Proceedings of the Standing Senate Committee on
Banking, Trade and
Commerce
Issue 49 - Evidence, April 15, 1999
OTTAWA, Thursday, April 15, 1999
The Standing Senate Committee on Banking, Trade and Commerce, to which was referred Bill S-25, respecting the Certified General Accountants Association of Canada, met this day at 11:00 a.m. to give consideration to the bill.
Senator David Tkachuk (Deputy Chairman) in the Chair.
[English]
The Deputy Chairman: Our first witnesses today are from the Certified General Accountants Association of Canada. Please proceed.
Ms Shirley Reilly, Chairman and CEO, Certified General Accountants Association of Canada: Mr. Chairman, it is an honour to have this opportunity to speak to the Senate Banking, Trade and Commerce Committee concerning Bill S-25.
Some 86 years ago, acting on behalf of a few dozen accountants, 12 individuals petitioned Parliament to incorporate a new Canadian professional accounting association. As a result, the General Accountants Association, later renamed the Certified General Accountants Association of Canada, was born on June 13, 1913.
The last 86 years have been eventful ones. For one thing, we have grown. As chair and CEO of the Certified General Accountants Association of Canada, I represent more than just a handful of accountants. Currently, there are 30,000 certified general accountants and 30,500 students in our program of professional studies. CGAs practise their profession in every province and territory of our nation. To illustrate the increasingly global nature of the accounting profession, some of our members and students live in Bermuda, the nations of the Caribbean, Hong Kong and the Peoples' Republic of China, an expansion never envisioned by our founding members.
As our membership has grown we have become aware of certain shortcomings in our current governing act. For example, although our association represents close to 10,000 francophone CGAs and students, it does not have a French name. CGA Canada has long prided itself on maintaining a policy of bilingualism. Therefore, we look forward to that situation being rectified. With the passing of Bill S-25, we will become known in French as l'Association des comptables généraux accrédités du Canada. We also find that our name can be a bit of a mouthful and we want to entrench in law our right to use the abbreviated form we have come to be known by, which is CGA Canada.
Over the years, a number of changes affecting our association have led to other revisions reflected in the bill before you. Back in 1913, our founding members sought two basic powers that they felt were required to create an association of respected professionals. Those were the right to set examinations for those seeking membership and the right to grant certificates to candidates who successfully completed those examinations. The objects and powers that were appropriate to CGAs at the turn of the century have served our profession well, but they are a long way from the current scope of the operations of the Certified General Accountants Association and the importance of today's CGA profession. All of these new areas are laid out in Bill S-25.
Mr. Guy Legault, President, Certified General Accountants Association of Canada: Our association has developed an internationally respected program of professional studies that is continually revised and kept current. It has also mandated examination and experience requirements that, together with successful completion of the program, lead to the granting of our designation -- certified general accountant. However, CGA Canada not only grants certificates to those who meet our membership qualifications, it also develops standards for members such as our Code of Ethics.
[Translation]
In addition to defending the interests of our members, we draw on their expertise to express opinions of a range of public issues. Recently, we had the honour of appearing before the House of Commons Standing Committee on Industry to give our position on Bill C-54, the Personal Information Protection and Electronic Documents Act.
[English]
Those are but a few examples of the types of activities that we have been undertaking over the years. CGA Canada now seeks to formalize its current activities through this revised act. We seek as well to create a foundation that will allow our association to grow and thrive in a new millenium and that will allow us to support our members as they carry out their professional responsibilities to the public they serve.
In 1913, our founding members had a vision. They sought to create an association of accountants who would network, exchange ideas and promote professionalism. Pardon the cliché, but they succeeded beyond their wildest dreams.
Ms Reilly: Mr. Chairman, I should also like to point out that this bill is the final outcome of a lengthy process and review. CGA Canada established an act-of-incorporation work group consisting of national and provincial representatives. The work group sought input from our professional and territorial affiliates on an ongoing basis and worked closely with Senate legal counsel. Consequently, this bill has been drafted to carefully reflect the existing division of responsibilities between national and provincial and territorial bodies. The provincial and territorial affiliates support the national activities of CGA Canada. They have all, through their members on the board of directors of the Certified General Accountants Association of Canada, endorsed the process of modernization and the reform found in the bill. This bill was finally approved by our members at our annual general meeting last September.
This bill is important for CGA Canada because it will establish a French name for our association. It will also modernize the objects and powers with which our association can continue to grow and operate well into the next century. By recognizing the scope and importance of the activities carried on by the association and by CGAs generally, the amendments proposed are, we believe, reasonable, worthwhile and in the public interest.
