Unlike several of my colleagues in our accounting publications group, I did not attend a college where football was king. No, at my alma mater in the Rockies, hockey was the marquee sport, and during my well-documented overstay there, the school regularly imported Canadians to play - many of whom graduated to lucrative careers in the National Hockey League.And as I got to know several of them personally, I was sort of taken aback at just how little I, like many Americans, knew about our neighbor to the north - both geographically and culturally. I learned about such Canadian traditions as "socials" and what "frost shields" were, learned to translate the words "oot" and "a-boot" and got into a number of arguments with a hulking player from Manitoba who insisted that a little eatery in Winnipeg served the best french fries in the world.
But for all the differences between the U.S. and the Great White North, last month's report from the Canadian Public Accountability Board revealed a troubling similarity.
Echoing the recent findings of its U.S. counterpart - the Public Company Accounting Oversight Board - the Canadian regulator's inspection reports on the Big Four north of the border stated that they have, ahem, a bit more work to do in order to improve audit quality and more or less adhere to the standards for which myriad clients hire them.
This, the CPAB's third public report, outlined its 2005 inspections for the country's four largest firms, which, to no one's surprise, are the four largest firms down here as well - Deloitte & Touche, Ernst & Young, KPMG and PricewaterhouseCoopers. That quartet audits roughly 4,000 public companies and other issuers in Canada - representing some 63 percent of the total market share as measured by number of clients, and more than 90 percent as measured by market capitalization.
The CPAB report said that the inspected firms have to improve specifically in compliance with policies and procedures and in performance on audit engagements. The CPAB went on to note that the four firm's performances on some 87 audit engagements found that at least one audit performed by each of the firms was seriously deficient.
"Unacceptable" was the term the CPAB used.
Many of you who are experienced auditors could no doubt make a very educated guess about what went wrong, but nevertheless, there seems to be a disturbing pattern here with regard to Big Four auditing, be it north or south.
Each firm that was singled out for inspection was sent a private report by the CPAB that includes, free of charge, a set of specific recommendations to fix the audit problems, which the firms have about six months to implement.
On a brighter note, the CPAB said that the prior year's recommendations to these same firms have been "implemented effectively." As did the U.S. report, the Canadian examinations complimented each firm on the progress they have heretofore made - tossing around such terms as "quality leadership" and the 21st-century favorite, "tone at the top" - but nevertheless strongly suggested they get busy and fix the above-mentioned problems.
Having seen the reports from both U.S. and Canadian overseers closely mirror each other, one has to wonder whether any audit inspection in the near future will ever give a Big Four firm a clean bill of health.
And that's not lost in translation.
