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OTTAWA ─ October 24, 2022 ─ Office of the Superintendent of Financial Institutions and Canadian Public Accountability Board

Independent external audits contribute to public confidence in Canada’s financial system. On October 20th, the Office of the Superintendent of Financial Institutions (OSFI) and the Canadian Public Accountability Board (CPAB) co-hosted a roundtable on audit quality with the Canadian Securities Administrators (CSA) in Toronto.

During the roundtable, senior representatives from financial regulators, standard-setters and audit firms shared perspectives on current and emerging risks, the role of audit firm culture, developments in sustainability and climate disclosure reporting standards and practices, and the impacts of technology and digitalization.

The roundtable also featured bilateral discussions between the audit firms of Canada’s largest financial institutions and representatives of OSFI, CPAB and the CSA on:

• Audit firm governance and culture
• Sufficiency of people, resources and specialists
• Auditor’s role related to detecting fraud
• Climate-related risks in financial reporting and assurance over sustainability reporting
• Challenges for a robust and timely implementation of the new insurance accounting standard, IFRS 17 Insurance Contracts, and its impact on audits

Canada has a strong history of audit quality, but there is still room for improvement. Despite progress on inspection results and quality control management systems, there remains inconsistency in the level of audit quality observed and a gap to the high level of quality that is expected. The roundtable was an important forum to discuss key issues and agree on priorities through coordinated efforts that support the integrity of financial reporting in Canada.

• Continued open communications and enhanced transparency among key stakeholders of audited financial reports enables early identification of issues and timely intervention as well as fosters a robust Canadian financial system.
• Strong ethical behaviours and upholding compliance with the highest ethics standards for auditors is a foundational element to support a sound financial system. In the face of pressures, auditors must consider the public interest and do the right thing.
• As organizations strengthen their risk management practices and disclosures on climate-related risks, the reliability of these disclosures will become increasingly important for users. Audit firms should continue incorporating climate-related risks into audit risk assessments and auditor response to ensure financial statements and disclosures are fairly presented.

QUOTES

“The quality of financial information is a cornerstone of financial stability. Canada’s audit firms provide OSFI and market participants with the assurance that the financial reports on which they rely are fairly presented. We work closely with auditors to strengthen public confidence in the integrity of financial reporting.”

- Peter Routledge, Superintendent, OSFI

“Auditors play a critical role in Canada’s capital markets by ensuring that audited financial statements can be reasonably relied upon by the investing public when making investment decisions. Any actual or perceived issues related to the integrity of financial reporting can undermine investor confidence. CPAB works closely with other capital market regulators to protect investors and build confidence in Canada’s capital markets.”

- Carol Paradine, CEO, CPAB

About OSFI

The Office of the Superintendent of Financial Institutions (OSFI) is an independent agency of the Government of Canada, established in 1987, to protect depositors, policyholders, financial institution creditors and pension plan members, while allowing financial institutions to compete and take reasonable risks. OSFI supervises more than 400 federally regulated financial institutions and 1,200 pension plans to determine whether they are in sound financial condition and meeting their prudential requirements.

Media Contact

The Canadian Public Accountability Board (CPAB) is Canada’s independent, public company audit regulator. Charged with overseeing audits performed by registered public accounting firms, CPAB contributes to public confidence in the integrity of financial reporting and is committed to protecting Canada’s investing public. CPAB promotes audit quality through proactive regulation, dialogue with domestic and international stakeholders, and practicable insights to inform capital market participants. CPAB has offices in Montreal, Toronto and Vancouver.