Print Edition
      December 2011

The changing accounting landscape

Uniting Canada’s accounting profession

By Deirdre McMurdy

Over the course of a distinguished career, Ed Waitzer has been involved in more than his share of complex business mergers. When it comes to the proposed creation of a Canadian chartered professional accountant (CPA) designation, the former head of the Ontario Securities Commission, Canada’s largest securities regulator, firmly believes the proposal makes sense. 

The national CA, CMA and CGA organizations, along with some of their provincial counterparts, are exploring the possibility of uniting under the Canadian CPA banner.

Is Canada keeping pace?
“If professional accountants in Canada want to stay relevant, they’re going to have to edge out of their comfort zone,” Waitzer says. “They have to understand that the world around them is changing fast — even if they’re reluctant to keep pace and come together.”

Waitzer, a corporate lawyer, director and governance adviser, knows what he’s talking about: he played a key role in restructuring the International Accounting Standards Board and was a member of  the Independent Review Panel on the Modernization of Comptrollership in the Government of Canada. He was also a participant on the Canadian Institute of Chartered Accountants’ (CICA) Task Force on Standard Setting and a public director of the American Institute of Certified Public Accountants (AICPA).

Historically, says Waitzer, the solid reputation of Canadian accounting standards has been sufficient.

“Canada has always punched above its weight in international accounting circles,” he says. But in the current global context, “professional fragmentation is increasingly fatal and we will quickly lose our clout.”

Tom O’Neill, FCA, chairman of BCE and Bell Canada and former CEO of PricewaterhouseCoopers, puts it rather more bluntly: “Canada is a rounding error in the world economy. As accountants, we need the strongest possible voice if we want to be heard on key issues.”

Certainly, the pressure to play a role on the international stage has intensified with Canada’s recent adoption of international financial reporting standards for publicly traded entities. To have an influential role in the shaping of international standards, Canada’s voice must be heard.

Paul Tellier, a former clerk of the Privy Council and former president and CEO of both CN Rail and Bombardier, agrees it is important for the profession to maintain its influential voice. He now serves as a trustee with the IFRS Foundation based in London. “When it comes to shaping standards, a single body — as lawyers and doctors have in Canada — would be much easier and much more credible,” says Tellier.

Winds of change gaining strength
There is intense competition among international accounting bodies looking to grow their own global brands and market share.

Even the planned use of chartered professional accountant in Canada is gaining attention elsewhere. Two accounting organizations in the UK have filed for use of the chartered professional accountant name and CPA designation.

But the challenges facing the accounting profession involve more than maintaining a strong international presence. Factors such as consolidation or eroded self-regulation are other possibilities.

In the UK, a jurisdiction with multiple accounting designations, a House of Lords’ committee noted that the “regulation of accounting and auditing is fragmented and unwieldy.” The committee is expecting the profession to provide impetus for “rationalisation and reform,” but if things take too long, it has recommended “that the government stand ready to impose a remedy.”

In Canada, specifically Quebec, the CA, CMA and CGA orders announced in October that their respective boards of directors have recommended moving forward with a merger of their organizations. The provincial government is expected to introduce legislation to establish the new organization in early 2012, and it is expected to come into force in April 2012.  

Confusion about accounting designations
Furthermore, research indicates that the lines of distinction between the accounting bodies in Canada are blurring. As a former regulator, Waitzer is emphatic that the growing private and public sector confusion about the different domestic accounting designations — CA, CMA and CGA — and what they mean is weakening the profession at a critical time.  

“If Canadian accountants want to maintain the argument for self-regulation they have to present a strong, united front,” he says.

That warning is echoed by Jack Mintz, a tax expert who currently chairs the University of Calgary School of Public Policy.

“Self-regulation is a practice that’s really waned over the last few years, in part because governments stepped in to bolster consumer confidence in the aftermath of various scandals,” he notes, pointing specifically to the experience in the US.

“You need a strong, credible, unified body to reinforce the case for self-regulation. It’s the ultimate ‘trust me’ at a time when trust is rare.”

Former senator and business executive Michael Kirby concurs that the accounting profession’s vulnerability is as pronounced domestically as it is internationally.

