Click here to access a list of participating audit firms subject to enforcement actions imposed based on investigation findings and significant enforcement actions arising from inspection findings imposed after January 1, 2023.
Throughout our regulatory assessment program, CPAB inspects audits conducted by Firms and identifies audit deficiencies that require remediation. The CPAB Rules (Rules) also provide a framework of enforcement mechanisms to address audit quality deficiencies at the file and firm levels.
Throughout the inspection process, a Firm and its engagement team are given the opportunity to provide perspectives and written responses in relation to the facts, findings and recommendations arising from CPAB’s inspection. Once the inspection process has concluded matters of concern may be escalated to CPAB’s Enforcement Department to determine if enforcement actions are warranted. Enforcement actions may include the imposition of requirements, restrictions or sanctions[1].
Requirements typically involve CPAB mandating that the Firm implement targeted actions or change certain practices to improve audit quality, such as conducting a cultural assessment or providing additional training. Restrictions typically involve CPAB limiting the audit firm’s practice, including restricting the Firm from taking on new reporting issuer clients, high risk reporting issuer clients or reporting issuer clients in particular industries. Sanctions typically include a public censure or termination of a firm’s status as a participating audit firm.
CPAB may commence an investigation when it considers that a Violation Event may have occurred and wishes to seek additional information. A Violation Event includes conduct that breaches the CPAB Rules or professional standards for the audit profession and may have an impact on the provision of audit services. It also encompasses breaches of enforcement actions previously imposed on a Firm.
To impose enforcement actions on a Firm, a recommendation is brought to CPAB’s Enforcement Screening Panel (Panel), comprised of senior members of the CPAB Leadership Team. The Panel will assess the matter considering, among other things, the severity of the conduct, the enforcement history of the Firm (if any), the risk posed to the investing public and the Firm’s s level of cooperation throughout the process. In circumstances where it is determined that enforcement actions should be pursued, a recommendation will be brought to the CPAB Board of Directors (Board) for evaluation and determination. If approved, the Firm is notified of CPAB’s proposal to impose enforcement actions including the particulars of the proposed requirements, restrictions or sanctions.
Should a Firm wish to challenge CPAB’s enforcement actions it may petition for a review proceeding before a panel of independent hearing officers within 15 days of receiving notice of the proposal to impose enforcement actions.
CPAB and the Firm may engage in settlement discussions throughout the process in an effort to reach a resolution acceptable to both parties.
Administrative matters that require clarification, or reasonable requests for extensions of certain deadlines can be addressed through informal discussions with Enforcement staff.
[1] In the appropriate circumstances CPAB may engage the firm in a process of informal resolution to address the audit deficiencies identified. This may include a voluntary commitment such as an undertaking.
An order for an Investigation may be issued for a Participating Audit Firm (Firm) if CPAB considers that a Violation Event may have occurred. A Violation Event includes conduct that breaches the CPAB Rules (Rules) or standards of professional conduct for the audit profession that may have an impact on the provision of audit services. It also encompasses a breach of enforcement actions previously imposed on a Firm.
During an investigation CPAB may require or request access to documentation and information from Firms and third parties (including e-mails, text messages, instant messages, internal correspondence, materials provided to the Firm’s board of directors, audit working papers) and require individuals to provide testimony with respect to any matter that CPAB considers relevant or material to an Investigation. Pursuant to the Participation Agreements entered into by CPAB and the Firms at registration, CPABs investigation costs are recoverable from the Firm.
Once the investigation has concluded, if a Violation Event is being identified, CPAB may recommend to the Enforcement Screening Panel that enforcement actions be proposed. If the recommendation is accepted, a proposal to impose enforcement actions is brought to the CPAB Board of Directors for evaluation and determination. If approved by the Board of Directors, a formal notice is provided to the Firm outlining the specifics of the enforcement actions which are being proposed. This process does not preclude a negotiated settlement between the parties at any time.
Pursuant to 603 of the Rules, a Firm has 15 days to petition for a review proceeding following the receipt of the notice. If the Firm does not petition, written notification is provided advising that the enforcement actions are in effect.
Enforcement actions imposed as a result of an investigation will result in a public censure. In cases of serious misconduct, the publication will remain on CPAB’s website in perpetuity, for less serious matters the publication will be removed after a period of four years.
The following are concluded investigations where a public censure was imposed.
Click here to access a list of participating audit firms subject to enforcement actions imposed based on investigation findings.
Enforcement actions may also be imposed on a Participating Audit Firm (Firm) as a result of a special or regular inspection. The initial decision to propose the imposition of enforcement actions is determined by CPAB’s Enforcement Screening Panel where each matter is reviewed and a recommendation is brought to CPAB’s board of directors for review.
Following a decision by the board to approve a proposal to impose enforcement actions, notice is provided to the Firm. Pursuant to CPAB Rule 603, a Firm has 15 days to petition for a review proceeding following the receipt of the notice. If a petition is filed the review panel will determine whether a Violation Event has occurred and/or whether to accept, reject or vary any of the proposed enforcement actions. More information about CPAB’s review proceedings can be found here.
If the Firm does not petition, a final written notice is sent to the Firm advising that the enforcement actions are in effect and the Firm must immediately comply.
In early 2023, CPAB began publishing on its website the names of Firms that are subject to significant enforcement actions imposed as a consequence of an inspection.
Significant enforcement actions include:
- Termination of one or more audit engagements.
- Prohibition from accepting new reporting issuer clients (which may include reporting issuers in specific industries or other defined categories)
- Prohibition from assigning a designated professional to audits of reporting issuers.
- Sanctions imposed under Rule 601 for breaching an existing requirement, restriction, or sanction.
- Termination as a participating audit firm.
Firms subject to enforcement actions imposed prior to 2023 as a result of inspections will not be publicly disclosed.
Click here to access a list of participating audit firms subject to enforcement actions arising from inspection findings imposed after January 1, 2023.