Practice Inspection Policy

Description: Updated; 2nd Release

Originated: CPA New Brunswick

Reviewed: CPA New Brunswick Staff  

Approved: CPA New Brunswick Board; November 18th, 2016

To download a copy of the Practice Inspection policy, please click HERE

In accordance with CPA New Brunswick By-Law 18.01, “Every Public Practice Permit holder shall be subject to practice inspections, conducted by the Practice Inspection Committee in accordance with Policies adopted by the Board which will conform, to the greatest extent possible, with any national standards for practice inspection adopted by CPA Canada”.    

DEFINITIONS             

According to CPA New Brunswick By-Laws and Practice Inspection Manual:            

Candidate” means a person who is enrolled in the CPA Professional Education Program established by CPA New Brunswick;

Desk Review” means a review done at the office of CPA New Brunswick or at the office of the inspector;

Firm” means a sole practitioner or proprietorship, a partnership or a corporation;

Inspection Cycle” means that every Member, Firm or PC engaged in Public Practice will be inspected at least every 3 years and/or after 12 months following initial registration;

Member” means a Chartered Professional Accountant and any person whose name is entered in the Register, Specialists Register or in any of the Rosters established and maintained pursuant to the Act, the By-Laws or Policies, and includes for the purposes of applying the provisions of the Act, Professional Corporations and such persons who are permitted by the Act, By-Laws or Policies to carry on, in association, partnership or other prescribed arrangements with a Chartered Professional Accountant or Professional Corporation, the practice of Chartered Professional Accountant, or such aspects thereof as may be prescribed;

Practice Inspection Committee" means the Practice Inspection Committee appointed pursuant to the By-Laws;

Practising Member” means a Member authorized by the Act, By-Laws, and Policies for a Public Practice or other regulated services and includes the Office of the Auditor General of New Brunswick and Office of the Auditor General of Canada and employees in those Offices;

Public Practice” means those tasks, services, and functions, as may be prescribed, performed by a CPA, and offered to or provided to the public” whether on a full-time or part-time basis, alone or in partnership with others, in respect of any one or more of the following:

•    performing an audit engagement and issuing an auditor’s report;
•    performing any other assurance engagement and issuing an assurance report;
•    a compilation, including a compilation of a financial forecast or projection, prepared while performing an external engagement service and the notice to reader communication is required as set out in the compilation engagement section(s) of the CPA Canada Handbook – Assurance;
•    accounting, insofar as it involves analysis, advice and interpretation in an expert capacity, but excluding record keeping; and ;
•    taxation, insofar as it involves advice and counseling in an expert capacity, but excluding mechanical processing of returns

Professional Corporation” or “PC” means a corporation the name of which is entered in the Professional Corporation Register;

Student” means a person who is enrolled in the CPA preparatory courses established by CPA New Brunswick.

PRACTICE INSPECTION COMMITTEE

COMPOSITION OF PRACTICE INSPECTION COMMITTEE

The Practice Inspection Committee shall be appointed by the Board (By-Law 18.02).
The Practice Inspection Committee shall have seven Active Members or Active Associate Members consisting of the Registrar or a designated representative and six Members appointed by the Board (By-Law 18.03).
The Chair of the Practice Inspection Committee shall be appointed by the Board from among the Members of the Practice Inspection Committee (By-Law 18.04).

QUORUM OF PRACTICE INSPECTION COMMITTEE

A majority of the Practice Inspection Committee shall constitute a quorum of that Committee (By-Law 18.05). At least a simple majority of those attending a meeting is required to make a decision.
To illustrate the point with a seven Member committee, four Members are required for quorum to hold a meeting and, if only four attend a meeting, the vote of three of those Members is necessary for a decision.

The Chair of the Practice Inspection Committee has two votes in the event of a tie (By-Law 18.06).

TERM OF COMMITTEE MEMBERS

To balance the need for providing Members with sufficient time to work through the learning and develop expertise, against the need to have new people on the Committee, Members shall serve a term of three years and are eligible for a one-term three year renewal. However, for the first Committee, 3 Members will serve a two-year term and 3 Members will serve a three-year term.  Those Members with staggered terms will be eligible for one three year term renewal.

