Canada posts first audit firm inspection reports

The Canadian Public Accountability Board published individual auditing firm inspection reports for the first time, marking a significant milestone in the evolution of the board’s public disclosure practices. 

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The publication of reports on the Big Four firms by Canada’s auditing regulator comes during a time of transition in the U.S. auditing profession, after Securities and Exchange Commission chairman Paul Atkins appointed a new chair and three new board members at the Public Company Accounting Oversight Board at the end of January. They are expected to pursue far less enforcement than the PCAOB did under the Biden administration and former chair Erica Williams. Recent reports from the Brattle Group and Cornerstone Research show the PCAOB and the SEC significantly reduced their enforcement actions against auditing firms last year.

“Today’s achievement represents an important step forward in CPAB’s commitment to transparency,” said CPAB CEO Sonny Randhawa in a statement Wednesday. “Public disclosure of these reports strengthens confidence in audit quality and delivers meaningful information to investors, audit committee chairs and other stakeholders across Canada.”

The reports found deficiencies in each of the Big Four audit firms, with KPMG having the largest number, at five significant findings in the 24 audit files inspected by the CPAB. Ernst & Young had two significant findings in the 11 files inspected. PricewaterhouseCoopers also had two significant findings in the 14 files inspected, while Deloitte had one significant finding in the 13 files inspected. 

The CPAB has been offering more disclosures and shedding more light on the auditing and accounting profession in recent years, including public disclosure of significant enforcement actions and unresolved recommendations, along with requirements for firms to share issuer‑specific inspection findings with audit committees. The changes come after public consultations and the implementation of related rules and legislative amendments last March.