I know that all the members of the CGA delegation present this morning are anxious to assist the committee in its consideration of Bill S-25. We would be delighted to answer any questions that you may have now or that may occur to you as the morning progresses.
Senator Angus: Congratulations on the material that you have submitted to us. It is exactly the type of thing that is helpful to folks like ourselves when we get it well in advance, as we did. It explains so clearly what you are trying to do.
I have asked this question before. It seems to me that about six years ago you were here at the committee or you were talking to us with a view to this special bill being introduced. In a nutshell, can you explain the difference between the profession of accountancy, generally, or chartered accountants perhaps, and certified general accountants? What is the basic difference?
Mr. Legault: The profession of accountancy is represented in Canada by three official bodies. There are the chartered accountants, the certified management accountants and the certified general accountants. Roughly, the certified general accountants represent 25 per cent of the profession. We all have the same competencies when it comes to doing our profession, which is the profession of accountancy. The difference between the three bodies is in how we achieve our competencies and how we get there.
Without getting into the nitty gritty of how each does it -- and I would not want to speak on behalf of my colleagues -- one of the particularities of the CGA is that we have our own program of studies where we can basically train an individual from the beginning to the end and they become a professional accountant, with the added requirement that they also need a university degree before designation.
If that is not specific enough, I would be happy to go into more detail.
Senator Angus: Does the university degree requirement apply to all three groups?
Mr. Legault: Yes, it applies to all three as far as I know.
Senator Angus: I am still unclear. I need a little more explanation. You are saying that you are all members of the profession of accountancy. There are members of the CICA, there are members of your association and there are members of the Association of Management Accountants.
Is there not one overriding difference that would help me?
Mr. Legault: Everyone has the right to practise accountancy in Canada. The profession of accountancy also is comprised of regulated services and non-regulated services. There are in fact some differences when it comes to the regulated services. The members of the CGA have the right, for example, to perform audits in nine provinces and territories in Canada, whereas some other bodies, like the members of the CICA, have the right to do it in every province or territory. That is one difference.
Senator Angus: What is the rationale for that? That is a very big difference. The subject of the integrity of financial information, for example, comes before our committee very often in terms of disclosure and reliability of information that is made available to shareholders or investors. There must be something in the qualifications of your association's members that is different.
Mr. Legault: You might also ask why we have rights in nine provinces and territories but not in the other three. The reasons are history, monopoly and politics, in the end, because those rights are entrenched in provincial legislation. Changing that legislation would require changing something that has been in place for quite a long time. Two years ago, we succeeded in changing provincial legislation with our colleagues in Newfoundland.
The competencies are there. It is only a question of changing legislation that is in place and has been in place for a long time. It is never easy to change a monopoly. It is, obviously, a question of politics.
When you consider all the trends at the national level or even at the international level, you realize that people are looking at competencies nowadays. We have proven through the years that our members have the competency even to perform audits and that is proven by the fact that we do have full public practise rights in nine provinces and territories in Canada.
Senator Austin: Let me ask you a provocative question. For the last three years, we have been doing a study related to joint and several responsibility. The members of the CICA have taken a very active role because they have felt that the legislation, as it exists presently, enables or opens up the possibility of them being added as defendants in lawsuits because they have deep pockets. For 1 per cent responsibility they could ultimately have to pay 100 per cent of a judgment. They have been very helpful to the committee. They have come before us many times and have spearheaded a move worldwide to try to bring the law more into balance or sync, if you will, with the realities of modern global financial markets and the investing community and litigation trends.
We did not hear from you folks on that. Is there a reason for that? Are you concerned about joint and several liability?
Mr. Legault: We may not have appeared before you in person, but we have written to Senator Kirby, as the chair of the committee, and also have presented briefs on the issue.
Yes, we are concerned about liability. We did not appear in person because we had to look at the makeup of our membership and we had to decide on what issues our resources were to be put.
Our membership is comprised of many practitioners and people working in industry. A large percentage of them work in small and medium-sized enterprises. You can imagine, then, that the liability issue is not of the same magnitude as it is for accountants who work at the five big firms. As well, we do have a requirement for insurance. Our members have to carry professional liability insurance. Those two factors together meant that we were probably less on the forefront of that issue, but it was an issue that we were concerned about, like all accountants over the world.
Senator Kroft: I have had considerable experience with members of your professional organization. They have universally been impressive.
I have a supplementary question specifically on the issue of the difference between you and the CICA. I want to take Senator Angus's question one step further. When a firm of chartered accountants presents a financial statement, we are accustomed to them putting a certificate, clean or qualified, on that statement. Can your members do something equivalent for a financial statement? What is the equivalent of a chartered accountant's certification of a set of financial statements? What will lending institutions or government agencies or securities regulators accept? Is it something legal or within your by-laws or is it simply a matter of, in a broad sense, political considerations or bureaucratic practices?