“Going back to the late 1990s, the Senate was asking why there were so many accounting organizations and bodies in Canada,” he notes. “Those aren’t questions that actually have a positive answer — especially more than a decade later.”

A clearer picture about the Canadian accounting profession would benefit the business community.

“Owners of small and medium-sized companies want things as clear, simple and efficient as possible. They don’t want to have to figure out all the differences between CAs, CMAs and CGAs — they just want it done,” says Catherine Swift, CEO of the Canadian Federation of Independent Business.

Attracting the next generation of accountants
“We do a lot of recruiting right out of universities, and there’s no question that the competition between the various accounting designations adds to the confusion,” says Michael Burch, a CA and managing partner at Welch LLP in Ottawa. “The fact that we are battling one another and trying to push our designation over another doesn’t really serve anyone well. Not them, not us. And it’s also a waste of money and energy.”

O’Neill heartily agrees.

“Over my career, my most effective partners have had degrees in history, political and social sciences. The accounting profession hurts itself by not encouraging a more eclectic background,” he says.

“There’s a real demographic squeeze and it’s going to get worse. Even with immigration, the Canadian labour force is stagnant,” says Mintz. “It’s going to be harder to recruit and to re-tain than ever before.”

This is particularly challenging because regulated professions, such as accounting, have a responsibility to maintain standards to protect the public interest. The credentials of internationally trained accounting professionals must be fairly assessed but there must also be efficient and accessible routes for these individuals to join the Canadian workforce.  

The bottom-line impact
A united accounting profession should produce cost savings and improved efficiencies — something dear to the heart of any accountant.

“There are just so many obvious efficiencies with one set of standards, one oversight body and a national reach,” says Randy Garvey, FCMA, executive vice-president at Canadian Western Bank in Edmonton. “The bottom line is that the world just isn’t the same as it was when three accounting organizations were established.”

That said, the effort to unite Canada’s accounting bodies has been a tough sell over the years.   

“Mark Twain once said that everyone’s in favour of progress; it’s change they don’t like,” says Kirby. “And that’s what we’re dealing with here.”
Furthermore, he notes, “Emotional arguments are always the hardest to overcome.”

Both Kirby and O’Neill agree that “CAs tend to have an attitude of superiority about their credentials and want to preserve that perception” and that “misplaced elitism” is a serious stumbling block.

Maintaining specializations
Roger Martin, dean of the Rotman School of Management at the University of Toronto, doesn’t agree that such an ingrained hierarchy is entirely out of place. Nor, in his eyes, is a merger and the creation of a single designation a panacea for addressing the issues at hand.

“The process of unification will succeed only if there’s an acknowledgement of the differences,” he insists.

“In medical practice, they are all doctors but some are general practitioners, some are brain surgeons,” Martin argues. “Levels of specialty are clear and are helpful to the end-user: you don’t call a brain surgeon when you have a cold.”

“The training is very different for CAs and CMAs and they have different purposes,” says Don Lewtas, a CA and CFO at Onex Corp., in response to comments made during the CA-CMA consultation process. “But can we live together under one umbrella? Yes.”

In fact, Lewtas suggests that overall, governance of the profession could improve through a unification that creates an organization more broadly reflective of the accounting profession.

“I think that new breadth would diminish the influence that’s inevitably exercised by a few large players. It would create a more sustainable balance,” he says.

As for the view held by some CAs that a merger would dilute their professional brand and status, Lewtas insists that perspective is too narrow.

“In many businesses, there are different accounting skills sets that represent the greatest value to an operation,” he states. “In manufacturing, for example, people who do cost accounting and analysis can bring far more value than the ones who focus on external financial reporting.”

The conclusion based on his experience? “We can and should live together.”

It appears that Canada’s accounting profession does not have the luxury of time if it wants to control its own destiny. Change is coming. But just how and when that will happen will be determined by a process subjected to multifaceted scrutiny.

Note: In an effort to provide both CA and CMA members with an external, informed perspective on the proposed merger, both magazines are running shared content. Deirdre McMurdy, a well-respected Canadian business writer, prepared a similar article for CMA magazine

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