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TORONTO, August 18, 2024 – Last week, the Public Company Accounting Oversight Board in the United States released inspection reports for all accounting firms it inspected today in 2023. The list included six global network firms, including the Big Four, as well as two Canadian firms. The audit inspection reports were released months earlier than in recent years, which the PCAOB attributed to ongoing efforts to expedite the release of reports.

In Canada and the United States, there is typically a two-year delay between the year an audit engagement is audited and the report is published. When the Canadian Public Accountability Board released its annual audit report for 2023 in April this year, the findings were based on audits audited in 2022. The American audit regulator has now shortened the publication delay by one year.

The PCAOB has also increased its transparency under the leadership of Chair Erica Y. Williams. Its inspection reports are accompanied by a new staff spotlight publication that provides an overview of staff observations during 2023 inspections. It is an insightful document that looks at audit deficiency rates and the impact of the pandemic and remote work on audit engagements.

Canada’s auditing regulations have been in the media spotlight in recent years. Most recently, Glacier Media criticized the Chartered Professional Accountants of British Columbia, but the Globe and Mail also criticized the lack of transparency in audit inspections by CPAB. According to CPAB, which conducted a transparency review, legislative changes are needed to make some transparency changes.

“Making inspection information accessible and actionable for PCAOB stakeholders is a top priority and a means to improve audit quality,” said the PCAOB’s Christine Gunia when the new efficiency and transparency measures were released this week. “We will continue to look for new ways to make our findings accessible to investors, audit committees and others.”

And now for the rest of the news from Canadian accounting this past week.

Dueling narratives: taxes and the economy in Canada

There are days when it seems Canadians live in two different visions of Canada. In one narrative, we are taxed to the max, the economy sucks, and Canada is “broken.” In the other, we are an egalitarian society where the rich pay their “fair share” to fund social programs, with a stable economy and a strong social safety net.

But a growing number of voices, perhaps inspired by the success of Pierre Poilievre’s End the (Carbon) Tax, are voicing their displeasure with taxation in general and the capital gains tax increase in particular. The conservative think tank Fraser Institute got the ball rolling when it claimed that the average Canadian family now spends more of its income on taxes than on all basic needs combined. The report, which claimed the average tax burden had increased by 2,705 percent since 1961, was further bolstered by auditor Kim Moody in the Financial Post. But the figures were ridiculed by Linda McQuaig in the Toronto Star, the Canadian Centre for Policy Alternatives and others.

Allan Lanthier, another chartered accountant, brought some balance to the tax debate in the Financial Post in late July, noting that “taxes in Canada are not particularly high” and are just below the OECD average. (It is only when compared to the “tax-averse” United States that they appear high.) Meanwhile, in the Globe and Mail, economist Kevin Milligan dismissed opposition to the capital gains tax, while Tim Cestnick, also a chartered accountant, warned of the dangers of “overtaxing the rich.”

All a healthy debate, of course. But two quick comments from us, and you can make of them what you will. First, it seems that the Postmedia chain, which includes the tabloids National Post, Financial Post and Sun, are the only media outlets that regularly tell the story that taxes in Canada are too high. And second, the Globe and Mail, which is anything but a left-wing publication, rarely (and we mean rarely) cites data from the Fraser Institute or the Canadian Taxpayers Federation. Why? Discuss it among yourselves.

Inadequate defense leads to reopening of proceedings against tax advisor

Very few Canadians end up in prison because of the Canada Revenue Agency. (Of the 31 tax evasion convictions in 2023, only 13 people were sent to prison.) So if a tax preparer goes to prison for alleged tax fraud, you would expect a pretty clear-cut case.

But in a bizarre legal twist, the Ontario Court of Appeal ordered the retrial of George Nnane, the owner of a tax consulting firm called Golden Capital Management Inc., on the basis of an “ineffective” defence. According to the Toronto Star, the defendant’s lawyer, Ari Goldkind, expressed disappointment but respected the court and its decision. The Law Times also reported on the decision, which is considered “extremely rare”.

Accounting Dealbook

Homegrown national accounting firm MNP has acquired another British Columbia company. This time it is KCS Inc. Chartered Professional Accountants, based in White Rock, south of Vancouver and just a stone’s throw from the United States border. The company is led by Kevin Schindler, a former tax partner at KPMG, who will now join MNP as a partner on October 1, 2024.

Software news: Sage, Xero and more

Sage Intacct has introduced a number of product enhancements in Canada and globally, including AP Automation, which uses AI to reduce the time for accounts payable processes. Sage Intacct has also improved insights into revenue recognition and introduced a new feature called Sage Intelligent Time with improved AI support.

And Xero has expanded its integration with Caseware, offering joint customers a solution that allows them to import balance sheets and general ledger data from Xero into Caseware Working Papers. The two accounting software platforms already offer integration between cloud apps. This expands on the existing integration between Xero and Caseware’s cloud apps. This new integration will be available to accountants and bookkeepers in Canada later this year, just in time to accelerate year-end compliance requirements.

Quick Hits: Interesting Articles

Canadian

Ottawa has softened the increase in capital gains tax. But that is still not enough (Globe and Mail)
BC United promises significant income tax cuts if elected (CBC)

International

PwC fined £15m for failing to report suspected fraud at City firm (The Guardian)
The door is open for an Australian tech tax. Can Labor get it passed? (The Guardian)
EY and KPMG benefit most from PwC China’s regulatory problems (Reuters)

By the staff of the Canadian Accountant.