Canada

Private Sector Accounting

Canada's corporate financial reporting framework is established under governing legislation, such as the Canada Business Corporations Act and the provincial Business Corporations Acts. The legislation specifies that generally accepted accounting principles (GAAP) be used when preparing general-purpose financial statements. The CPA Canada Handbook – Accounting (Handbook) is considered the source of Canadian GAAP.

The Accounting Standards Board of Canada (AcSB), an independent body, sets GAAP applicable to different types of entities:

• Publicly accountable enterprises (PAE) apply the IFRS Standards in Part I of the Handbook. The AcSB endorses IFRS Standards, as issued by the IASB, following its due process. 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);
• Private enterprises apply Accounting Standards for Private Enterprises in Part II of the Handbook.
• Not-for-profit organizations apply Accounting Standards for Not-for-Profit Organizations in Part III of the Handbook.
• Pension plans, and benefit plans that have characteristics similar to pension plans and provide benefits other than pensions, apply accounting standards for pension plans in Part IV of the Handbook.

Private enterprises and not-for-profit organizations may also choose to apply IFRS Standards. Standards in Part II to IV in the Handbook are domestic standards established by the AcSB in accordance with its due process and differ from IFRS Standards.

Public Sector Accounting

The Public Sector Accounting Board (PSAB), an independent body, sets accounting standards for the public sector in accordance with its due process. The Public sector refers to governments, government components, government organizations and partnerships. Each of these entities is a "public sector entity." The CPA Canada Public Sector Accounting Handbook (Handbook) includes the public sector accounting standards (PSAS). These standards apply to all public sector entities that issue general-purpose financial statements unless specifically directed or permitted to use alternative standards by PSAB, or limited in applicability as outlined in the individual Sections.

In 2020, the PSAB decided to continue developing PSAS, but future standards would be based on the principles of International Public Sector Accounting Standards (IPSAS). This means that if a project is undertaken and an IPSAS already exists, the principles of that IPSAS will be used as a base for developing the corresponding Canadian PSAS. To support this decision, the PSAB developed criteria for modifying and reviewing IPSAS principles and updated the GAAP hierarchy to position IPSAS as the first accounting framework to consult among pronouncements issued by other bodies authorized to issue accounting standards.

Audit Requirements

Legislation, such as the Canada Business Corporations Act and the provincial Business Corporations Acts, establish mandatory audit requirements and requires that audits be performed in accordance with generally accepted auditing standards (GAAS). The CPA Canada Handbook – Assurance (Handbook) is considered the source of Canadian GAAS.

The Auditing and Assurance Standards Board (AASB), an independent body, sets GAAS. The AASB adopts ISA as issued by the IAASB as Canadian Auditing Standards (CAS) and quality management standards as Canadian Standards on Quality Management (CSQM), in accordance with its due process. However, there may be circumstances where amendments are required, and such amendments are made in accordance with strict amendment criteria. The CASs constitute GAAS for an audit of financial statements.

The Canadian accountancy profession is regulated by the provincial and territorial accounting bodies (referred to within as provincial accounting bodies) of Chartered Professional Accountants (CPAs) and the Canadian Public Accountability Board (CPAB), which regulate auditors of reporting issuers.

In accordance with each provincial Chartered Professional Accountants Act, each provincial accounting body has the authority to: (i) grant and regulate the designation; (ii) maintain a registry of CPAs in each of their respective jurisdictions; (iii) set initial professional development and continuing professional development requirements; (iv) set ethical requirements; (v) carry out investigative and disciplinary processes; and (vi) conduct inspections for quality assurance. The CPA Canada and the provincial accounting bodies collaborate through the profession's Public Trust Committee to recommend ethical requirements, a harmonized quality assurance program, and investigative and disciplinary processes for adoption in each province as applicable and where permitted.

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

The Canadian Securities Administrators issued the National Instrument 52-108 Auditor Oversight, which 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. CPAB fulfills 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.

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 independent audit oversight function for public markets in Canada is performed by the Canadian Public Accountability Board (CPAB). The CPAB is a member of the International Forum of Independent Audit Regulators. The CPAB functions are outlined in the Regulation section.