Notwithstanding the above, if an individual becomes Chair, that individual shall be eligible to serve an additional two years (giving a maximum of eight years on the Committee) in order to complete his or her term as Chair. The term of the Chair shall be as decided by the Board, which term shall not exceed four years.
Having served the full six years (or potentially eight if Chair), an individual seeking to return to the Committee shall have a time-out period from the committee equivalent to one three year term.

POWERS/AUTHORITY OF PRACTICE INSPECTION COMMITTEE

The Board delegates to the Practice Inspection Committee its authority to oversee practice inspections in New Brunswick (By-Law 18.08).

The Practice Inspection Committee shall appoint practice inspectors who shall not be Members of the Practice Inspection Committee and who shall report to the Practice Inspection Committee.

QUALIFICATIONS OF PRACTICE INSPECTION COMMITTEE MEMBERS

Committee Members shall be Members in good standing with CPA New Brunswick, and be regarded by their peers as competent professionals. To ensure that the Committee has the appropriate composition, at least 75% of the Members, excluding the President & CEO or a designated representative, shall be practice leaders and at least 75% of the Members shall have been Members in good standing of CPA New Brunswick or a legacy body for more than 10 years.

The committee shall be composed of individuals who collectively possess the experience and technical knowledge needed to address the broad range of circumstances and industry sectors that will come before it, including accounting and auditing issues related to reporting issuers, governments and not-for-profit organizations. This will also include current professional standards, assurance engagements and compilations.  Each Member on the Practice Inspection Committee shall be Practising Members for no less than the last three years.

CONFLICTS OF INTEREST OF PRACTICE INSPECTION COMMITTEE MEMBERS

Practice Inspection Committee Members shall be free from conflicts of interest to review practice inspections. The following activities may be considered to be conflicts of interest:

•    Participating in the work of CPA New Brunswick’s Complaints or Hearing committees; or
•    Performing quality control of the Inspection Committee Member’s own firm or Professional Corporation.

Each year, Practice Inspection Committee Members must bring to the attention of CPA New Brunswick any real or perceived conflicts of interest that may arise during the course of the review of the practice inspection files and sign a conflict of interest statement to identify those conflicts, where appropriate.

CONFIDENTIALITY REQUIREMENTS OF PRACTICE INSPECTION COMMITTEE MEMBERS

The Practice Inspection Committee Members must maintain strict confidentiality in respect of all inspection reports and shall not disclose any such information or material to any person except as required by legislation or in accordance with the By-Laws.

PERSONAL CONDUCT OF PRACTICE INSPECTION COMMITTEE MEMBERS

As a CPA Member, all Practice Inspection Committee Members must be in compliance with the CPA New Brunswick Code of Professional Conduct.

NEW COMMITTEE MEMBERS

All new Committee Members shall be required to attend an orientation session prior to reviewing inspection reports. This session will review the inspection evaluation process, including sample inspection reports.

MEETINGS AND CONFERENCE CALLS

The Practice Inspection Committee meets no less than once a year and holds conference calls as frequently as necessary. The face-to-face meeting is scheduled in the month of February of each year.

REQUIREMENTS TO REMAIN CURRENT ON RELEVANT PROFESSIONAL STANDARDS

Practice Inspection Committee Members must maintain up-to-date knowledge of professional standards in the practice areas in which they are reviewing inspection reports.

The annual Continuing Professional Development report completed during the year for each Committee Member will be reviewed by CPA New Brunswick to monitor Committee Members maintenance of their up-to-date knowledge of relevant professional standards (as required in the Section “Fundamental Principles Governing Conduct – Professional Competence” of the CPA New Brunswick Code of Professional Conduct and in compliance with the CPA New Brunswick CPD Policy).

REIMBURSEMENT OF EXPENSES

The Committee Members will be paid for:

•    travel time (actual hours) at the rate of $50 per hour; and
•    other travel expenses, such as meals and Kilometers, as per the Travel Policy.


For the purposes of the reimbursement of expenses set forth above, the Committee Member will prepare and submit an electronic travel expense report to the Senior Manager, Practice Inspection and Professional Standards at CPA New Brunswick (the “Senior Manager”). The travel expense report will only be submitted once the practice inspection meeting has occurred.

The reimbursement of expenses will be completed and sent to the Practice Inspection Committee Member in a timely manner following the receipt of the travel expense report.