Mr. Legault: Let me clarify what I meant earlier by public practise rights. The fact that we have public practise rights in nine jurisdictions in Canada means that our members can sign a set of financial statements and an audited statement the same way that a chartered accountant can. We have the right to do that in most jurisdictions in Canada. There is no difference when that signature is on the report. The users of those financial statements can rely on them the same way they could if the statements were signed by a chartered accountant or a certified general accountant. Under provincial legislation we are allowed to do that.
Senator Kroft: There is no legal distinction. It is a matter of what weight or consideration the receiver of the statement wishes to grant to it.
Ms Reilly: We do not have the right to issue an audited statement in Ontario, but some of our members in that province do have that right. When Ontario changed its legislation in 1962, we had members who had the right to sign audit certificates and we still have some of those members in Ontario. However, the legislation in Ontario is such that since that date, none of our members has been given the right to sign audit statements. It is a long and varied history.
In 1978, the Progressive Conservative government's Professional Affairs Committee recommended that we be given rights. However, the government did not enact the legislation. The subsequent Liberal government told us that they had the legislation drafted to give us the rights. Unfortunately, they did not win the election before they tabled it. The NDP government said that they would do it, but you will notice Bob Rae is no longer there. We are now back to the PCs. It is political.
The same holds true in Quebec. Some of our members in Quebec have the right to sign statements but, again, it is a provincial and a political issue.
Senator Callbeck: When you are studying to be a CGA, do you go with a firm like a CA does or do you study on your own for a while before you go with a firm? What is the process?
Ms Reilly: We will accept practical experience from a public accounting firm. We will accept it from industry or from public service -- wherever you work. Each province has their own rules; however, if you want to practise public accounting, generally you have to take a course in public accounting and prove experience. Therefore, before you serve the public in that way, you are qualified. If it has been a while, you will have to take a refresher course.
Senator Callbeck: Did you say that each province is different?
Ms Reilly: Each province is different.
Senator Callbeck: Is it the same for the CA program?
Ms Reilly: I could not speak for the CAs.
Senator Oliver: As one of the three accounting organizations in Canada, what steps have you taken to ensure that the legislation that you are bringing before us has met with the approval of the others? How do we know that they have no objections? As I understand it, they are not being called to give evidence here today. Do you have letters or waivers from them to indicate that this is acceptable to them and that this legislation will not impose on some of their turf?
The Deputy Chairman: We do have representatives from the Canadian Institute of Chartered Accountants here today. We do not have the management accountants.
Senator Oliver: I did not know that.
Mr. Legault: In August of last year, we did submit the project to the other bodies, the Certified Management Accountants and the chartered accountants. That was just before going to our annual general meeting. We heard from the chartered accountants last week and I understand that they will be appearing here this morning.
No objection was raised by the Certified Management Accountants. As far as I am aware, the chartered accountants made some suggestions that we had the opportunity to discuss over the last couple of days. We will agree to the changes that they are recommending.
Our understanding of our legislation is that we are not infringing on the legislation of the other two accounting bodies.
Senator Kelleher: Have your organization and the CAs ever tried to get together or to merge into one? Certainly the CAs do not seem to have a problem merging back and forth with all kinds of firms. They appear to have a mentality that leads to that. Have you people ever tried to get together? Everybody else is consolidating and amalgamating today.
Senator Austin: Not everyone.
Ms Reilly: To my recollection, it has been tried at least twice in the province of Quebec and has failed twice. There does not seem to be that much interest in coming to a general agreement. We have certainly not been approached as a national association.
Senator Kelleher: You say you have tried twice in the province of Quebec, but I am thinking of nationally.
Ms Reilly: As long as I have been involved, which is nearly 20 years, there has been no national attempt to amalgamate the two bodies.
Senator Kelleher: Do you people have any interest in that?
Ms Reilly: There is a basic philosophical difference between the two organizations. Our members are extremely committed to open access. We do not care who you are when you come to us, whether you come as a mature student, out of a community college, or out of university. However, you must complete the program and you must have a university degree when you finish. Regardless of who you are, you can come in.
My understanding is that the other two organizations require a university degree before you can start. We require it when you finish, which means that you can do it along with your program. That is a fundamental difference in philosophy.
The Deputy Chairman: Does it matter what university degree?
