As a self-regulating organization, CPABC (the “organization”) has a mandate to maintain and improve the knowledge, skill, and proficiency of its members, as well as protect the public. One of the ways in which it fulfills this mandate is through a program of reviewing the practices of CPAs who are licensed to offer services to the public.
- Program Objective and Scope
- Files Subject to Practice Review
- Selection of Offices for Review
- Practice Review Cycle
- Follow-up Review
- Scheduling the Practice Review
- Cancellation of a Scheduled Practice Review
- The Practice Review
- Desk Reviews
- Reportable Deficiencies and Non-Reportable Matters
- PRO Recommendations
- Consistency Review and Committee Review
- Public Practice Committee
- Practice Review Officers
- Frequently Asked Questions: Practice Review
- Contact Public Practice Regulation Department
The objective of the practice review program is the protection of the public by assessing the compliance with professional standards of members/firms that perform assurance, compilation and other specified engagements, and by taking appropriate follow-up or remedial action in instances of non-compliance. The public is further protected by practice review providing an educational experience to members/firms.
Files Subject to Practice Review
All engagements addressed by the standards in the CPA Canada Handbook – Assurance are subject to inspection. Practice Review can include, but is not limited to:
- Audit and reviews of financial statements1
- Other assurance engagements1
- Specified auditing procedures engagements2
- Compilation engagements
- Corporate and personal tax returns, and optional tax filings
Note 1 – The standard on quality control (CSQC-1) for firms that perform audits and reviews of financial statements, and other assurance engagements shall be subject to practice review.
Note 2 – Examples include Real Estate Council of BC Trust Reports and BC Law Society Trust Reports.
Practice reviews are conducted for each practicing office. As partners within an office conduct their work on firm letterhead and share liability for the work issued by the office, all partners must be accountable for the work completed by their fellow partners. As such, all partners in the office are practice reviewed together. Furthermore, if other senior individuals within the office have been given the authority to issue or release financial statements or tax returns, they are also required to be licensed and will be included in the scope of the practice review. The cumulative findings for all the files inspected drive the overall practice review result for the office. Therefore, the deficiencies of one partner could potentially result in the entire office being found to not comply with professional standards, thereby subjecting the entire firm to a follow-up review.
All offices are reviewed on a 3-year risk-adjusted cycle and must be reviewed within 3 years from when their previous practice review was completed. However, risk factors are considered and practice reviews may occur more frequently if considered necessary. Factors which might indicate a more frequent practice review than every 3 years include
- A new firm or office
- Firm is newly registered with the Canadian Public Accountability Board (“CPAB”) and/or the Public Company Accounting Oversight Board (“PCAOB”)
- Significant increase in reporting issuer clients
- Change in practice profile of the firm, such as taking on new types of engagements
- Merger or a loss of a significant number of partners or a number of new partners
- Discipline decisions
- Failure to meet Continuing Professional Development (“CPD”) requirements
- Weak history of practice review results
- Other information coming to the attention of CPABC
Based on the results of the practice review, if the office is determined not to be in compliance with professional standards it will be subject to follow-up review. The cost of a follow-up review must be paid by the office and is based on an hourly rate for the amount of time taken to complete the follow-up review. The current rate for follow-up review is $200/hour per Practice Review Officer.
The follow-up review will typically focus on those practice areas where the office was not complying with the standards. All partners and partner equivalents of the office are included in the follow-up review. This may be irrespective of the fact that only one partner may have had the issues that caused the non-compliance.
Practice reviews are typically assigned to the Practice Review Officers (“PROs”) annually based on geographic location of the review and availability of the PROs. Once the PRO obtains their assignments, they will start to contact offices to schedule their practice reviews. The PRO will also try to gain a better understanding of the practice areas for each of the licensed practitioners in order to determine the amount of time to set aside for the review. The general rule of thumb is that that PRO will take one full day per assurance practitioner and a little less than half a day for a compilation/tax only practitioner.
The office will typically receive a call from a PRO at least a month or two in advance of when the PRO would like to schedule the review. As the PRO must have the reviews completed prior to the due dates, the actual date on which the PRO would like to schedule the review may be months before the due date. The PROs will do their best to be flexible in coming to a mutually agreed upon date for the practice review as long as the review can be completed prior to the due date. The office will receive an email from CPABC confirming the date set for the practice review.