Please note HST is applicable on all expenses if the Committee Member is registered for HST purposes.

REQUIREMENT AND SUBMISSION OF PRACTICE INSPECTION REPORTS

A minimum of 8 inspection reports per year must be reviewed by each Committee Member.

The final practice inspection report including all related working papers will be submitted to the Senior Manager, no later than fifteen (15) working days after the receipt of the recommendations of the practice inspectors.

Requests for extensions to submit practice inspection reports and working papers may be considered only after the Practice Inspection Committee Member has notified the Senior Manager, directly by email at mlapierre@cpanewbrunswick.ca, of the circumstances giving rise to such request for extension and upon the agreement of the Senior Manager.

TERMINATION

If there is breach of any of the terms and conditions set out in the terms of reference (the “Agreement”) of the Practice Inspection Committee the Committee Member shall be immediately terminated.
Further, a Member of the Practice Inspection Committee shall be automatically suspended if a Committee Member is personally involved in any situation that may amount to professional misconduct until such matter is resolved to the satisfaction of the Board of Directors of CPA New Brunswick. If the situation results in a charge being laid against the Committee Member under the CPA New Brunswick Code of Professional Conduct and the Committee Member is found guilty of the charge by the Complaints Committee or the Hearing Committee of CPA New Brunswick, the Agreement between the Committee Member and CPA New Brunswick shall be terminated immediately.


PRACTICE INSPECTORS

RESPONSIBILITIES OF PRACTICE INSPECTORS

The Practice Inspector’s responsibility is to conduct practice inspections and report any reportable deficiencies of the practice reviewed to the Practice Inspection Committee in accordance with the policies and procedures established from time to time by CPA New Brunswick.

POWERS/AUTHORITY OF PRACTICE INSPECTORS

In the course of an inspection, an Inspector may:
•    Conduct such inspections as are authorized by the By-Laws and this Policy;
•    Inquire into all matters which are referred to the inspector by the Practice Inspection Committee in connection with any such inspection;
•    Interview any Member or former Member or CPA candidate, or employee of a Public Practice, in connection with any such inspection;
•    Require any Member, former Member, or employee of a Public Practice to provide any working papers, files, books, documents, records, notes or other information in her or his possession, custody or control, or in the possession, custody or control of any partnership with which the Member, former Member, or employee of a Public Practice, are associated or employed, in connection with any such inspection.

QUALIFICATIONS AND COMPETENCIES OF PRACTICE INSPECTORS

Practice Inspectors shall be Members in good standing.

Practice Inspectors shall possess the following qualities: interest in coaching members, communication skills, ability to explain technical material (verbally and in writing), experience with professional standards and matters relating to areas covered by practice inspections, demonstrated ability at a senior level to apply professional judgment, technical expertise and computer literacy to be able to work with tools commonly used in public practices.

CONFLICTS OF INTEREST OF PRACTICE INSPECTORS

Practice Inspectors shall be free from conflicts of interest to perform practice inspections. The following activities may be considered to be conflicts of interest:

•    Participating in the work of CPA New Brunswick’s Complaints or Hearing committees;
•    Serving on the Practice Inspection Committee;
•    Performing quality control of the Inspector’s own Firm or Professional Corporation.

Each year, Practice Inspectors must bring to the attention of CPA New Brunswick any real or perceived conflicts of interest that may arise during the course of the Practice Inspection process and sign a conflict of interest statement to identify those conflicts, where appropriate.

The Practice Inspector must be and remains independent from the Member inspected and of all clients and files of the Member’s practice while carrying out the Practice Inspection; and the Practice Inspector shall immediately advise the Senior Manager upon becoming aware of any threat to independence, including any matter or relationship which, in the eyes of a reasonable observer, might be perceived as a threat to the Inspector’s independence in the performance of the inspection; and the Practice Inspector shall not commence or continue the Practice Inspection unless instructed in writing by the Senior Manager to do so.

CONFIDENTIALITY REQUIREMENTS OF PRACTICE INSPECTORS

The Practice Inspector must maintain strict confidentiality in respect of all inspection reports, all working paper files, books, documents or other material, and the affairs of any Members and the Member’s clients, and any other matter arising out of a Practice Inspection, and shall not disclose any such information or material to any person except as required by legislation or in accordance with the By-Laws.

