Statement of Accountability and Governance Practices

​Accountability

The Canadian Public Accountability Board (CPAB) is the national body responsible for the regulation of public accounting firms that audit Canadian reporting issuers[1]. CPAB was created by Canada's provincial Securities Commissions, the Federal Superintendent of Financial Institutions and the Canadian Institute of Chartered Accountants as a federal not-for-profit corporation. CPAB is recognized formally by Canada's securities regulators through their National Instrument 52-108 Auditor Oversight. CPAB is also recognized under legislation in Ontario, Quebec, British Columbia, Saskatchewan, New Brunswick, Manitoba, Yukon, and the North West Territories.  CPAB is an independent body which is not part of the self-regulatory arrangements for the accounting industry.

CPAB's By-Laws establishes two classes of "members": "Council of Governors Members" and "Provincial Audit Regulator Members".

Council of Governors

The Council of Governors has primary oversight responsibility for CPAB and, in particular, appoints CPAB's directors annually as well as the Chair and Vice Chair of CPAB's Board of Directors. The Council of Governors has the ability to remove any directors it has appointed. In addition, the Council of Governors' approval must be secured re any proposed amendment of CPAB's By-Law.

The Council of Governors is comprised of the Chair of the Canadian Securities Administrators (CSA)[2], the Chair of the Ontario Securities Commission (OSC), the Chair of the Autorité des marchés financiers (AMF), the Superintendent of Financial Institutions of Canada, a fifth Governor selected by the CSA, and a person selected by the other five Governors who is a professional accountant and has audit oversight regulatory experience (the Accountant Council of Governors Member). The Council of Governors has a duty to consult with the Provincial Audit Regulator Members regarding the appointment of the Accountant Council of Governors Member.

The Council of Governors also carries out an annual high level assessment of CPAB against its mandate pursuant to the provisions of the Canadian Public Accountability Board Act (Ontario). This assessment is provided to the OSC and also provided formally to the Securities Commissions in British Columbia, Saskatchewan, New Brunswick, Manitoba, Yukon, and the North West Territories as a condition of CPAB's recognition by those provinces as an auditor oversight organization.

Provincial Audit Regulator Members

The Provincial Audit Regulator Members vote on any proposed amendments of CPAB's By- Law, appoint CPAB's external auditor and receive annual financial statements and the external auditor's report. Provincial Audit Regulator membership is available to provincial audit regulators who oversee audit firms whose aggregate Canadian audit fee revenue from reporting issuers in a province is at least $7 million, and whose disciplinary process and Code of Ethics meet standards established by CPAB's Board of Directors. Provincial Audit Regulator Members include a representative from the pertinent organizations representing professional accountants from each province and territory.

Board of Directors

The Board of Directors has overall responsibility for overseeing the management of CPAB's activities and affairs.

CPAB's Board of Directors is comprised of a range of nine to eleven members, all of whom are appointed by the Council of Governors. At least three must be professional accountants to ensure the Board has directors with accounting expertise, however, there shall always be more non-accountant than accountant directors. At least two directors must have audit oversight or regulatory experience. At least one of these two directors with regulatory experience must also be a professional accountant and at least one of these two directors with regulatory experience must have audit oversight regulatory experience. The positions of Chair of the Board and CEO are separate. The CEO is not a member of CPAB's Board.

The Council of Governors seeks to meet these requirements and criteria and ensure that there is an optimal mix of expertise and industry experience as well as geographical and gender representation. Board appointments are until the next annual meeting of the Council.

The Board believes its current size and range of skills are appropriate and foster dialogue, substantive decision-making and effective oversight. CPAB's Board nominates new director candidates for consideration by the Council, which considers them and consults with the Provincial Audit Regulator Members before making appointments. The Chair of CPAB also annually proposes to the Council of Governors individuals for reappointment to the Board. CPAB has adopted a policy that it will only nominate a person for membership on the Board for a maximum of three periods of three years each, with the potential for reappointment beyond the maximum term of office for an additional one year term if the Board believes it is in the best interests of CPAB. Appointments are staggered to ensure reasonable rotation. There is no mandatory retirement age. All new directors participate in an orientation program and CPAB also operates a director education program.

Board members are independent and cannot have current positions or material relationships with audit firms regulated by CPAB. Retired members of a regulated audit firm are eligible for appointment to CPAB one year after they have left their position with the firm. Participation in an audit firm's retirement arrangement is not considered to compromise a person's independence. Persons who have positions as members of Audit Committees of reporting issuers are eligible for appointment to CPAB's Board. Board members do not receive any identifying information from CPAB's management regarding participating firms or any reporting issuers.

The Board or one of its Committees may engage independent advice to assist in fulfilling their responsibilities.

