Date (before October 31, 2008)
Mtre Jean Paul Dutrisac President Office des professions du Québec 800 place D'Youville, 10th Floor Quebec City, Quebec G1R 5Z3
Dear Sir: Subject: Draft Regulation respecting the public accountancy permit of the Ordre des comptables en management accrédités du Québec In response to the notice published in the Gazette officielle du Québec of September 17, 2008, we are submitting the comments of _______________________________ on the draft Regulation respecting the public accountancy permit of the Ordre des comptables en management accrédités du Québec. Before presenting our arguments, we would like to inform you of our conclusion: the “standards” proposed in the CMA’s draft Regulation on the public accountancy permit cannot be recognized as analogous to those required today to practice public accountancy in Quebec. As you know, the legislative provisions authorizing the Ordre des CMA to issue a public accountancy permit explicitly require that the standards used in making the first regulation on the issuance of this permit “be analogous to those recognized on 21 December 2007 regarding the practise of public 1 accountancy in Quebec (1) .” Our analysis is therefore not simply intended as a comparison between the Regulation proposed by the CMAs and the existing Regulation of the Ordre des comptables agréés du Québec. Since the legislation creates an obligation to go beyond and refer to recognized standards, the following comments refer to the standards that applied to the practice of public accountancy on December 21, 2007, i.e. the standards that apply to us and that we apply every day in our practice of public accountancy. Our financial statements are circulated widely on capital markets and it is essential that they garner the trust of our investors and creditors as well as financial analysts. The role of public accountancy professionals is crucial in this regard. Up until now, Quebec has been able to count on professionals with the highest level of competency thanks to their rigorous and diversified professional education. To protect the public and the economic interest of Quebec, the government must ensure that the current requirements are maintained. Continuing education of CMAs respecting the practice of public accountancy Under the draft Regulation, the Ordre des comptables en management accrédités (the Ordre des CMA) would be authorized to issue a public accountancy permit to members who have successfully completed a post-certification program defined by the Ordre des CMA, completed a 24-month training period in public accountancy under the supervision of a member of the Ordre and passed the examination of the Ordre. The draft Regulation is silent on a key element of the process to obtain a public accountancy permit, i.e. the qualifying education for admission to the Ordre des CMA, which is the first step of that process. In the expert report submitted to the Office des professions in January 2005, Jacques Plante pointed out that
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Section 6 of the Act to amend the Professional Code and the Chartered Accountants Act in respect of public accountancy, S.Q. 2007, Chapter 42.
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university undergraduate programs offered to CMA candidates did not cover all the essential competencies required to audit financial statements. He concluded that to bridge this education gap, major amendments may have to be made to a number of university programs to ensure the protection of the public. Despite this situation, known to all for three years, there is no indication that university programs have been amended for CMA candidates. Mr. Plante’s findings are still valid today and we must conclude that CMA qualifying education cannot be recognized as analogous to that currently required to practice public accountancy. The post-certification program set out in the draft Regulation is a mere statement of general intent to provide a training program at “the university Master’s level.” No information is given on the program’s actual content, or even on the institutions that would likely offer such training, which therefore begs the question: doesn’t the legislation provide that only a recognized university can offer graduate-level education and qualify the education it provides as being at the “Master’s level?” In the absence of adequate undergraduate education and since the purpose of the post-certification program seems to be to address the major deficiencies in qualifying education to practice public accountancy, it behooves the authorities to obtain complete information on this program, as it will be delivered, and make the information publicly available before taking steps to authorize the Ordre des CMA to issue public accountancy permits. Until that time, it would be premature, to say the least, to conclude that this education is in any way analogous to that currently required to practice public accountancy. Provisions respecting the training period The draft Regulation provides for the acquisition of practical experience in public accountancy by way of a training period, the objective of which is the “application and development of the theoretical knowledge of the post-certification public accountancy program.” The training must be completed under the supervision of a member of the Ordre des CMA. We must take exception with this provision which does not provide for the acquisition of diversified experience and will only allow candidates to audit entities that CMAs can already audit. A diversity of mandates and clients is essential for candidates to acquire sufficient autonomy to assume responsibility for an assurance mandate in the future. This dual diversity criterion is imposed by the Ordre des comptables agréés du Québec to prospective training employers and is also found in the standards adopted by the International Federation of Accountants (IFAC). In our opinion, this requirement of the draft Regulation is therefore insufficient. The draft Regulation also stipulates that the training period of a “duration of 24 months” required to obtain the public accountancy permit shall consist of not less than 1,250 hours of “professional services in the field of public accountancy.” We assume that the expression “professional services in the field of public accountancy” means