A: Per section 231.1(a) of the Income Tax Act, CRA “may, at all reasonable times, for any purpose related to the administration and enforcement of this Act, inspect, audit or examine the books, records and documents or examine property in inventory of the taxpayer or of any other person for the purposes of ascertaining the amount payable by the taxpayer under this Act”. The term "document" appears to be broadly interpreted to include all documents in the possession of the taxpayer or his/her advisors.

If a Special Investigation is taking place in the course of a tax evasion criminal prosecution, CRA has the authority to request that third parties meet information requests within a reasonable time period. You may want to obtain legal advice if you are requested to make a statement to CRA. If so requested, you have a duty of confidentiality to your client which can only be displaced by order of lawful authority or your client's permission.

Note: As in any case involving legal issues or consequences you should consider obtaining legal advice.  

This topic is explored in detail in the Institute’s CRA Dispute Resolution course. For more information, look at the online PD Catalogue on the Institute’s Web site. [MAY 2005] [close]

A: The Institute provides a fees mediation service free of charge when fee disputes arise between CAs and their clients. Used wisely and in good faith, it can help the parties find fair solutions, efficiently and quickly. Access to this service may be initiated by either the CA or the client, however, both parties must agree to the terms of the process. For more information on the process see Fees Mediation . [MARCH 2005][close]

A: The Institute does not regulate rates or have fee guidelines.  Market rates vary by the level of experience of CA(s) and other staff performing the service, the geographic location of the public accounting firm and the type of service provided. [MAY 2005] [close]

A:  "Professional Corporation" cannot be abbreviated and must appear in full for an entity that is a Professional Corporation, in accordance with provision 3.2(2)3 of the Ontario Business Corporations Act. [MARCH 2005][close]

A: Sole practitioners can continue to perform assurance services, including both audit and review engagements. The Quality Control Standard (GSF-QC) outlines recommendations for all firms to follow to ensure quality of performance of assurance engagements.  More specifically, the firm should establish policies and procedures:

• To provide it with reasonable assurance that consultation at the appropriate professional level, inside the firm or external, takes place on difficult or contentious matters; that consultations are appropriately documented; and that conclusions resulting from consultations are implemented.
• To require that an engagement quality control review be completed before the issuance of the practitioner's report for all audit engagements to report on the financial statements of a public enterprise; and for other assurance engagements based on an assessment against criteria established by the firm, such as:  the number of stakeholders relying upon the practitioner's report; the extent to which the subject matter and the practitioner's report thereon are of interest to the public; and the potential sources of risk associated with accepting or continuing with an engagement.
• To monitor compliance with quality control polices and procedures, including a periodic inspection of a selection of completed assurance engagements.  Per paragraph .093 of this standard: “ A small firm or a sole practitioner may wish to use the services of a suitably qualified external person or another firm to carry out assurance engagement inspections and other monitoring procedures. Alternatively, they may wish to establish arrangements to share resources with other appropriate organizations and thereby facilitate monitoring activities.”
  

To assist members in implementing and documenting these standards for their own practices, the CICA has developed a Quality Assurance Manual with sample manuals for various sizes of firms. [MARCH 2005, amended OCTOBER 2005] [close]

A:  The firm needs to make sure that the external provider is suitably qualified. The engagement of the consultant or file reviewer should be documented upfront, including matters such as: discussion of the roles and responsibilities, the scope of the engagement, any specific requirements and issues, and the procedures for dealing with any differences of opinion. Sample engagement letters have been included in QAM. Practitioners are, however, strongly encouraged to seek their own legal and professional advice, including a review of their errors and omissions professional liability policy to determine whether there is coverage for services provided.  Note that it may be a simple matter to add an external consultant or engagement file quality reviewer as an additional insured.  [JULY 2005] [close]

A:  A firm is required to have an engagement quality control (“EQC”) review completed before the issuance of an audit report on the financial statements of a public enterprise¹.  For all other assurance engagements, the firm should establish criteria (such as those listed in GSF-QC.069) to determine whether an EQC review should be conducted before the issuance of the practitioner’s report.

Note that a firm that performs assurance engagements must also establish monitoring processes, which include periodic/cyclical reviews of a sample of completed assurance engagements for all practitioners², to ensure that an effective system of quality control is in place and being complied with.

¹  This is not the same as the definition of a “publicly accountable enterprise”, a term used in various sections of the CICA Handbook. A “public” enterprise” (as defined in GSF-QC.008(m)) is “an enterprise that has issued debt or equity securities that are traded in a public market.....”

²    A “practitioner” is defined in CICA Handbook section GSF-QC.008(k) as the person with overall responsibility for the performance of the assurance engagement and issuance of the report. [OCTOBER 2005] [close]

A:  The QAM includes two versions of sample quality control manuals for use by sole practitioners: 1) for a sole practitioner with no professional staff; and 2) for a sole practitioner with professional staff. The staff should have extensive experience performing and reviewing assurance engagement functions at senior levels, should be technically competent and up-to-date on the application of professional accounting and assurance standards, and should be able to fill a monitoring role. [OCTOBER 2005] [close]

A:  Look for the PD Calendar on the Institute’s Web site. [OCTOBER 2005] [close]

A:  An independence assessment involves reviewing circumstances that influence being able to maintain an objective state of mind (as outlined in Rule of Professional Conduct 204) and then evaluating whether these circumstances impact the ability to accept or continue with an engagement.  A conflict of interest assessment involves reviewing whether the firm is in a position where the firm’s interests conflict with that of any clients or potential client, or whether the firm’s position puts one client in conflict with another (as outlined in Rule of Professional Conduct 210).  QAM¹  provides sample forms/checklists to assist with an independence assessment; see the list of forms below. Separate forms are not provided for conflict of interest assessments; the firm should document in planning section of the engagement file that this assessment has been completed and what conclusions were made. 

