The number of deficiencies found in audits of public companies went up in 2018, indicating that “consistent audit quality remains a challenge in Canada,” the Canadian Public Accountability Board (CPAB) said Friday.
In an annual inspection of audit quality in Canada, the CPAB found that the number of “significant inspection findings” increased last year. A “significant inspection finding” refers to a deficiency in generally accepted auditing standards that could result in a restatement, the CPAB said in its audit quality insights report.
All firms that audit Canadian public companies must register with the CPAB and submit to inspection (a total of 273 firms in 2018). Last year, the inspections flagged significant findings in 28% of files.
“A critical concern for CPAB is the recent deterioration in inspection results,” Carol Paradine, CPAB’s CEO, said in a statement. Paradine noted that the increase in significant inspection findings was mostly driven by six firms, which are now implementing “a variety of changes in systems and controls designed to improve audit quality.”
A noteworthy share of the findings was found in audits following business acquisitions and in nascent industries including cannabis and cryptoassets.
Inspections by the CPAB resulted in five restatements of public company financial statements last year.
The full report can be found here.