CPA Canada

The CPA Canada enhances the Canadian CPA profession's influence, relevance and value by acting in the public interest, supporting its members, and contributing to economic and social development. The CPA Canada represents the CPA profession nationally, with international chapters in the Caribbean. The CPA Canada contributes to national and international accounting standard-setting and advocates before legislative bodies and public interest groups. The CPA Canada develops education materials for the provincial accounting bodies, 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 2012, the three professional accountancy organizations, the 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, CPA Canada signed an agreement to merge with the CGA-Canada. The merger became effective on October 1, 2014, integrating the country's national accounting bodies.

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).

The Canadian Public Accountability Board (CPAB), under National Instrument 52-108 Auditor Oversight, is responsible for conducting audit quality assurance (QA) reviews through the inspection of selected higher-risk sections of audit files of reporting issuers (RI) and by an evaluation of the elements of quality management of the firms who audit them.

Firms are subject to inspection by the CPAB depending upon their number of RI clients. Generally, firms auditing 100 or more RI are subject to annual inspection; those between 50 and 99 RI audits are subject to inspection every two years, and other firms are subject to inspection on their risk-adjusted methodology. CPA Canada states that the CPAB's QA system fulfills all the requirements of SMO 1.

According to a memorandum of understanding with the CPAB, the provincial accounting bodies share the responsibility for inspecting CPAs that perform audits of public companies. The provincial accounting bodies of CPAs also conduct inspections concerning quality management and assurance work not covered by the CPAB. The provincial accounting bodies collaborate through the profession's Public Trust Committee to maintain the harmonized quality assurance programs. The CPA Canada states that the provincial accounting bodies have fully operational QA review systems in place and that the QA review systems adhere to the requirements of SMO 1.

The Auditing and Assurance Standards Board (AASB) adopts the International Standards on Quality Management (ISQM) as the Canadian Standards on Quality Management (CSQM). The AASB's overriding goal is to adopt ISQMs without amendment. However, there may be circumstances where amendments are required, and such amendments are made following strict amendment criteria. The CSQM are issued in English and French.

Current Status: Adopted

The CPA Canada and the provincial accounting bodies collaborate through the profession's Public Trust Committee to consider initial and continuing professional education development (IPD and CPD) requirements and to consider the International Education Standards (IESs). The provincial accounting bodies of CPAs set each province's IPD and CPD requirements.

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

The CPA Canada states that the education requirements for Canadian CPAs meet or exceed the latest version of the IES.

Current Status: Adopted

Incorporating or other governing legislation generally establishes mandatory audit requirements and requires that audits be performed in accordance with generally accepted auditing standards (GAAS). The CPA Canada Handbook – Assurance (Handbook) is considered the source of Canadian GAAS.

The Auditing and Assurance Standards Board (AASB), an independent body, sets GAAS. The AASB adopts ISA as issued by the IAASB as Canadian Auditing Standards (CAS) and quality management standards as Canadian Standards on Quality Management (CSQM), in accordance with its due process. However, there may be circumstances where amendments are required, and such amendments are made in accordance with strict amendment criteria. The CASs constitute GAAS for an audit of financial statements. The CAS are issued in English and French.

Current Status: Adopted

The provincial accounting bodies of CPAs have the legislative authority to set ethical requirements for their members in accordance with each provincial Chartered Professional Accountants Act or other professional legislation. The provincial accounting bodies collaborate through the profession's Public Trust Committee to recommend standards for adoption in each province and to respond to IESBA consultations, including Exposure Drafts.

The CPA Canada reports that the ethical requirements of the harmonized Canadian CPA Code of Professional Conduct (CPA Code) are under active consideration to more closely align with the IESBA Code of Ethics unless differences are required in regards to Canadian laws, regulations, or the public interest. The 2023 IESBA Code, including provisions not yet in effect, is being considered and the IESBA sustainability developments are being monitored for consideration.

Current Status: Partially Adopted

The Public Sector Accounting Board (PSAB), an independent body, sets accounting standards for the public sector in accordance with its due process. The CPA Canada Public Sector Accounting Handbook (Handbook) includes the public sector accounting standards (PSAS). PSAB's standards are on a full accrual basis (IFAC/CIPFA International Public Sector Financial Accountability Index 2020).

