The Firm noted that the period from 2010 onward had been an extremely challenging time for
venture capital markets, with many reporting issuers struggling to obtain and maintain adequate
financing in order to stay operational. Most of the clients in question had continued to trade
on the TSX Venture Exchange, but two had had cease trade orders issued by the BCSC for failing
to file annual audited financial statements.
The Firm stated that it had continued to render services to certain clients with unpaid accounts
because the nature of the venture market was such that subsequent financings were often able
to clear outstanding receivables. The Firm also pointed out that when the size of the receivable
had grown to the extent that the receivable endangered the Firm’s independence, and/or when
the debt had become too large with no reasonable prospect of repayment, it had declined to per-
OWN
YOUR
FUTURE
UBC Diploma in Accounting
Have a university degree but lack the prerequisites to pursue the
new Chartered Professional Accountants (CPA) designation?
The UBC Diploma in Accounting program (UBC DAP) bridges the gap
by equipping graduates with the foundation for success in the CPA
Professional Education Program. Widely recognized by the accounting
industry, UBC DAP can be completed in as little as 10 or as long as 24
months while candidates continue to work.
Find out how to put your career aspirations into action:
visit sauder.ubc.ca/dap
34 CPABC in Focus •May/June 2015
form further audit services for the client until
payment was received. This had occurred in
the case of one client for 2012, and two clients
for 2013.
PCEC finds safeguards insufficient
The PCEC gave careful consideration to the
Firm’s position, but ultimately determined that
grounds existed to establish the Firm’s contravention of Rules of Professional Conduct 201.1
(Maintenance of Reputation of the Profession);
204.1 (Independence); 204.2 (Compliance with
Rule 204.1); 204.3 (Identification of Threats
and Safeguards); and 204.5 (Documentation).3
The Firm had issued independent auditors’
reports on the financial statements of a number of public companies while a significant
portion of the previous years’ fees for professional services remained outstanding. The
PCEC said this constituted a self-interest
threat to the Firm’s independence—one the
Firm had not adequately addressed, despite
the safeguards it had put in place. At the end
of the day, it was the PCEC’s position that
when there are three to four years of audit fees
outstanding, there are not enough safeguards
available to reduce the threat to an acceptable level; therefore, the Firm should have
refused to continue performing engagements
for these clients.
The PCEC recommended that the Firm accept a reprimand, pay a fine of $3,000, and pay
$1,450 toward the recovery of investigation
expenses. The Firm agreed and complied
with all of the recommendations.
t should be noted that a member or firm
I
3
cannot be found in breach of a Council
Interpretation (CI) to the Rules of
Professional Conduct, which is why the
PCEC did not include the CI to Rule 204 paragraph 192, in its determination.