A Non-Disclosure and Confidentiality Agreement shall be signed by all Practice Inspectors each year, prior to the commencement of the inspection cycle.

REQUIREMENTS TO REMAIN CURRENT ON RELEVANT PROFESSIONAL STANDARDS

Practice Inspectors shall have the necessary training to perform Practice Inspections. Practice
Inspectors must maintain up-to-date knowledge of professional standards in the practice areas in which they are conducting Inspections (as required in the Section “Fundamental Principles Governing Conduct – Professional Competence” of the CPA New Brunswick Code of Professional Conduct and  in compliance with the CPA New Brunswick CPD Policy).

The annual Continuing Professional Development report completed during the year for each Practice Inspector will be reviewed by CPA New Brunswick.

PERSONAL CONDUCT OF PRACTICE INSPECTORS

As a CPA Member, all Practice Inspectors must be in compliance with the CPA New Brunswick Code of Professional Conduct.

NEW INSPECTOR

Prior to being assigned Practice Inspections, it is necessary for all new Inspectors to attend an orientation/training session for new Practice Inspectors. This provides the Inspector with a more thorough understanding of the program and a consistent approach to the Inspection visits.

A practice inspector contract outlining terms and conditions is to be entered into between each new inspector and CPA New Brunswick prior to being assigned a Practice Inspection.

TIMING AND MEETING REQUIREMENTS

A minimum of 4 inspections per year must be done by each Inspector.

Each Practice Inspector shall attend the full day face-to-face meeting scheduled during the summer period each year (before the Practice Inspections cycle commences) and should participate in all other meetings and/or conference calls scheduled from time to time by the Practice Inspection Committee or the Senior Manager.

COMPENSATION AND REIMBURSEMENT OF EXPENSES

In compensation for the services provided to CPA New Brunswick, the Practice Inspector will be remunerated at a rate determined yearly by the Board of Directors plus applicable taxes for the time spent on a Practice Inspection and in preparing any report and documents relating thereto.

The Practice Inspector will also be paid for:

•    travel time on the road (actual hours) at a rate determined yearly by the Board of Directors plus applicable taxes;
•    other travel expenses, such as meals and kilometers, as per the Travel Policy.

For the purposes of the reimbursement of expenses set forth above, the Practice Inspector will prepare and submit an electronic travel expense report to the Senior Manager. The travel expense report will only be submitted once the practice inspection report has been provided to CPA New Brunswick.

The reimbursement of expenses will be completed and sent to the Practice Inspector in a timely manner following the receipt and review for completeness of the report and all other mandatory documents by the Senior Manager.

TERM OF PRACTICE INSPECTORS

The term of a Practice Inspector contract is one inspection cycle and is renewable upon mutual agreement by both CPA New Brunswick and the Practice Inspector.

EVALUATION

Practice Inspectors’ performance will be evaluated each year throughout their contract period.

An assessment form is provided to the Members/Firm inspected at the end of each practice inspection and must be submitted directly to the Senior Manager. The results will be compiled and provided to the Practice Inspector during the face-to-face meeting in the summer period.

TERMINATION OF CONTRACT

The contract between the Practice Inspector and CPA New Brunswick shall be immediately terminated if there is a breach of any of its terms and conditions..
Further, the Practice Inspector shall be automatically suspended if a Practice Inspector is personally involved in any situation that may amount to professional misconduct until such matter is resolved to the satisfaction of the Practice Inspection Committee and CPA New Brunswick. If the situation results in a charge being laid against the Practice Inspector under the CPA New Brunswick Code of Professional Conduct and the Practice Inspector is found guilty of the charge by the Complaints Committee or a Hearing Committee of CPA New Brunswick, the contract between the Practice Inspector and CPA New Brunswick shall be terminated immediately.

PRACTICE INSPECTION PROCESS

SCOPE OF INSPECTIONS

According to CPA New Brunswick By-Law 18.09 “The Public Practice Permit holder shall be inspected in accordance with the By-Laws and Policies. The Practice Inspection Committee shall authorize the inspection of:

i.    Every Member, Firm or PC engaged in Public Practice at least every three years, and
ii.    Every Member, Firm or PC engaged in Public Practice after twelve months of initial registration.”

