Watchdog censures four Vancouver accountancies this year

The Canadian Public Accountability Board (CPAB), Canada’s non-profit accounting industry watchdog, has censured four Vancouver-based accounting firms this year: Hay & Watson, Smyth LLP, Manning Elliott LLP, and DMCL.

The public censures are part of increased scrutiny by CPAB of the small accounting firms auditing companies listed on the TSX Venture Exchange.

For most of its history since its founding in the wake of the Enron accounting scandal in 2003, CPAB opted not to disclose actions it took after firm inspections. This makes sense, because such announcements create bad press for the industry and its constituent firms, and CPAB is an industry non-profit rather than a government body.

However, CPAB has been trying to be more transparent, subject to federal and provincial statutes. Since January 1, CPAB has been publicizing enforcement actions arising from its inspections of audit work.

CPAB on August 2 announced it had banned Hay & Watson from auditing public companies because of violations of audit documentation and supervision standards.

Hay & Watson, a boutique firm with approximately 20 employees, was last year banned from auditing public companies by the PCAOB, the CPAB’s counterpart in the US.

The firm audited less than 50 public companies at the time of inspection. Hay & Watson also provides services to non-profits and private firms.

In June, CPAB banned Manning Elliott LLP from taking on risky public companies after finding deficiencies in its work. Risky clients have businesses that make their audits more complex, and thus more likely to produce accounting errors.

CPAB said it found three significant inspection findings in two of the four Manning Elliott audits from 2022 it examined. A significant finding entails falling short of accepted auditing standards for a material portion of a financial statement.

Manning Elliott audited 126 public companies at the time of inspection.

Also in June, CPAB banned DMCL from taking on risky public company clients after the board identified significant findings in two of the six audits it inspected.

DMCL audits approximately 268 public companies and has received enforcement actions from CPAB for three consecutive years.

In May, CPAB barred Smythe LLP from taking on any new public company clients after finding deficiencies in four audits it inspected in 2021 and 2022.

The firm audited approximately 117 public companies at the time of inspection.