Ms Reilly: What university degree you have depends on how many credits you get coming into the program. There are 17 courses in the program. If you come in with a university degree, you will come in around the fourth level of our program. If you come in with an accounting or business degree, you will get more credits than if you have a degree in plant physiology or philosophy, for example.
The Deputy Chairman: We will now call on the next group, the Canadian Institute of Chartered Accountants.
Mr. Peter Wilkinson, Director, Government Affairs, Canadian Institute of Chartered Accountants: Mr. Chester and I are pleased to provide you with our brief comments on Bill S-25, which is before you today. We are supportive of what CGA Canada is seeking to accomplish with this legislation and we have no broad objections to the content of the bill.
In reviewing the legislation, we see reflected in it some specific wording and provisions that were contained in legislation that was passed in 1990 to amend the Canadian Institute of Chartered Accountants Act. Those of you who were involved at that time will recall that there was a fair amount of discussion surrounding the 1990 bill that modernized the CICA Act originally passed in 1902.
At that time, our CGA colleagues were concerned that those provisions were too broad and that the proposed powers invested in the CICA as a result would apply beyond our own members. We agreed with that and accepted wording changes that were aimed at indicating clearly that certain clauses of the bill would apply only to the CICA and its members.
It is in that same spirit that today we are seeking specific changes to three clauses of Bill S-25 so that the same clarity that CGA Canada sought in our legislation will exist in Bill S-25.
Specifically, we are proposing that some references to the accountancy profession or the accounting profession be removed. I believe you have received a letter that we sent to Senator Kirby yesterday after a series of discussions with CGA Canada last week.
Under clause 2 of Bill S-25, we suggest that proposed subsection 4(1) be amended to read as follows:
The purposes of CGA Canada are to promote the practice, profession and common interests of certified general accountants.
That amendment removes the general reference to the profession of accountancy in that clause.
Under clause 2 of the bill, we suggest that proposed paragraph 4(2)(g) be amended to read as follows:
to encourage and assist certified general accountants to adapt to changes in the accounting profession.
That amendment removes the reference to the accounting profession in general.
Finally, again under clause 2 of the bill, we suggest that paragraph 4(2)(h) be amended to read as follows:
to communicate with the public, governments, the accounting profession and other parties in respect of issues, circumstances, policies, practices and other matters that have a national aspect and are of concern or interest to certified general accountants or society generally and to do all such things as are calculated to give the public a greater and more general appreciation of the profession of accountancy.
By removing one reference to the accounting profession, that amendment clarifies that CGA Canada can communicate on matters of concern and interest to certified general accountants rather than speaking for the accounting profession as a whole. Also, the last part of the clause has been modified to parallel similar wording in the CICA Act.
We hope that you will regard those amendments as reasonable ones that do not affect the substance of Bill S-25, but merely bring about in it the same clarity that CGA Canada sought in the CICA Act in 1990. We understand that the amendments that we are proposing today are acceptable to CGA Canada.
Senator Angus: I can see where you are coming from. Could you live with the bill?
Mr. Wilkinson: I would say, Senator Angus, that we should like the bill to be amended to seek the clarity in it that was sought in ours. We should like what it is to be clear.
Senator Oliver: That was not his question. Can you live with it?
Mr. Wilkinson: We should like it amended. Also, I believe our colleagues at CGA Canada could live with the amendments that we have proposed.
The Deputy Chairman: Do they like them or can they just live with them?
Mr. Simon Chester, Legal Counsel, Canadian Institute of Chartered Accountants: I should like to offer this observation to the committee. We think that they should be able to like them because in many respects, they reflect wording that the CGAs themselves proposed some nine years ago.
Senator Angus: It is a tit-for-tat operation.
Mr. Chester: No, it is equality.
Senator Austin: I remember the banking committee discussions when the shoe was on the other foot.
Do you have any concerns with respect to the provisions in the budget that allegedly heighten professional responsibility?
Mr. Wilkinson: Are you referring to civil penalties for tax preparers, senator?
Senator Austin: Yes.
Mr. Wilkinson: Yes, the CICA has grave concerns about the civil penalty proposals in the federal budget. We have had a series of discussions with the Department of Finance and with Revenue Canada. Our members are quite upset about what has occurred, that it occurred without any consultation with us, I believe, or with anyone else in the professional accounting world. We have made it clear that we want that removed or significantly amended so that there are not civil penalties for tax preparers in situations where supposedly they should have known about something when really they could not have known about it.
We certainly have no problems with civil penalties for people who knowingly participate in something that is wrong or fraudulent or in tax shelters.
Senator Austin: My understanding is that the department's argument relates to something called gross negligence.
