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Chartered Accountants of B.C. |
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Issue 2006/03
October 2006
From the Advisory Services Department (with contributions from the Practice Review & Licensing Department).
News & Views is circulated to sole practitioners, partners, and staff in all CA firms in BC and the Yukon. The views expressed in this newsletter are those of the authors and do not represent an official position of the Institute
Practice Matters
Accounting and Auditing Standards
Hints and Ideas
PD News
Bits and Pieces
Members practising throughout the province have been telling us how busy they are and how challenging it has been to hire more staff. This means now is the ideal time for all of you to take a closer look at your existing client roster to decide which clients you want to keep and the type of clients you would accept in the future.
Having a client acceptance and retention policy is nothing new; many firms, including sole practitioners, have had one in place for many years for both private businesses and public companies. Moreover, it is required by the General Standards of Quality Control for Firms Performing Assurance Engagements that has been part of the CICA Handbook – Assurance since December 1, 2005. (The Quality Assurance Manual is available from CICA to assist practitioners in implementing this standard and can be purchased at www.knotia.ca.)
Even for members who provide compilation services exclusively, having a client acceptance and retention policy makes sense because this ensures you are dealing only with quality clients who appreciate your services and advice, and are a good fit with the skills and competencies of your firm. Prudent members are very selective about who they accept as new clients. Successful practitioners routinely rank their clients based on a set of criteria they’ve developed and terminate the relationship with those clients scoring below a pre-determined mark.
The purpose of a client acceptance and retention policy is to assist the firm in assessing the risks associated with providing services to each client. The factors to consider are determined solely by the firms as each has a different level of risk tolerance. In general, firms would consider the following before accepting a new client:
The question some practitioners ask is how does one go about finding out about the reputation and attitude of management and directors. There is no easy answer but the first thing is to actually talk to the people involved, and not a quick 15-minute chat over coffee before taking the retainer cheque. It’s important to know up front who and what you are dealing with. Practitioners should not hesitate to ask the tough questions about the history of the company, the people running the company, and their plans for the company. If they are reluctant or evasive, it could be a warning sign that they may also not be forthcoming about the financial information for the company later. In addition, finding out who are the client’s other advisors may give practitioners a clue as to the integrity of the client.
Many practitioners “google” the names of the client, management, and director as a matter of course. It’s good to know why potential clients are making the news! For a public company client, some firms will obtain the personal information forms each director and officer must file with the relevant securities commission, as well as check whether those directors and officers, and others involved with the company, have been sanctioned by the various securities commissions. Others even go so far as to conduct criminal record searches. The reasoning being that if you wouldn’t hire an employee without checking references, why would you associate your firm with people whose reputation is less than sterling. We all know that it takes a lifetime to build a stellar reputation but only one mistake can destroy it. It’s a worthwhile investment in time and effort to know your potential clients better before they actually become your clients.
Practitioners must keep in mind the second part of their client acceptance and retention policy and review their clientele on a regular basis. Although your firm has not changed, your clients may have. Has there been a change in senior management? Is there a new significant shareholder? Has the client entered into new partnerships or joint ventures? Has the client made a major shift in business direction or its market? Whether a public or private enterprise, drastic and unfavourable changes in the company or its business may lead you to the conclusion that continued association is not appropriate for your firm.
On the other hand, your firm may have changed recently in that you have merged with another firm, purchased a practice, or purchased a large block of accounts. How do the client acceptance and retention policy of the two firms compare? Are the other party’s standards as high as yours? Are you certain you want to keep all of the clients? If this wasn’t part of your negotiation, it’s not too late to start talking about it now. Make sure you’re not taking on someone else’s problems!
The term due diligence is often used in connection with investment deals or financing transactions. However, it can apply equally well to any professional relationship where the parties want to take some reasonable steps to ensure they do not suffer any harm. In the current litigious environment and increased professional liability, it just makes sense for practitioners to take the time to learn as much as possible about potential clients and even turn business away. If an existing client changes so much that it no longer fits your firm’s risk profile, it’s not out of the question to resign. With so much work available out there, practitioners can afford to be choosy and say no!
With so much talk about the need to plan for succession in public practice, the Advisory Services Department is pleased to offer a new posting service on the Institute’s website. This new posting service is provided for the benefit of members wanting to sell or purchase a public accounting practice (or a block of accounts). Only members of ICABC may post ads and the service is operated in a very similar manner as our Employment Posting Service. To ensure the ads are current, they stay up for a maximum of three months.
