News from the profession    
 
   
 

News from the profession

A summary of current CICA projects and initiatives

Moving forward

By Christian Bellavance

Twenty-five years as a partner with PricewaterhouseCoopers Canada (including the last four as CEO), and two stints with Finance in Ottawa (with two years as assistant deputy minister for the Tax Policy Branch) weren’t enough to make him stop.

“I guess 56 is still young,” says Kevin J. Dancey, the new CICA president and CEO. “It's all relative these days.” He retired from PwC in 2005 with the idea of going the board of director’s route, but an unexpected call got his attention while he was completing the Rotman School of Management Directors Education Program. It was from the CICA selection committee inquiring about his interest in the president and CEO position that David Smith was about to leave. “Given my history in public practice in Canada, on PwC’s global leadership team and in government,” he told CAmagazine two days before stepping into his new job, “I thought it was a good opportunity to give something back to this great profession — I know it may sound a little corny of me, give back to the profession — but the skill set that I bring to the table seems ideal at this time.” By that he means that the CA profession has reorganized itself and is now run much more collaboratively between the national and the provincial institutes/ordre through its Council of Senior Executives (CSE). “In Ottawa,” he says, “I saw a lot of sharing between the federal and the provincial governments.

I got to see how the country works.” For Dancey, the way to make this new governance system succeed is to respect everyone’s jurisdiction and to continue to build trust and effective working relationships through good communication. “First,” he explains, “we need to identify issues and look at the resources and strengths of all parties. This is how we will find commonalities, and then we canshare working models and deliver more and better services to all segments of the membership.”

The profession agreed recently on a new strategic plan, and the CICA’s new boss identified its implementation as his most immediate challenge. “The profession decided to focus on education, branding, member relations and public trust,” he says. “Now we’re moving into the heavy lifting phase and of actually proving to the world that this concept of the provincial and national organizations working together very well can happen. Lots of plans have been set up in the past couple of years, and, now, we’ve got to get it done.”

Building on Smith’s strategy to create a high level of trust throughout the various components of the national profession, Dancey wants to move forward on the four pillars of the strategic plan:

  1. Education. Among other things, all the provincial institutes/ordre recently announced proposed changes to the CA experience
    criteria, which will allow expanded training opportunities not only in CA firms, but in the corporate and public sector as well (see “Canada-wide approval in principle for changes to CA experience criteria,” CAmagazine, June/July 2006, p. 22).
  2. Branding. The CSE’s Branding Committee will launch a new national advertising campaign next month, the result of months of extensive data collecting and analysis (see “New CA ad campaign
    slated for September,” p 21).
  3. Public trust. The Public Trust Task Force is studying a number of solutions to ensure that the very high CA standards are met across the board. It has already proposed uniform national minimum requirements for both continuing professional development and professional liability (see “CA profession raises the bar to continue protecting the public interest,” CAmagazine, May 2006, p. 20).
  4. Member services. Another national committee, the Member Relations Task Force, is analyzing the results of extensive research initiatives, such as the MOPEs and young members surveys, to create new products and services for CAs in industry as well as in public practice.

The profession is also moving toward deeper global integration with the decision to adopt international accounting and auditing standards. While well received by publicly traded companies and the accounting and financial professionals within that circle, the decision to drop homegrown standards in favour of global ones got mixed reviews at best from private companies and small practitioners. “I certainly understand the position of members on this issue,” says Dancey, “and I know the Accounting Standards Board (AcSB) is working to find a solution based on the actual needs of private entities and those of the various users of financial statements.” Dancey also acknowledged there is “a standards overload issue in the private company space that simply must be addressed.”

Dancey dismisses the idea that Canada and the CA profession are losing their influence on the standard setting process.

“We have a responsibility to make the financial market more efficient,” he says, “and we do this through supporting the standard setting process in Canada. This country has as much influence in setting standards as any other.”

Dancey identifies the Canadian Public Accountability Board (CPAB) as an example that illustrates how the profession can work collaboratively and effectively to respond to new challenges. “CPAB is a uniquely Canadian solution to provide oversight. In the US, they have a hard time believing that we actually managed to create a national regulator through contractual arrangements without government intervention, considering it had to be legislated in their country.”

