Skip to main content

Canada’s audit regulator has banned Vancouver-based firm Hay & Watson Chartered Professional Accountants from auditing publicly listed organizations over violations of audit documentation and supervision standards, it said in a release on Wednesday afternoon.

This is the first time the Canadian Public Accountability Board (CPAB), the watchdog of accounting firms that audit the books of publicly traded companies, has revealed the termination of an auditor because of an enforcement action since implementing a new disclosures framework in January.

Hay & Watson audited less than 50 public companies, according to the release. CPAB began investigating the firm in 2022 and now alleges that it was responsible for “serious violations of audit documentation standards and a fundamental absence of supervision and review.”

“The combination of these violations concentrated in such high numbers in each of these files raised significant concerns regarding the quality of the firm’s audit work,” CPAB said.

Canadian auditing standards breached included audit documentation, quality control for an audit of financial statements and the auditor’s responses to assessed risks, among others.

Hay & Watson has declined to provide comment to The Globe and Mail at this time.

Audit problems spread at Canadian accounting firms last year, industry regulator finds

Since earlier this year, CPAB now specifies when terminations occur because of significant enforcement actions found during its inspections. Previously, this information was only shared when public sanctions were imposed.

Reasons firms can be terminated include failing to submit information required yearly or to pay the annual participation fee, or as a result of enforcement actions by CPAB for seriously violating professional standards or CPAB rules.

In total, the board has cancelled the registration of 17 companies, of which four were terminated in 2023, as per information listed on their website. The other three firms banned this year were not terminated by an order of enforcement, according to a CPAB spokesperson.

Hay & Watson, a small boutique firm with 20 employees, also provides services to private companies and not-for-profit organizations.

In May, B.C. accounting firm Smythe LLP was the subject of a disciplinary case which led to a ban to auditing new clients that file financial statements with securities regulators. Later in June, CPAB prohibited Vancouver-based accounting firm Manning Elliott LLP from auditing risky public companies.

Follow related authors and topics

Authors and topics you follow will be added to your personal news feed in Following.

Interact with The Globe