These standards apply to all public sector entities that issue general-purpose financial statements unless specifically directed or permitted to use alternative standards by PSAB or limited in applicability as outlined in the individual sections.

In 2020, the PSAB decided to continue developing PSAS, but future standards would be based on International Public Sector Accounting Standards (IPSAS) principles. This means that if a project is undertaken and an IPSAS already exists, the principles of that IPSAS will be used as a base for developing the corresponding Canadian PSAS. To support this decision, the PSAB developed criteria for modifying and reviewing IPSAS principles and updated the GAAP hierarchy to position IPSAS as the first accounting framework to consult among pronouncements issued by other bodies authorized to issue accounting standards.

Current Status: Partially Adopted

The provincial accounting bodies of CPAs have the legislative authority to carry out investigative and disciplinary (I&D) processes for their members in accordance with the respective provincial Chartered Professional Accountants Acts or other professional legislation. The provincial bodies collaborate through the profession's Public Trust Committee to develop I&D processes that are as harmonized as possible and recommended for adoption in each province.

The CPA Canada states that the provincial accounting bodies have demonstrated their commitment to support and adhere to the requirements of SMO 6. The Public Trust Committee, through its Conduct and Discipline Standing Committee, reviewed in detail the provincial accounting bodies' I&D systems and processes and used the IFAC SMO 6 self-assessment tool, concluding that SMO 6 is being complied with in accordance with provincial legislative and regulatory requirements.

In addition, auditors providing services to reporting issuers are subject to the 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. Based on the information on the CPAB website and IFIAR profile, it appears the system also meets the SMO 6 benchmark.

Current Status: Adopted

The corporate financial reporting framework in Canada is established under governing legislation, such as the Canada Business Corporations Act and the provincial Business Corporations Acts. The legislation specifies that generally accepted accounting principles (GAAP) be used when preparing general-purpose financial statements. The CPA Canada Handbook – Accounting (Handbook) is considered the source of Canadian GAAP.

The Accounting Standards Board of Canada (AcSB), an independent body, sets GAAP applicable to different types of entities:

• Publicly accountable enterprises (PAE) apply the IFRS Standards in Part I of the Handbook. The AcSB endorses IFRS Standards, as issued by the IASB, following its due process. 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);
• Private enterprises apply Accounting Standards for Private Enterprises in Part II of the Handbook.
• Not-for-profit organizations apply Accounting Standards for Not-for-Profit Organizations in Part III of the Handbook.
• Pension plans, and benefit plans that have characteristics similar to pension plans and provide benefits other than pensions, apply accounting standards for pension plans in Part IV of the Handbook.

Private enterprises and not-for-profit organizations may also choose to apply IFRS Standards. Standards in Part II to IV in the Handbook are domestic standards established by the AcSB in accordance with its due process and differ from IFRS Standards.

Current Status: Adopted

Relevant Organizations

• Accounting Standards Board (AcSB)
• Accounting Standards Oversight Council (AcSOC)
• Auditing and Assurance Standards Board (AASB)
• HYPERLINK "https://www.frascanada.ca/en/aasoc" Auditing and Assurance Standards Oversight Council (AASOC)
• Canadian Public Accountability Board (CPAB)
• Canadian Securities Administrators (CSA)
• Chartered Professional Accountants of Canada (CPA Canada)
• Public Sector Accounting Board (PSAB)
• Provincial Accounting Bodies (individual websites)

Relevant Legislation

• Banking Act
• Canada Business Corporations Act and Canada Business Corporations Regulations
• Canadian Securities Administrators , National Instrument - 52-108 ?Auditor Oversight?
• HYPERLINK "https://www.osc.ca/en/securities-law/instruments-rules-policies/5/52-107/consolidation-ni-52-107-and-its-cp-january-1-2011" \t "_blank" National Instrument 52-107 Acceptable Accounting Principles and Auditing Standards 
• Canadian Not-for-profit Corporations Act and Canadian Not-for-profit Corporations Regulations
• Insurance Companies Act

Relevant Publications

• CPA Canada, SMO Action Plan, 2023.
• IFIAR, Member Profile – CPAB
• IFRS Foundation, IFRS Application around the World?Jurisdictional Profile: Canada, October 2023.