that these services will have to be rendered in a firm, and not for the exclusive benefit of an enterprise. The diversity of clients and the nature of the mandates should ensure that broad experience is acquired. The standards of the Ordre des comptables agréés du Québec respecting training periods provide that to be entered on the Ordre’s Membership Roll and practice public accountancy, a candidate must have accumulated 2,500 hours of professional services in a firm, including at least 1,250 hours in assurance and 100 hours in taxation. In addition to enabling future professionals to acquire sufficient autonomy to perform mandates for varied clienteles, the purpose of this 2,500 hour requirement is to ensure the continuity and intensity needed to acquire the various competencies that are essential to provide assurance services to the public. This standard is applied by CA firms not only in Quebec but also across Canada. The 1,250 hours in assurance without the 2,500 hours of professional services offered to the public is not consistent with the standards currently in force. …\ 3
A number of additional questions are raised respecting the training period. There is no indication that the training period would have to be completed in the firm in which the training employer practices. This condition, which is the basis of all practical experience requirements, allows for the supervision and mentoring necessary to acquire and internalize the competencies that are essential to the practice of public accountancy. Clearly, we can conclude to a lack of analogy where the training period requirements are concerned. The examination As for the requirement to pass the Ordre des CMA examination, there is no information in the Regulation that we can analyze, since no description of the examination is provided and we have not had the opportunity to review the papers submitted to candidates. It appears that this examination is still in the development stage. We are therefore unable to conclude that the standards in the Regulation are analogous in this regard. For the above-mentioned reasons, more specifically as concerns the professional examination and the education required to obtain the public accountancy permit, we must request that you suspend the consultation and adoption process respecting the draft Regulation until the exact and concrete nature of the requirements proposed by the Ordre des CMA are made public and the various stakeholders, including the Office des professions and the Ordre des comptables agréés du Québec, have had an opportunity to perform their analysis. As currently issued, the draft Regulation respecting the public accountancy permit of the Ordre des CMA only sets out principles and wishes and does not constitute a body of rules that are likely to provide the public with the assurance it needs regarding the competency of those persons to whom the Ordre des CMA would deliver a public accountancy permit. Mobility of the workforce and reciprocity agreement In closing, we would like to draw your attention to the impact such a regulation would have on the mobility of the workforce and economic activity since the Quebec economy is open to the world and many organizations operate at the national and international levels. The mobility of professionals continues to be a major issue for the Quebec government and Quebec Premier Jean Charest. Quebec’s major trading partner is Ontario, which adopted the Public Accounting Act in 2004, creating The Public Accountant Council for the Province of Ontario (the “PAC”). The PAC’s mandate is to govern public accountancy in Ontario. It is essential that the Office and the PAC harmonize their supervision of the practice of public accountancy. Currently, only the Institute of Chartered Accountants of Ontario is authorized by the PAC to deliver public accountancy permits. To preserve the mobility of accounting professionals, a comparison between the Ontario and Quebec requirements is crucial, especially since the standards governing the practice of public accountancy by Quebec chartered accountants are substantially the same as those governing chartered accountants in Ontario. However, the PAC does not yet recognize the Institute of Certified Management Accountants of Ontario. The PAC’s decision is based on an in-depth analysis of the Ontario CMA requirements respecting professional education, the examination, training period and supervision of public practice, which are substantially the same as those proposed by the Ordre des CMA. Since the conditions of the proposed Regulation for the issue of public accountancy permits by the Ordre des CMA are similar, in many respects, to those that govern CMAs in the other provinces and more particularly in Ontario, it is to be expected that the Ontario regulator will be reticent to recognize Quebec CMAs if it has not recognized Ontario CMAs. Finally, it should be noted that none of the CMA institutes of Canada have been recognized by the National Association of State Boards of Accountancy of the United States (“NASBA) for purposes of …\ 4
signing reciprocity agreements with the state societies of the American Institute of Certified Public 2 Accountants (“AICPA”) . Canada’s CA institutes/Ordre were granted such recognition several years ago and have signed reciprocity agreements. We must therefore conclude that the draft Regulation respecting public accountancy permits presented by the Ordre des comptables en management accrédités contains weaknesses that make it impossible to recognize the analogous nature of its standards, which is required by legislation. In this turbulent period where the very credibility of financial markets has been shaken, assurance is clearly a vital function for enterprises and the high level of core competencies required to practice public accountancy must be maintained. In our opinion, the major deficiencies we have identified pose a serious risk to the protection of the public. Yours truly,
Signature
c.c.
Daniel McMahon, FCA President and CEO Ordre des comptables agréés du Québec
Please send a copy of your comments to: Daniel McMahon, FCA President and CEO Ordre des comptables agréés du Québec 680 Sherbrooke Street West, 18th Floor Montreal, Quebec H3A 2S3
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Only CPAs are authorized to perform audit services in the United States. …\