October 2013 Barbara Collins On October 17, 2013, the Canadian Securities Administrators (the "CSA") published a request for comments on proposed amendments to National Instrument 52-108 Auditor Oversight ("NI 52-108"). The amended NI 52-108 is intended to replace the current NI 52-108 in its entirety.
The purpose of NI 52-108 is to ensure the integrity of financial reporting of public companies by ensuing quality, independent auditing. The main focus of the amendments to NI 52-108 is the change of the triggers for when a public accounting firm is to deliver to the regulator a notice relating to remedial action imposed by the Canadian Public Accountability Board ("CPAB"). The CSA is also proposing to amend "change in auditor" rules so that reporting issuers provide more timely and complete information to the market. In addition, a new prospectus requirement is being considered that would require issuers to disclose that an auditor is not subject to the CPAB oversight program. CSA is also proposing an amendment to disclosure requirements for foreign issuers requiring them to comply with NI 52-108 (which aligns their auditor and auditor oversight obligations).
Below is a summary of the amendments:
- require a public accounting firm to deliver a notice to the regulator if CPAB imposes certain types of remedial actions regardless of the labels CPAB attaches to them (e.g., "sanction" or "restriction");
- require a public accounting firm to notify its reporting issuer clients if it is not in compliance with certain requirements in the Instrument;
- require disclosure in a prospectus, if the financial statements of the issuer included in the prospectus were audited by an auditor that, as at the date of the most recent auditor's report on financial statements included in the prospectus, was not required to be subject to, and was not subject to the oversight program of CPAB;
- reduce the filing period from 30 days to 14 days for a change of auditor notice required by National Instrument 51-102 Continuous Disclosure Obligations ("NI 51-102") following the termination, resignation or appointment of an auditor by a reporting issuer;
- require a predecessor auditor or a successor auditor to notify the regulator on a timely basis if a reporting issuer does not file a change of auditor notice required by NI 51-102, and
- add a condition to the current exemptions in National Instrument 71-102 Continuous Disclosure and Other Exemptions Relating to Foreign Issuers relating to audited financial statements of SEC foreign issuers and designated foreign issuers to require compliance with NI 52-108. This aligns the requirements for foreign issuers with the current requirement for an auditor of a foreign issuer to comply with NI 52-108.
The CSA is not proposing changes to the notification rules for when an auditor must provide notice to the audit committee of a reporting issuer when remedial actions have been imposed by CPAB. Any such changes have been deferred until further consideration is given to the recommendations by the Enhancing Audit Quality initiative that more information on CPAB inspection results be given to audit committees.
The comment period on the proposed amendments is open until January 15, 2014.
The foregoing provides only an overview. Readers are cautioned against making any decisions based on this material alone. Rather, a qualified lawyer should be consulted.
© Copyright 2013 McMillan LLP
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