CAs For Change - Professional Standards

"The Toronto Financial Services Alliance is one of the city's leading advocates for boosting the competitiveness of our financial sector. Creating the right environment for the right people is part of making that happen. The issues raised by Ontario's "CAs for Change" campaign will be important in accomplishing this task."

Janet Ecker, President, The Toronto Financial Services Alliance

Public accounting qualification standards and the AIT

The Ontario government has worked hard to strengthen the Agreement on Internal Trade. In particular, a revised section on labour mobility enables the “automatic certification” of workers if they move from one province to another, with no need for additional training or testing. Built into the AIT, however, is a way to exempt some occupations from this requirement if it can be shown that doing so protects the public. This applies where one jurisdiction can prove that the way it regulates a given occupation is superior to the way others do it.

Case in point: In 2006, the Government of Ontario enacted public accounting legislation that benchmarked qualification standards against our major international trading partners. Other Ontario accounting designations could join CAs in public accounting if their standards passed the same test. But in many other provinces, there are either lower legislated standards or none whatsoever. So, late in 2009, the Government of Ontario adopted an AIT exception for this province’s rigorous public accounting system.

The next step is to work toward nationally consistent standards for public accounting benchmarked against Ontario’s. This would provide genuine labour mobility for all public accountants in Canada in a way that strengthens protection for investors and the public.

Globe and Mail / Ontario CA Publication on Professional Standards

Page 1: Links between the Agreement on Internal Trade and the public accounting issue - pdf
Page 2: Q and A, and perspectives from Ontario's Attorney General - pdf
Page 3: Lessons from the U.S. on the value of consistent public accounting standards - pdf
Page 4: Brian Hunt: “Don’t erect international barriers by taking down domestic ones” - pdf
Page 5: Ad Campaign - pdf

FREQUENTLY ASKED QUESTIONS

What is public accounting?
Who is allowed to practise public accounting in Canada?
What is the public accounting qualification standards issue raised by the CAs for Change campaign?
Why is it important to have nationally consistent, internationally recognized standards for public accounting?
What should such standards require?
Do CAs have nationally consistent, internationally recognized standards?
How do nationally consistent, internationally recognized standards of qualification and conduct for public accounting relate to the AIT?
How can the public be sure its best interests are being protected when standards are set for public accounting?
Do others share the view that professional standards such as these should be aligned with our major trading partners?
Are high internationally recognized standards for public accounting a barrier to competition?

What is public accounting?

Public accounting is the business of expressing independent assurance on financial statements and other financial information of enterprises of every size, to ensure that the information truly reflects their financial condition. Large and small investors, financial institutions and other third parties then use that assurance to help them make informed investment and lending decisions. Many of those decisions involve investments in RSPs, mutual funds or pension funds – making the practice of public accounting relevant to nearly all Canadians.

Who is allowed to practise public accounting in Canada?

This varies depending on the province and territory. In Ontario and Quebec, for example, the standards for education, experience and conduct for public accounting have been set at high, internationally recognized levels. This has effectively meant only Chartered Accountants were qualified to practise, although public accounting practice rights will now be offered to accountants with other designations in both provinces if they can achieve the standards that CAs are required to meet.

While CA standards for qualification and conduct for public accounting are internationally recognized, in some parts of Canada, legislated standards are either set below the internationally recognized level or are non-existent. In some parts of the country anyone who can get a client can sign off on financial statements. However, only the work of a CA would be seen as equivalent to that of accountants working in public accounting outside of Canada, as the CA profession has reciprocity agreements with the leading accounting bodies of our major trading partners, such as the U.S., U.K., Japan and others.

What is the public accounting qualification standards issue raised by the CAs for Change campaign?

Ontario’s Chartered Accountants believe it is important to have nationally consistent, internationally recognized standards of qualification and professional conduct for public accountants. Currently, standards in the various provinces and territories vary between the internationally recognized, legislated standards required in Ontario and Quebec, to lower or in some cases no legislated standards for those wishing to practise public accounting outside the CA profession. Canada’s premiers now have an opportunity to harmonize these and other professional standards to a high level that protects the public and strengthens our international competitiveness, through reforms they have announced for the Agreement on Internal Trade, effective in early 2009.

Why is it important to have nationally consistent, internationally recognized standards of qualification and professional conduct for public accounting?

Of the leading economic powers, Canada is the only country that has varying standards for public accounting and the only one containing jurisdictions where there are no legislated standards at all. Because CAs in all provinces and territories must meet internationally recognized standards of qualification and professional conduct, they are able to provide public companies, in provinces having lower or non-existent standards, with services that are acceptable in Ontario, Quebec and in other countries. However, in a world where investors and the public are demanding higher levels of certainty and protection, it is increasingly unacceptable for Canada not to have internationally recognized standards for the conduct of public accounting.

What should such standards require?

Standards for conducting public accounting should set the levels for education, practical experience and conduct oversight at the same high levels as those of accounting bodies in leading countries, such as the U.S. and U.K. That has been the CA practice for many years and it has helped protect and build Canada’s reputation as a good place to invest, work and create jobs. Any accounting body or select portion of its top members that can achieve those standards should be allowed to license its members for public accounting.

Do CAs have nationally consistent, internationally recognized standards?

For many years, CAs have upheld qualification standards that match or exceed those of our major trading partners. This is demonstrated by the mutual recognition agreements the CA profession has with the top accounting bodies of most leading industrialized countries, such as U.S. CPAs.

How do nationally consistent, internationally recognized standards of qualification and conduct for public accounting relate to the AIT?