Practice reviews are scheduled with a view to making the most efficient use of the Practice Review Officers (“PROs”) time. There is a cancellation fee if this is done on short notice (within 15 working days of the scheduled start date) with no extenuating circumstances. The current short notice cancellation fee is $750. The fee may be waived for extenuating circumstances.
The office will need to ensure that all engagement files are available and ready to be pulled if selected for practice review. The Practice Review Officer (“PRO”) will review their sample of files and provide a summary of reportable deficiencies and non-reportable matters to the practitioner for discussion. Practitioners will have an opportunity to address the deficiencies and provide further information or clarification which may result in changes to the deficiencies. Upon completion of the review, the PRO will provide the office with their findings and recommendations in a PRO report.
Throughout the process, practitioners are encouraged to ask questions or discuss issues and practice matters with the PRO.
For practitioners with a home-based practice*, CPABC conducts its inspection as a desk review. Instead of a Practice Review Officer visiting the office/home, engagement files are sent in to CPABC’s office, with questions arising from the practice review addressed via email/phone or during an in-person meeting with the practitioner and the PRO. Once the questions are resolved, the Practice Review Officer’s report is then provided either electronically or at the end of the in-person meeting.
Practitioners whose inspections are performed as a desk review are contacted by professional staff at least two months’ before their scheduled practice review due date to discuss file selection and other logistics.
*A home-based practice is defined as a practice located inside a practitioner’s home. A practitioner who operates in a self-contained space on their property which is open to the public would not be considered a home-based office.
Reportable Deficiencies include both material and non-quantifiable matters that do not meet the requirements of the CPA Handbook or constitute a breach of the CPA Code of Professional Conduct. Examples of which would include, a material or non-quantifiable error in financial statements, omission of required disclosures, incomplete or inadequate procedures and documentation, non-compliance with the rules on independence, etc.
Non-reportable Matters include immaterial matters or suggestions for best practice.
Examples would include the use of templates or checklists in file documentation.
The PRO report may also include recommendations to be completed in a specific timeframe such as:
- An action plan in response to the identified reportable deficiencies be drafted and provided to CPABC within 30 days
- Recommended/required professional development courses
- Approval or loss of pre-approved training privileges
- That a follow-up review take place within a year to ensure the firm is complying with professional standards
All reportable deficiencies should be addressed immediately and recommendations are expected to be acted upon in the time frame specified.
The following link can be used to obtain a template for an action plan: Action Plan PDF
Once the practice review has been completed, it will be subject to Consistency Review and then Committee Review. The Consistency Reviewer conducts a full review of the inspection file to ensure that they agree with the overall findings and recommendations of the PRO and that the final result is consistent with that of inspections with similar findings.
Once agreement has been reached, the files with deficiencies are then assigned to various Committee members, on an anonymous basis, to perform a final independent review of the findings and recommendations. If the Committee member(s) assigned to the review agree with the results then the review goes to the full Public Practice Committee for final approval. After the Committee process, members/firms then receive a letter advising on the final results.
The Public Practice Committee is made up of 20 CPABC registered practicing members and 2 public representatives.
All Practice Review Officers (“PROs”) are fully trained and qualified to inspect files in the areas of practice for which CPABC conducts practice reviews. CPABC is committed to ensuring the practice review program meets both its regulatory and educational mandates. Following the practice review, each office has the opportunity to complete an online survey where they will be asked to rate the PRO in the areas of professionalism, ability to handle questions, provide constructive commentary/tips and their knowledge of public practice matters. The office will also have an opportunity to provide open feedback on the PRO, the practice review process and the overall program.
Our Current Practice Review Officers
Dennis Bettiol, CPA, CA
David Braithwaite, CPA, CA
Bob Broder, CPA, CA
Robyn Campbell, CPA, CA (staff)
Chuck Chandler, FCPA, FCA
Mark Dickie, FCPA, FCA
Brianne Formosa, CPA (staff)
Damian Hee, CPA, CA (staff)
Victor Huang, CPA, CA (staff)
Keon Kwan, CPA, CGA
Roger Merkosky, CPA, CA
John Pankratz, FCPA, FCGA
Valerie Warren, CPA, CA