CAs welcome change to Ontario’s Chartered Accountants Act

But government can do more to attract, retain top professional talent

TORONTO (March 24, 2006) - The Ontario Government has made a progressive move to ensure the province's competitiveness by allowing professional corporations to be partners in limited liability partnership (LLP) audit firms, according to the Institute of Chartered Accountants of Ontario.

Thursday's provincial budget provides for an amendment relating to Section 13.1 of the Chartered Accountants Act respecting limited liability partnerships. Once adopted, it will remove an inconsistency between the LLP provision of the Act and a comparable provision contained in the Business Corporations Act by enabling a professional corporation to be considered a member for the purpose of forming an LLP.

Up to this point, section 13.1 of the CA Act provided that two or more members could form an LLP. However, as a professional corporation is not a "member," it could not be a partner in an LLP, even if all shareholders of the professional corporation were CAs. At the same time, the relevant section of the Business Corporations Act generally permits professional corporations to enter into limited liability partnerships.

"This situation was unfair as it discriminated between other professions and CAs, as well as between incorporated and unincorporated CAs' ability to form limited liability partnerships," says Brian Hunt, FCA, Institute President and CEO. "We applaud the McGuinty government for listening to the concerns of our profession and taking the appropriate corrective measures.

"We believe this helps keep Ontario more competitive with other jurisdictions at a time when competition for the best people is intense."

"Ontario has taken a critical first step toward creating a legal environment that ensures our province can continue to attract and retain top professional talent," said Rod Barr, FCA, Institute Chair. "But more must be done to level the playing field with other North American jurisdictions. Ontario's outdated liability regime - as the leading example - keeps our province at a competitive disadvantage because of the higher risks involved in doing essential audit work here. Ontario needs to move to full-shield LLPs and proportionate liability for auditors."

Today, under our current joint and several liability system, even if an auditor is only partly responsible for a financial loss owing to error, the auditor can be made to pay the full share of other parties involved who may simply not have the money to settle damages. Barr said that for the accounting profession, liability concerns are driving the risks of an assurance engagement higher than the returns. Firms are exiting the audit field in Ontario, which is having negative effect on access to quality audit services, resulting in more investor uncertainty and an impediment to job-creating business transactions.

"Auditors expect to be held responsible for their work, but can no longer afford to be the de facto insurers of Ontario's capital markets," said Barr. "We will be working closely with the McGuinty government to help improve the current system and promote fairness, competitiveness and confidence in our investment climate."

About the Institute of Chartered Accountants of Ontario:
The Institute of Chartered Accountants of Ontario is the qualifying and regulatory body of Ontario's 31,000 CAs and 3,500 CA students. Since 1879, the Institute has protected the public interest through the CA profession's high standards of qualification and the enforcement of its rules of professional conduct. The Institute website is: www.icao.on.ca

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For more information please contact:
Perry Jensen
The Institute of Chartered Accountants of Ontario
416-969-4271
1-800-387-0735 ext. 271
pjensen@icao.on.ca