Sunday News Roundup 22.05.22: Big Four audit split, accounting standards setter goes global, and more
Wrapping up the odds and ends from the past week in Canadian accounting news
Subscribe to our weekly newsletter and get all the week’s stories. Click here to sign up.
TORONTO, May 29, 2022 – News broke this past week that Ernst & Young LLP is considering a world-wide split of its audit and advisory businesses. If true, the decision would impact thousands of Canadian accountants and have ramifications for the accounting profession in Canada, most notably at the Big Four.
The story was first reported by Michael West Media, an independent investigative journalism platform based in Australia, which said “EY partners of the groups around the world have inked non-disclosure agreements in an effort to prevent the news leaking before final decisions are made about the structure of the two new companies.”
The news was then picked up by the Wall Street Journal, which focused on the potential creation of two giant professional services firms, and The Guardian in the UK, which focused more on the record of audit failures at the Big Four and the regulatory scrutiny of the firms’ independence. Yesterday, the Wall Street Journal reported that the other Big Four firms have no intentions of following EY, and “issued statements defending their existing models.” And today came news that the global head of EY, Carmine Di Sibio, "pleaded with the firm’s more than 300,000 staff to not be distracted by the break-up plans and said no final decisions had been made," according to Australia's Financial Review.
In a related note, the UK Financial Times and AccountingWEB each reported this past week that audit failure fines actually benefit the accounting profession. The fines levied against UK accounting firms by the Financial Reporting Council are actually sent to the Institute of Chartered Accountants in England and Wales, rather than the securities regulator (as is the case in Canada and the US), or even (as has been suggested) into reserve funds to reimburse victims of audit failures, such as employees who have lost jobs and pensions when companies collapsed.
AccountingWEB explains it best: “when a major auditor is fined by the FRC the fine in question is reimbursed, net of costs, to the professional institute that had the primary responsibility for regulating the firm found guilty.”
Accounting standards chair appointed to IASB
In Canadian accounting, the big news of the week was the appointment of Linda Mezon-Hutter, the Chair of the Canadian Accounting Standards Board (AcSB), to the International Accounting Standards Board. Mezon-Hutter has been a fixture in standards setting for year, having joined AcSB in 2004 and serving as Chair since 2013.
David Milstead at the Globe and Mail covered her appointment (and has interviewed Mezon-Hutter as far back as 2015). Milstead rightly refers to many of the accounting standards challenges that marked Mezon-Hutter’s tenure, such as the shift to IFRS, non-GAAP reporting, and cannabis accounting standards, issues that were debated at length by the business press.
Appeals Court upholds SR&ED tax credit decision
Scientific research and experimental development (SR&ED) tax credits are big business for accounting and business consulting firms. And Canadian innovators are wondering what yet another government review of the program might accomplish, according to Betakit, in addressing the balance between direct and indirect support of research and innovation.
So it might be worth reading Federal Court of Appeal affirms decision denying tax credits claimed by consulting firm in Canadian Lawyer. Not only did the claim not qualify for a tax credit but both judges agreed that the claim was not supported by adequate records. (Patrick Brethour in the Globe and Mail also references the decision.)
UK professional services firms seek exemptions to ban on Russia work (Financial Times UK)
City of Greater Sudbury Receives National Award for Financial Reporting (Greater Sudbury)
The housing market is out of control. Here are five fixes that could help bring prices down (Toronto Star)
Luxury tax will reduce sales of autos, planes and boats by more than $600-million a year, PBO says (Globe and Mail)
Snowbirds face a potpourri of tax issues (Globe and Mail)
Tax and Spend: The Micawber principle of public debt (Globe and Mail)
Canadian foreign aid was discussed during Barrick tax dispute in Tanzania, internal e-mails show (Globe and Mail)
By Canadian Accountant staff.