To Dancey, however, the issue is more than just GAAP. In fact, he feels strongly that the CICA should look into the current corporate reporting model and see if it could help make it more relevant by putting more emphasis on ongoing and forward-looking financial information rather than on the traditional — he calls it “rearview mirror” — and historical data that are the standard today. “Historical information will always be important but investors need more timely and comprehensive financial and nonfinancial information.” He understands that there are real challenges to this issue, pro forma accounting being one of them. But he is convinced that the CA profession can articulate a credible model that would take into account the present and the future, not just the past.

“There are a lot of non-GAAP issues out there,” he says, “and it is the profession’s responsibility to help the markets understand these non-GAAP measures and build some consensus. As an organization, this is our sweet spot.” In fact, Dancey thinks the CA profession should reach out to the investor side of the financial community, such as pension funds and analysts, as well as to the CFO group. “It’s critical that we find out about other stakeholders’ needs,” he says. “I’m convinced that people care about the quality of financial information and reporting, people who are out there trying to make this country better and so much more efficient. I want them to think that these guys in the CA profession are really pulling their weight and adding value to the debate, that they’re pushing the envelope forward.”

Dancey’s passion about these issues is palpable, but he is just warming up. Mention “professional liability” and you’ll really get him going. In fact, he feels that the current joint and several liability regime is the “elephant in the room that gets in the way.”

He has even come up with a 10-point argument explaining proportionate liability (see “Why adopting proportionate liability is in the public interest,” page 19) that calls for a party to be responsible for the cost related to its share of the responsibility, not of someone else as is the case now. He’s absolutely convinced that the current liability regime gets in the way of a improving the corporate reporting model. “At the end of the day,” he says, “that’s probably the most important point. It precludes improvements in the corporate reporting model and probably precludes having as effective and efficient a working relationship between the auditor, the board and the management as it could be.”

He thinks the country needs what he calls “rational liability,” and that it is inevitable. “It’s in the public interest to make sure the right people get into this profession,” he says. “It’s in the public interest to have a better reporting model. It’s in the public interest to have a regime that is fair.” You can be sure that the CA profession will be working hard to bring that change.

As with the implementation of the strategic plan and the other issues he identified, Dancey vows that the CICA will work with the provincial institutes/ordre to explain to governments how important this issue is for the general public, businesses and the broader financial markets not just for the CA profession. He certainly hopes the issue will have been dealt with when he leaves the organization.

So how does Dancey see Canada’s CAs? “Along with the profession’s core values of integrity, objectivity and independence,” he says, “CAs bring financial expertise, business insight, strategic thinking and leadership, whether you find them in industry, government, academia or public practice. They are vital members of any successful team.”
      

WHY ADOPTING PROPORTIONATE LIABILITY IS IN THE PUBLIC INTEREST

  1. Fairness: Accountants should be responsible for their fair share of responsibility, not for the share of others, as is the case in the current joint and several liability regime. In some cases, a firm’s responsibility could be set at only 1% but, because of unlimited liability and the fact they are perceived to have deep pockets, they’re made to pay for 100%.
  2. Consistent legislations: Legislations vary between jurisdictions. From a policy perspective, it doesn’t make sense on such an important issue.
  3. Quality auditors: Because of the high risk related to the current regime, it’s getting more and more difficult to attract and retain qualityauditors and partners, affecting the quality and quantity of services available.
  4. Broader audit firm market: Few new accounting firms enter the market for auditing public companies because the risks far exceed the rewards, thus limiting competition and access to audit services.
  5. Reduces the risk of audit firm failure: The size of imposed settlements caused by the current liability regime raises significantly the risk of failure for some audit firms that would be highly disruptive to the capital markets.
  6. Reduces the cost of audit: Audit firms have to pass along excessive settlement, litigation and insurance costs to clients, which in turn raises costs for businesses.
  7. Broader access to insurance: Because claims are unquantifiable, it is impossible or too expensive for many audit firms to get insurance, which is another reason for firms to raise prices, refuse or drop clients, face a higher failure risk or not enter the audit market.
  8. Ensures access to auditing services: Many high-risk and smaller public companies can’t find an auditor or receive the level of services they need, excluding them from access to much needed capital.
  9. Remaining competitive with our international peers: Canada is a less attractive place to do business compared with a growing number of competing jurisdictions that have either scrapped joint and several liability or have heavily amended it.
  10. Improves the corporate reporting model: The current regime precludes improvements to the corporate reporting model and may negatively impact the critical working relationship between the external auditors, the board of directors and the company management.