In posting an ad, it’s up to buyers and sellers to determine how much information they wish to provide. If you wish to maintain a certain amount of anonymity, users might consider signing up for a special email account to correspond with interested parties, as we do not offer any mailbox service. This posting service is provided as a member service; the Institute does not accept any responsibility or liability for information provided by either sellers or purchasers. We also do not make any representation or warranty as to the quality or value of practices offered for sale.
To post ads, please visit our website at www.ica.bc.ca/kb.php3?catid=922.
Members in public practices, partners and staff alike, are generally aware that the Employment Standards Act does not apply to employees who are members or students of the Institute of Chartered Accountants of BC, along with fifteen other professions and occupations. This means you may make your own arrangements regarding overtime, vacation, and other terms of employment.
However, this exemption does not apply to other designated staff and students or administrative employees in your office. This means you must comply with all of the provisions of the Employment Standards Act if you employ any non-CA designated staff, undesignated technicians and clerical staff. The Employment Standards Branch offers a number of “Factsheets” to assist employers in meeting their obligations and they can be downloaded at www.labour.gov.bc.ca/esb. (See PD catalogue for executive breakfast related to this topic.)
During the summer, the Accounting Standards Board (AcSB) issued its second bulletin, this time to update stakeholders on GAAP for private companies. The Board is continuing with its research on users and needs with acknowledgement of concerns of standards overload. No decision has been made yet as to which path private company GAAP will follow, so stay tuned and we will keep you posted.
Just earlier in September, the AcSB issued its third bulletin, with news on the move to implement International Financial Reporting Standards (IFRS) for public companies. This bulletin briefly describes the Board’s timetable for implementation and public companies are encouraged to develop a similar timetable for themselves so as to meet their obligations. The advice is to start planning now, not leave it until the last moment!
Visit AcSB’s website at http://www.acsbcanada.org/index.cfm/ci_id/185/la_id/1.htm to read both bulletins.
With the implementation of the new audit risk standards, practitioners may be looking for guidance on applying these standards for smaller audit clients. We’re pleased to advise that CICA updated its audit technique study Audit of a Small Entity earlier this year to provide practical guidance on how to conduct an efficient and effective audit, including small not-for-profit entities. The study is now available on Knotia at https://www.knotia.ca/kStore/Catalogue/ProductPricing.cfm?productID=589&nc=1159657043001.
While most practitioners were enjoying the summer, the Accounting and the Auditing and Assurance Standards Boards were both busy preparing exposure drafts for public comment. The following exposure drafts are now available and we encourage members to visit the CICA website (http://www.cica.ca/index.cfm/ci_id/11252/la_id/1.htm for accounting and http://www.cica.ca/index.cfm?ci_id=11265&la_id=1 for auditing) to download the documents and send in comments to the boards:
Practitioners across the country have been asking for more implementation guidance from CICA to deal with various complicated new standards such as financial instruments. The good news is that CICA has listened and developed a new section on its website called CICA Implementation Support Gateway at http://www.conferences.cica.ca/ssg/home.html.
The purpose of this gateway is to provide a central area for CICA to post guidance as it becomes available, thus saving members the trouble of having to look all over the place. This site is still under construction and more sections will be populated as additional materials are developed, so it’s important for users to keep checking back. Currently, there’s information on Financial Instruments, AuG 43 - Policy Liabilities, and Audit Risk. CICA has promised that more will follow!
Practice Review’s mandate includes promoting and maintaining the knowledge, skill and proficiency of members – a clear emphasis on education.
However, there are a number of factors increasing the emphasis on regulation. These include:
The Practice Review and Licensing Committee has agreed that a greater emphasis on regulation is appropriate at this time. What does this mean from the perspective of a practising office?
Rule 204.2 requires that a “member or licensed firm who is required to be independent … identify threats to independence, evaluate the significance of those threats and, if the threats are other than clearly insignificant, identify and apply safeguards … eliminate the … threat … or refuse to … continue the engagement … “
The rule has been in place since January 1, 2004. Practice Review is finding more violations as we see practising offices for the first time in the new-independence era.
We recognize that it is very tough to objectively self-assess relationships. It is even tougher when doing the right thing could be painful.
Keep an eye out for:
If you feel uncomfortable about a situation, there could be an unidentified threat. Check perceptions with someone not involved or contact the Institute’s Advisory Services Department for a confidential and informal discussion.
The relative quiet of summer provides space for practising office mergers and acquisitions. The June 2006 CA Magazine featured an inspiring article on acquiring a practice.
If you catch merger/acquisition fever, we recommend, as part of your acquisition due diligence that you:
It takes a lot of time and effort to successfully transition to new ownership. For busy, mature practices, attention to new organizational details can detract from client service. All too often, Practice Review Officers see a quality deterioration following an acquisition or merger.
