s investigation and discipline system with requirements of SMO 6 is unclear.

    Current Status: Partially Adopted

  • International Financial Reporting Standards

    The Business Corporations Regulations and securities legislation require companies to prepare financial statements in accordance with Canadian generally accepted accounting principles (Canadian GAAP) as set out in the CPA Canada Handbook – Accounting. The Accounting Standards Board (AcSB) an independent body, sets accounting standards for all entities outside of the public sector. This includes separate accounting standards for publicly accountable enterprises (PAE), private enterprises, not-for-profit organizations, and pension plans. AcSB has adopted IFRS, as issued by the IASB, to be applied for PAEs, which are defined as entities, other than not-for-profit organizations, that have issued, or are in the process of issuing, debt or equity instruments that are, or will be, outstanding and traded in a public market, or hold assets in a fiduciary capacity for a broad group of outsiders as one of their primary businesses. The IFRS are in Part I of the CPA Canada Handbook.

    Qualifying investment companies and segregated accounts of life insurance enterprises and entities with rate-regulated activities are required to adopt IFRS for interim and annual financial statements related to fiscal years beginning on or after January 1, 2014 and January 1, 2015, respectively.

    Companies that are not required to use IFRS follow a separate financial reporting framework for private enterprises developed by the AcSB, but may choose to apply full IFRS. IFRS for SMEs was considered for private enterprises but the AcSB decided that domestically developed standards would be more appropriate.

    Current Status: Adopted

Disclaimer

IFAC bears no responsibility for the information provided in the SMO Action Plans prepared by IFAC member organizations. Please see our full Disclaimer for additional information.

Methodology

Methodology
Last updated: 09/2018
We welcome feedback. Please email compliance@ifac.org

Thank you for your interest in our publications. These valuable works are the product of substantial time, effort and resources, which you acknowledge by accepting the following terms of use. You may not reproduce, store, transmit in any form or by any means, with the exception of non-commercial use (e.g., professional and personal reference and research work), translate, modify or create derivative works or adaptations based on such publications, or any part thereof, without the prior written permission of IFAC.

Our reproduction and translation policies, as well as our online permission request and inquiry system, are accessible on the Permissions Information web page.

For additional information, please read our website Terms of Use. ALL RIGHTS RESERVED.