Mr. Wilkinson: The department's argument does relate to gross negligence. As I understand it from our lawyers -- and Mr. Chester is not our lawyer on this issue -- the problem is that there are no standards for tax preparation in this country in the same way that there are standards for doing audited financial statements. There is GAAP and there is GAAS and there are rules for professional conduct. There is no GAAP or GAAS for tax returns. Hopefully, we will continue working with Finance and Revenue Canada and we will be able to come to an agreement that we all like.
I know that CGA Canada has also been dealing with this, but I will let them comment on that.
Senator Austin: I have no doubt that we will be hearing from you when that particular legislation is before the banking committee.
Mr. Wilkinson: If there is no change, senator, you will be hearing from us long before it gets to your committee.
Senator Kelleher: I should like to ask the same question I asked the other group. I am still slightly confused. I have never been able to figure out the difference between your two associations and nothing I have heard this morning has really helped all that much.
Has there ever been any attempt or interest by the CA Association to get together with the other association and to amalgamate into one? If not, why not?
Mr. Wilkinson: Certainly, I am not aware of any movement on our side or on anybody's side to amalgamate at the national level during the ten years that I have been with the CA profession.
However, as Ms Reilly said, there were two attempts to amalgamate in Quebec and my understanding was that it was rejected by the members. It was not rejected in the governance of the CA profession.
Our act is from 1902; the CGA Act is from 1913. We have both been around a long time.
Senator Kelleher: I will not pursue the matter, Mr. Chairman. I am still unenlightened.
The Deputy Chairman: The Canadian Institute of Chartered Accountants has suggested potential amendments. I understand that the Certified General Accountants have talked with the chartered accountants. Perhaps they could respond to this and then I will ask a senator to move that we accept those amendments.
Senator Angus: I am happy to move the three amendments. They seem to be housekeeping by nature. They seem to make sense and to be consistent with the earlier piece of legislation.
Senator Austin: I should like to know, Mr. Chairman, whether the CGA is prepared to accept those amendments.
The Deputy Chairman: I should like to recall the certified general accountants.
Ms Reilly: Mr. Chairman, I do not wish to bore the honourable members with the history that surrounds the passage of the CICA Act in 1990. Mr. Wilkinson has argued that certain general references to the accountancy profession in Bill S-25 should be revised to make it plain that they apply solely to the members of CGA Canada. As stated in our opening remarks, the new bill simply restates and expands the powers exercised by the Certified General Accountants Association of Canada by bringing the 1913 statement of objects and powers into conformity with current practice.
CGA Canada is well aware that no provision in private legislation affects the rights of any person except members of the organization that is subject to the bill. Therefore, I should like to indicate to the committee that CGA Canada could live with the proposed wording changes. It is our view that those changes are not substantial and in no way would affect the objects and powers exercised by CGA Canada.
Senator Oliver: Do you know whether or not Mark Audcent, who had a hand in the drafting of this bill, has looked at the language of the amendments to ensure that they are not inconsistent?
The Deputy Chairman: I would ask Mr. Audcent to come forward. There is no discussion on the amendment.
Mr. Mark Audcent, Law Clerk and Parliamentary Counsel, Senate of Canada: I have cooperated with legal counsel for CGA Canada over a substantial period of time in order to draft this bill, and I am quite prepared to advise that the bill is in good legislative format.
With respect to the amendments, I saw them only this morning. I really cannot comment on them. With the look that I have taken, they seem fine. I would be concerned that we do not have a French-language version yet, but my office could undertake to put the amendments into proper legislative format and get the French prepared so that you could report them.
Senator Angus: As the mover of the motion, I would be happy to add a rider to it, subject to the wording being in proper legislative format, both in English and in French.
The Deputy Chairman: We can do that even though we would not have seen the final version.
Senator Angus: Are you comfortable with that?
Mr. Audcent: Honourable senators, it has happened before that committees have adopted amendments and instructed counsel to draft them. Obviously, the report goes to the chair and the chair will look at the report that you would send back to the chamber with the amendments. If you would like me to do that, I am prepared to do it.
Senator Austin: Mr. Audcent and I had a very interesting discussion a while ago about parchment errors. Would this be within the definition of a parchment error?
Mr. Audcent: I am pleased to advise, senator, that there is no error on this parchment. We are into amendments.
Senator Austin: I just wanted to tease. Let us go ahead because the bill will be reported. If we are not satisfied we can deal with it again at third reading.
Senator Kelleher: Agreed.
The Deputy Chairman: Is there anyone opposed to the amendments? None opposed. Passed.
I will now propose that Bill S-25, as amended, be adopted and reported to the Senate.
Some Hon. Senators: Agreed.
The committee adjourned.