Code of Ethics
Under section 87 of the Professional Code, members of the Order are required to comply with the Code of Ethics of Chartered Professional Accountants which governs their general and special duties towards the public, their clients and their profession, particularly the duty to discharge their professional obligations with integrity.
Section 36.4 of the Code of ethics refers to the independence standards provided for in Rule 204 of the CPA Code of Professional Conduct (Rule 204 on independence). This dynamic reference means that Rule 204 on independence, a rule of professional conduct, is an integral part of Quebec’s Code of ethics of CPAs, and applies to all members of the Order once adopted by CPA Canada’s Public Trust Committee (PTC).
Note that only the rule itself is covered by the dynamic reference in section 36.4 of the Code of ethics of CPAs. However, while not claiming that it is bound by the “guidance” adopted by the PTC, the Order has made said “guidance” available to readers after each provision for transparency purposes. In the same way, the Order has made the Guide to Canadian Independence Standard available to readers for information purposes only.
The Canadian accounting profession is a member of the International Federation of Accountants (IFAC) and, as such, monitors IFAC developments to facilitate convergence of Canadian and international standards. For this reason, the Code of ethics, and specifically the independence rules adopted by the provincial bodies, should be no less stringent than the requirements for professional accountants included in the Code of ethics issued by the International Ethics Standards Board for Accountants (IESBA Code).
The PTC formed the Independence Task Force (ITF) to assist it in carrying out its review and oversight roles in the development and renewal of Canadian auditor independence standards. Since amendments are often made, the dynamic reference in section 36.4 of Quebec’s Code of ethics of CPA’s ensures that the harmonized rules on independence are kept up to date at all times. However, all proposed amendments to Rule 204 on independence are submitted for comments to Order members, provincial CPA bodies and various stakeholders in the practice of public accountancy.
- The definition of independence in assurance and specified auditing procedures engagements;
- The identification of threats and safeguards;
- The documentation required for a decision to accept or continue an engagement after a threat to independence is identified;
- The specific prohibitions that members and firms shall comply with across a range of situations where independence is threatened;
- The required procedures for members to disclose prohibited interests and relationships;
- The obligations and procedures for firms, partners and professional employees to ensure compliance;
- The disclosure of impaired independence.
Revision of the CPA Code of Professional Conduct and the effects on Rule 204 on independence
The development of ethics standards for the Canadian CPA profession led the PTC to adopt new standards based on the CPA Code of Professional Conduct and the “guidance” related thereto. On June 20, 2016, the PTC officially adopted Rule 204 on independence as set out in this revision. Note that the “guidance” is now provided after each provision of the rule instead of being appended at the end of the code.
- Rule 204 on independence as amended on June 20, 2016 (updated version) [PDF]
- June 20, 2016 version with tracked changes [PDF]
- Guide to Canadian Independence Standard (for information purposes only) [PDF]
The main changes include additional provisions on breaches, contingent fees and auditor independence under an elections act. This latter provision, now Rule 204.20, was part of the CPA Code of Professional Conduct, but was not included in Rule 204 on independence covered by the dynamic reference in the Code of ethics.
After considering the consequences of identifying breaches of independence requirements, the IESBA concluded that it would be in the public interest for the IESBA Code to contain provisions to address the various breaches of independence requirements and that these provisions should apply even in cases of inadvertent breaches.
The PTC reviewed IESBA’s approach and agreed that it was in the public interest for the CPA profession to apply provisions addressing breaches of independence standards, and that these provisions should address all breaches, whether inadvertent or not. Therefore, the PTC adopted the proposed amendments to Rule 204 on independence addressing breaches (204.6). This rule sets out the conditions to be met and steps to take when a breach of the independence rule is identified, including:
- reporting the breach to the firm;
- assessing the nature of the breach;
- evaluating whether the assurance engagement should be terminated;
- assessing and deciding on whether a previously issued assurance report should be withdrawn;
- reporting to the appropriate authorities within the client entity subject to the assurance engagement;
- documenting the analysis and decisions made during this process;
- reporting to the Order if an assurance engagement must be terminated or a previously issued report withdrawn.
Under this new rule, breaches of the independence rules that lead to a conclusion to terminate an audit or assurance engagement, or to withdraw a previously issued report, should always be reported to the profession’s provincial governing body, i.e. the Quebec CPA Order.
The CPA Code of Professional Conduct addressing independence did not deal with contingent fees.
The IESBA Code not only prohibits the provision of assurance services on a contingent fee basis, but also contingent fees where such fees might impair independence in an assurance engagement.
The PTC considered the IESBA approach and agreed that it was in the public interest to include the provisions in Rule 204 on independence (204.4(36.1)) prohibiting contingent fees. Even though these provisions are included in Rule 204 on independence, sections 59.1 to 59.3 of the Code of ethics of CPAs still apply.
The new provisions on breaches and contingent fees will apply to audit and review engagements for fiscal periods beginning after December 15, 2016. They will apply to other assurance engagements and engagements to report on the results of applying specified auditing procedures commencing after December 15, 2016.
Rule 204 on independence – Pre- 2016 versions
November 2013 version (adopted on November 14, 2013) [PDF]
Summary of November 2013 changes [PDF]
April 2011 version (adopted on April 4, 2011) [PDF]
January 2011 version (adopted on January 24, 2011 – Amendments to the French version only) [PDF]
November 2010 version (adopted on November 8, 2010) [PDF]
April 2010 version (adopted on April 13, 2010 and effective in Quebec on November 25, 2010 - Order in Council 944-2010) [PDF]