Section 5.01, Assurance Engagement Acceptance Form
Section 5.02, Assurance Engagement Retention Form

¹   PEM includes separate checklists for review engagements and audit engagements that are very similar to the combined assurance engagement forms listed above.  (See Sample Forms in PEM Section B (for Reviews) and Section C (for Audits)). [OCTOBER 2005][close]

A: A firm should complete a risk assessment¹ as part of the assessment process when making a decision to accept a new engagement or to continue to provide assurance services to an existing client. The engagement should not be undertaken if there are risks that would prevent professional standard, regulatory and legal requirements from being met (see GSF-GC.029).  Once the decision is made to accept a new client, or retain an existing client, a further risk analysis is required at the planning stage to assess whether a file quality review should be completed for the engagement.  

¹    A sample form for making this assessment is included in QAM (Part B, Appendix E, Engagement Acceptance/Retention Risk Tolerance Worksheet). [OCTOBER 2005] [close]

A:  As part of the planning process for each assurance engagement (whether the client is new or existing), the practitioner should make an assessment¹ as to whether any of the following additional resources are required for an engagement, and also whether the resources are inside the firm or must be hired externally.  (Sample engagement letters for each role are included in QAM).

• Specialists may be brought in to supplement the skills of the assurance engagement team. 
• Consultants may be required to help resolve a difficult or contentious issue.
• Monitors may be hired to assess that an effective system of quality control is in place and being complied with.
• Engagement/File Quality Reviewers may be required to review whether contentious issues have been identified and dealt with in an appropriate manner, therefore preventing an inappropriate opinion from being issued.

¹    In order to assist with this assessment, the QAM includes a Consultation/Specialist Risk Tolerance Worksheet (see Appendix F in Part B). [OCTOBER 2005][close]

A:  The QAM includes a sample engagement letter in Part B, Appendix I.  (For other types of specialists, refer to the previous FAQ). The practitioner is strongly recommended to get legal advice be obtained on wording for a firm’s specific circumstances, as well as contacting the firm’s insurance broker to ensure that the firm’s errors and omissions professional liability insurance policy provides coverage for the services provided. [OCTOBER 2005][close]

A:  If partners are operating independently or with a high level of autonomy, it is not possible to set a uniform tone at the top; “tone at the top” is an important firm-level quality control consideration. Clients and employees will get mixed messages if the partners each operate under with their own quality control manual. Firms in this position that perform assurance engagements need to decide whether to create a common set of quality control policies (that is, one manual), or whether to officially split the practice and practice as independent firms. Note that in the latter situation, it may still be possible to share space, and make mutually beneficial arrangements to consult with each other, monitor each other’s firm, and/or conduct engagement file quality reviews. [OCTOBER 2005][close]

A: Every public accounting practice must have policies and procedures in place to ensure that the final product released by the Public Accountant complies with all professional standards and has been signed off by a licensed Public Accountant.

The CICA Handbook 5400.36 states that "the name of the auditor may be provided in the form of a manual or printed signature" on the auditor’s report. [MARCH 2005][close]

A: If you send electronic financial statements to clients you must ensure that the appropriate safeguards and controls are in place such that they cannot make changes to the financial statements.  For example, financial statements sent in pdf format can be password protected so as to prevent unauthorized changes from being made.  In addition, you must take steps to protect yourself from the unauthorized duplication and use of your professional letterhead and signature on the report. [MARCH 2005] [close]

A: It does not matter whether a sole practitioner practices on his or her own or through a Professional Corporation, any communication should use the word “I” as this refers to the one individual who is ultimately responsible for the activities conducted by the practice. [JULY 2005][close]

A: The Canadian Payments Association is leading an industry-wide initiative to adopt a new clearing process based on cheque images that will replace the traditional “paper-based” cancelled cheques.  Cheque imaging involves creating a digital representation of the front and back of the cancelled cheque.  The implementation of the cheque imaging initiative is targeted to begin in early 2008 with full national implementation expected to be complete in 2009.  This process includes standardizing cheque specifications to facilitate accurate digital images/ recording by the end of 2006.  Some financial institutions have already started the cheque imaging process. 

Auditors have traditionally used paper-based cancelled cheques as a source of audit evidence.  Testing often includes:

• examining cancelled cheques for payee, signing officer and endorsements,
• checking for a “deposit to the account of” stamp on the back of the cancelled   cheque,
• inspecting paid dates to ensure cheques listed as outstanding were in fact issued before year end, etc.
  

The move to cheque imaging will not likely have a significant impact on most audits as the audit procedures listed above can still be performed on the “digital cheques”.  With cheque imaging, auditors will need to rely on “electronic audit evidence” in the form of digital records of cheques.  The use of “electronic audit evidence” is now quite common in audits and guidance can be found in CICA Handbook Section 5300 Audit Evidence.  Although not likely needed for most audits, the auditor should consider whether a service auditor’s report regarding the integrity of the financial institution’s cheque imaging process is required.

For further information on cheque imaging and cheque specifications, visit the Canadian Payments Association website at www.cdnpay.ca. [April 2006][close ]