EXEMPTIONS OF INSPECTIONS

In accordance with By-Law 18.10 “The Practice Inspection Committee may exempt a Public Practice Permit holder from inspection:•    If the Public Practice is inactive; •    If, in the opinion of the Practice Inspection Committee, the Public Practice is so small in volume that an inspection is not warranted; or •    On whatever other related grounds the Practice Inspection Committee deems appropriate.”

INSPECTION PROCEDURES

Communication with the Firm – First communication

Firms subject to an inspection in the current year shall be informed by a letter that they will be inspected. The letter will request the inspectee to contact the Senior Manager to determine the date of such inspection. Appointments are usually scheduled three months before the professional inspection season; April 1st to June 30.

Then, an Inspector is assigned by the Senior Manager based on the knowledge and skills of the Inspectors and the areas of expertise of the Firms. This assignment shall be approved by the Practice Inspection Committee.  

Submission of mandatory questionnaire(s) by the Firm

Prior to conducting an inspection, every Firm is obligated to complete and return the Confidential Information Questionnaire (CIQ) and, if applicable, the Questionnaire on the Canadian Standard on Quality Control (QCSQC 1) to CPA New Brunswick, within the time determined by CPA New Brunswick, and to cooperate in respect of a Practice Inspection and with the Practice Inspector.

All completed questionnaires will need to be returned to CPA New Brunswick’s office 30 days before the inspection date.

Communication with the Firm – Second communication

At least two weeks before the date of the inspection, the inspectee shall receive an official notice by email (cc to the Practice Inspector) including the date and time of the inspection and the name of the Inspector. An estimation of inspection fees and any other relevant information will be sent with this official notice.

A Firm may object in writing to the Senior Manager within seven days of receipt of notice of a Practice Inspection, on the grounds that an Inspector may be lacking in objectivity, or for any other valid reason. The Practice Inspection Committee shall appoint another Inspector if satisfied that there is a reasonable basis for the objection.

Communication with the Firm by the Practice Inspector

The Inspector must within two weeks of the receipt of official notice,  personally communicate by phone with the inspectee in order to introduce himself/herself, confirm the date of the Inspection, request permission to visit the site and make the final arrangements for the Inspection.

Inspection on site

During his/her inspection on site, the Practice Inspector will, among other things:

•    Request availabilities of the inspectee (for subsequent discussions);

•    Explain the process of the inspection and the standards which will be used during the review;

•    Obtain the list of clients;

•    Obtain the business card of the inspectee and letterhead where necessary;
•    Obtain the Quality Assurance Manual, if required;
•    Inform the inspectee that he/she must provide a copy of all selected reports and financial statements.

Submission of reports and expectation for completion of work

The Practice Inspection Report including, all related working papers and, if necessary, an exception report of reportable deficiencies will be submitted by the Practice Inspector to the Senior Manager.

The Senior Manager will review the completeness of the report and all other mandatory documents.

The Senior Manager will provide the Preliminary Practice Inspection Report and, if necessary the exception report to the Firm for comment and an action plan as to how they will correct reported deficiencies.

The Preliminary Practice Inspection Report, the action plan, the Firm’s comments on both (if any) and all other mandatory documents will be sent to the assigned Practice Inspection Committee Member for review.

The Final Practice Inspection Report including all related working papers reviewed by the Practice Inspection Committee Member will be submitted to the Senior Manager after the reception of the recommendations of the Practice Inspectors.

The intent is that the above process will be fully completed within a 2 month time frame.

Submission of the Final Practice Inspection Report and invoice of practice inspection fees to the Firm

An invoice will be sent to the Firm at the same time as the Final Practice Inspection Report by the Senior Manager. The payment shall be made upon receipt of the invoice.

FAILURE TO COOPERATE BY A PRACTICE LEADER

If a Public Practice Leader fails to cooperate in respect of a Practice Inspection or with a Practice Inspector, the Practice Inspection Committee may report the matter to the Registrar.  The Registrar shall notify the Public Practice that the failure to comply with the requirements of the Practice Inspection Committee within thirty days shall result in the suspension of the registration, permit and/or licence of the Public Practice, as the case may be.  The Registrar shall carry out such suspension if the failure to cooperate is not corrected within the said thirty days.  The Public Practice shall not be reinstated until all requirements of the Practice Inspection Committee have been met.