On an annual basis the Board, with the assistance of the Human Resources and Governance Committee, evaluates its performance and that of its Committees and the Chair of the Board. In pursuing its mandate, CPAB acts in accordance with:

  • The Canada Corporations Act
  • CPAB's Articles of Incorporation, By-Laws and Rules
  • The Charters of the Board and Board Committees
  • CPAB's Codes of Ethics

Directors are required annually to formally attest they have read the Directors' Code of Ethics and abide by it.

Directors are compensated by payment of a retainer of $40,000 and a per-meeting attended fee of $1,500. The Chair of the Board's annual retainer is $150,000. The Chair does not receive meeting attended fees.

The compensation of the Directors and the Chair of the Board are reviewed annually and are adjusted from time to time in relation to an analysis of the compensation of the peer group and increases in inflation.

The Board Charter sets out the respective responsibilities of management and the Board. The Board approves all significant decisions including:

  • Delegating signing authorities and other powers for day-to-day business
  • Authorizing expenditures above certain dollar amounts
  • Authorizing new Rules and Rule amendments
  • Imposing requirements, restrictions and sanctions on participating firms
  • Approving CPAB's annual financial statements (the Provincial Audit Regulator

Members then receive the financial statements and auditor's report)

  • Approving CPAB's annual Budget and Strategic Plan

The Board also has procedures for:

  • Overseeing the processes for identifying the principal risks faced by CPAB and the implementation of appropriate systems to manage those risks
  • Overseeing the processes to ensure the integrity of CPAB's internal controls and management information systems
  • Reviewing succession planning for senior management
  • Setting CPAB's Strategic Objectives and reviewing progress re those objectives
  • Reviewing management's performance and compensation. The CEO's compensation is determined by the Board, based on a recommendation of the Human Resources and Governance Committee, that Committee having considered the CEO's performance.

CPAB's Board meets a minimum of five times per year to discharge its oversight responsibilities. The Board may meet more often should emerging issues require its immediate attention.

The Board has established two standing Committees of the Board, a Risk and Audit Committee and a Human Resources and Governance Committee. These Committees report to the Board on material matters after each of their meetings.

Risk and Audit Committee

The Risk and Audit Committee's role is set out in its Charter. The Risk and Audit Committee has responsibility for the oversight of CPAB's financial reporting, including the work of the external auditor. The Risk and Audit Committee also oversees risk management, business continuity and internal controls at CPAB, which controls are reviewed at least annually with the external auditor, in the absence of management, and the results are reported to the Board.

As part of its oversight of risk management, the Risk and Audit Committee regularly reviews the controls surrounding information technology and the procedures CPAB has developed to protect private information.

Human Resources and Governance Committee

The role of CPAB's Human Resources and Governance Committee is set out in its Charter. The Human Resources and Governance Committee reviews, reports and make recommendations to the Board on matters of corporate governance, Board composition, the formation and membership of Committees, compensation of the Chair of the Board and directors, the objectives, performance and compensation of the Chief Executive Officer, and the content and application of CPAB's Codes of Ethics.

The Human Resources and Governance Committee is also responsible for overseeing CPAB's succession plan for ensuring the quality and continuity of management, and for assessing and reporting to the Board on management's performance.

Consultative Committees

Under its By-Law, CPAB has also established two Consultative Committees, one with CA Provincial Audit Regulator Members and the other with CGA Provincial audit regulators. The purpose of the Consultative Committees is to foster cooperation and collaboration between CPAB and the professional accounting designations. These Committees are chaired by the Chair of CPAB, and meet twice a year annually to discuss matters of common interest. The results of their meetings are reported to CPAB's Board.

Board Performance

Each year the Board conducts comprehensive effectiveness surveys of the Board, its Committees and the Chair of CPAB. Results are confidentially tabulated by the Corporate Secretary and are presented to the Board. As well, the Chair annually interviews individual Board members. A summary of the results of this process is presented to the Council of Governors to assist in its assessment of CPAB's performance.

Independence and Transparency

CPAB's mandate is to foster confidence in the integrity of financial reporting by Canadian reporting issuers. To achieve this objective, CPAB must act independently and transparently. CPAB's mandate includes a requirement for it to report publicly on the means taken by it to oversee the audit of reporting issuers and the results achieved. The results of its inspections are published in a public report which is prepared annually. These public reports are available on CPAB's website.

As noted above, CPAB also publishes an annual report on its activities, which includes its financial statements. These annual reports are available on CPAB's website.

Ethics

CPAB has developed a Code of Ethics which can be viewed on its website. All CPAB employees and directors sign an annual confirmation of compliance with the Code of Ethics. CPAB has also appointed an Ethics Officer whom staff may consult regarding ethics or compliance questions.

CPAB has implemented a whistle-blowing hotline that is available through its website both internally to staff and externally to outside stakeholders.


 

[1]"Reporting issuer" is a defined term in Canadian securities legislation.

[2] In the event the Chair of the CSA is also Chair of the OSC or Chair of the AMF, the CSA must select another member for the Council.

 

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