Canada's provincial premiers have announced their intent to strengthen the AIT to achieve enhanced inter-provincial trade and labour mobility between provinces by April 1, 2009. Specifically, the changes would strengthen provisions dealing with the recognition of credentials and training. The CA profession fully supports these goals, and has made submissions to the Government of Ontario on how they could be achieved. We believe that to ensure Canada remains competitive in a global economy, public accounting qualification standards must meet the internationally recognized, legislated levels already found in Ontario and Quebec and across the United States. The AIT process is an excellent opportunity for Canada to harmonize qualification standards for this crucial financial service in each province and territory – at a level that will meet the needs and expectations of financial markets and investors at home and abroad.

How can the public be sure its best interests are being protected when standards are set for public accounting?

The Ontario government’s regulation of public accounting is an excellent example of a system that fosters a high-quality and competitive environment for professional accounting services. In Ontario, regulation of this exacting and important field is characterized by:

a governance framework created by an Act of the Provincial Legislature
a role for Ontario’s Attorney General in approving the necessary professional standards
an independent oversight body called the Public Accountants Council (PAC) comprised of a majority of non-accountants to develop those standards and provide an additional layer of public oversight
vigorous competition between those accounting bodies authorized to provide public accounting services.

This system fully protects the public interest while promoting competition and could serve as a template for other jurisdictions.

Do others share the view that professional standards such as these should be aligned with our major trading partners?

Yes. In a landmark study of competitiveness issues facing Canada, the federal Competition Policy Review Panel recently recommended that Canada harmonize its product and professional standards with the United States, unless doing
so could be shown to be against the public interest. Adopting nationally consistent standards of qualification and conduct for public accountants would achieve this goal. That’s because, in the U.S., the Uniform Accountancy Act already
ensures consistent public accounting standards across 48 states. If all public accountants in Canada met those standards as CAs do, we would have fully harmonized professional public accounting qualification standards with our largest trading partner.

Are high internationally recognized standards for public accounting a barrier to competition?

In a recent report, Canada’s Competition Bureau stated: ‘To facilitate competition in public accounting services, the regulators in each province and territory should consider establishing minimum necessary competencies that public accountants should have and allowing members of all domestic and foreign accounting designations that meet this standard to offer public accounting services.’

This makes the case for requiring consistent, internationally recognized standards for all those who would practise public accounting. Such a reform would dissolve any barriers to labour mobility that still exist in Canada while ensuring uniformly high quality of service. It would also bring the country into line with the U.S., where the Uniform Accounting Act has achieved the same effect across more than 40 states to date.

By eliminating the current ‘patchwork quilt’ of public accounting standards, adopting internationally recognized, nationally consistent standards would eliminate labour mobility barriers, better protect investors and the public and enhance Canada’s international trade relationships – all while fostering competition for professional accounting services across a high level playing field. In contrast, lowering standards within Canada could lead to raising barriers with our international trading partners and, ultimately, make Canada less competitive.

The National Post Op-Ed: The Value of the Audit in Challenging Times
Toronto Star Op-Ed: Interprovincial Labour Mobility, Yes. Lower Standards, No
News Release: Institute of Chartered Accountants of Ontario Support Competition Panel Finding
Competition Policy Review Panel Compete to Win
Competition Bureau of Canada Report on Accounting Self-Regulation
News Release: Institute of Chartered Accountants of Ontario Responds to Competition Bureau Report
News Release: Institute of Chartered Accountants of Ontario Submission to Federal Competition Policy Review Panel

By Section: Institute of Chartered Accountants of Ontario Submission to Federal Competition Policy Review Panel

Introduction by Institute President and CEO Brian Hunt, FCA
Canada in a Global Context
Becoming a Destination for Capital, Talent and Innovation
Proposed National Public Accounting Standards: A Principled Approach
The Public Accounting Act, 2004
Backgrounder: The Public Accounting Act, 2004
Recognized Accounting Bodies
Accounting Standards Board

KEY POINTS

Ontario’s competitiveness benefits from internationally recognized high standards for the qualification and conduct of public accounting that are driven by the demands of our major trading partner relationships. These Ontario standards are mandated in legislation – the Public Accounting Act, 2004 – which was passed with the support of all parties.
The Act sets out the required qualification and conduct standards for public accountants. They are benchmarked against internationally recognized standards to ensure we can maintain mutual recognition agreements.
On the basis of meeting these standards, other Ontario accounting bodies can license their members to practise public accounting alongside CAs.
However, not all provinces enjoy internationally recognized, legislated high standards for the qualification and conduct of public accounting outside the CA profession. In fact, there is a “patchwork quilt” of 13 different forms of regulation across the country. In some provinces, there are no standards mandated by legislation – and you don’t even need an accounting designation.
Variations range from internationally recognized, government-mandated regulation in Ontario and Quebec to no standards of qualification and conduct for public accountants at all in other provinces.
By contrast, CAs in every province and territory must all meet our profession’s uniformly high standards, which are required under our international trading partner commitments.
To ensure our competitiveness, all of Canada needs internationally recognized, nationally consistent standards of qualification and conduct for all those who want to practise public accounting, as is required in Ontario.
A consistent, legislated framework for public accounting qualifications in every province and territory would meet the requirements of the Agreement on Internal Trade. The AIT is being changed in 2009 to ensure unfettered labour mobility within Canada by requiring that occupational credentials are recognized across jurisdictions.
This legislative initiative would also complement the U.S. Uniform Accountancy Act, which extends consistent public accounting standards across more than 40 U.S. states and territories in a similar way.