Proportionate liability is in the public interest. It is a myth to believe that maintaining joint and several liability enhances audit quality.

Audit quality is driven by good regulation and oversight (e.g., CPAB) and adherence to high professional standards.

 

CICA wins international contract to publish ISAs implementation guidelines for SMEs for worldwide distribution

The CICA will develop an explanatory guide on implementing ISAs in small and medium-sized entities’ (SME) audit engagements for worldwide distribution by the International Federation of Accountants (IFAC).

The IFAC board of directors awarded the contract to the CICA following an international competitive bid at its June meeting in Beijing. The guide will be published by IFAC and made avail-able to all the organization’s member countries at no cost. “We entered a competitive bid process, and we were the supplier of choice,” said David Smith, outgoing CICA president and CEO and IFAC board member. “This speaks volumes about the Canadian CA profession and also provides us with a great opportunity to showcase the high-quality products our profession produces in Canada.”

The first edition of the guide is planned for mid-2007 and sub-sequent revisions will be delivered in 2009 and 2010. The IFAC guide will be based upon the very successful CICA’s Professional Engagement Manual, which has recently been updated to reflect the new ISA-based audit risk standards. The IFAC guide will be written for the CICA by Stuart Hartley, FCA, the author of the CICA’s Professional Engagement and the Quality Assurance manuals. The CICA will also be producing derivative materials such as checklists, courses and related products, and those will be sold separately.

New CA ad campaign slated for September

The CA profession kicks off its branding program next month with the launch of a new high impact advertising campaign.

Targeted at business, students and the public, the campaign is designed to increase brand awareness and broaden the public’s
understanding of the wide range of valued skills that CAs have to offer. “There is an advantage to having a CA on any management team,” said Kevin J. Dancey, FCA, CICA’s new president and CEO. “The purpose of our new ad campaign is to show the unique reasons why the CA designation has earned the reputation of being the preeminent accounting designation in Canada.”

The new fall ad campaign is just one component of a multi-faceted branding strategy that will be implemented over the next several years. The program will also use marketing, public relations, media relations and sponsorship to clearly differentiate CAs in the marketplace. Most importantly, it will leverage the positive experience businesses and individuals have when working with CAs — making our already strong CA brand even stronger.

Read more about the profession’s new branding program and ad campaign in next month’s CAmagazine.

THE CANADIAN INSTITUTE OF CHARTERED ACCOUNTANTS
NOTICE OF ANNUAL MEETING

Montreal, Quebec
September 20, 2006

The one hundred and fourth Annual Meeting of the members of The Canadian Institute of Chartered Accountants will be held in the Monet-Chagall Room, Sofitel Montréal, 1155 Sherbrooke Street West, Montréal, Québec on Wednesday, September 20, 2006 at 09:00 hours (Local Time) for the reception of the reports of the Chair and the Board of Directors; the reception of the financial statements of the Institute for the fiscal year ended March 31, 2006, together with the auditor’s report thereon; the appointment of an auditor for the current fiscal year; and for the transaction of such other business as may properly come before the meeting.

Sub-section 20(3) of the by-laws permits members to be represented by proxy at any annual or special meeting of members of the Institute and provides that no proxy shall be exercised by a person who is not a member of the Institute. If any member wishes to be represented by proxy, any proper form may be used. As a convenience to members, however, a form of proxy has been posted on CICA’s website. Proxies for use at the meeting should be returned promptly to the attention of Mr. Walter Palmer, Fasken Martineau DuMoulin LLP, 66 Wellington Street West, Suite 4200, Toronto Dominion Bank Tower, Box 20 Toronto-Dominion Centre, Toronto, Ontario M5K 1N6.

Dated this 7th day of June, 2006

David W. Smith, FCA, President & CEO

David A. Hope, FCA, Chair of the Board of Directors