GSF-QC guidance indicates that quality monitoring procedures be undertaken, as a minimum, once each four years.
Practice Review Officers are now expecting that your Quality Assurance procedures include a schedule of when monitoring occurs. Where a monitor’s report has been prepared, practice inspection will read and refer to the report in determining the nature and extent of inspection procedures.
Smaller practice offices involved in assurance engagements may be encountering some difficulty in staffing the quality monitor requirements from internal resources. Where or how might a smaller practice find a quality monitor? At this time, one of the more promising routes appears to be some form of reciprocal arrangement with similar practices in the local community or region.
EIC 122 Balance Sheet Classification of Callable Debt Obligations and Debt Obligations Expected to be Refinanced might not be confused with any of the remotely popular standards in our Handbook. However, it is a standard and clients have to live with it, live with a reservation in a report or opinion, or just plain stay out of debt.
EIC 122 has been in effect since 2002. We continue to note a large number of deficiencies including incorrect reports and opinions, lack of documentation in support of non-current treatment, and material misstatements. Among the more frequent deficiencies is unsupported non-current treatment of shareholder or inter-company loans.
From time to time, we become aware of practising offices in need of external tutors or mentors. Services and related fees are negotiated between practising offices. Please contact Practice Review & Licensing if you have skills and capacity in a particular practice area and you are interested in tutoring or mentoring a fellow practitioner.
This year’s Fall program offers over 170 seminar titles. The Fall PD Brochure was mailed to all members in August, and is also available on the ICABC website. Register early for seminars of interest to you. Don’t forget to purchase one of our PD Passports to enjoy incredible savings on either classroom seminars or PD products.
Kelowna Oct 30-Nov 03 Grand Okanagan
Parksville Oct 17-Oct 20 Quality Bayside
Surrey Nov 14-Nov 17 Sheraton Guildford
Vancouver Nov 20-Nov 25 Sutton Place
Victoria Nov 14-Nov 17 Vic Conference Ctr
For detailed course descriptions, or for a complete schedule of upcoming PD seminars, consult your Fall 2006 PD brochure or check our website at www.icabc-pd.com. To register, call the PD Department at (604) 488-2643.
CICA Accounting Standards Board Update - Global Positioning: The New Direction
Paul Cherry, FCA, chair of the CICA Accounting Standards Board (AcSB) will provide a progress report on the AcSB’s recent decision that Canadian GAAP for public companies should be based on international standards, and the research underway on the financial reporting needs of private companies. Attendees will also have the opportunity to ask Paul questions about current issues and projects.
This free session is for CA MEMBERS ONLY. Pre-registration is required.
Oct 11 7:30-9:30am Pan Pacific, Vancouver
CPAB Forum for Small Firms
The objective of this session is to introduce smaller Canadian Public Accountability Board (CPAB) participating audit firms and their Reporting Issuer clients to the work of CPAB—specifically the inspection process. It will also identify what to expect during this process and discuss the common issues identified during the first two years of inspections.
Topics covered will include the purpose of CPAB, CPAB’s focus during inspections, and common deficiencies.
Oct 30 9am-12:30pm Sutton Place, Vancouver
Risk Areas of Tax Practice
Demands on the tax practitioner have grown as income tax rules and regulations have become more complex and involved, and clients and business structures have become more sophisticated. Clients insist that their tax advisor be able to provide them with ever-increasing amounts of instant advice on complicated tax planning schemes. But today’s tax practitioner is operating in a very risky environment, and this has led to increased litigation and insurance claims.
The objective of this half-day seminar is to discuss the top areas in which practitioners have run into trouble, and which actions and solutions exist to remedy tricky client situations. The seminar will have knowledgeable panellists, and is a must for every member in public practice.
Nov 14 9am-12:30pm Morris J Wosk Centre for Dialogue, Vancouver
Practitioners’ Potluck
We’re pleased to bring back this very popular conference for our members in public practice. Developed specifically in response to practitioners’ demand for a forum in which to address issues relevant to public practice management, this conference will offer members an overview of the key challenges professional practitioners in BC face today, as well as several PD breakout sessions.
The conference will also include an ideas exchange portion where members will be divided into two groups based on practice size. Facilitators in each group will address practice planning, as well as everyday practice management issues.
Oct 23 8:30am-5pm Sutton Place, Vancouver
The ICABC’s PD department invites you to join us for our first CA Conference Day in Kelowna. This special conference format provides members in both public practice and industry with the opportunity to broaden their expertise, strengthen management skills, and network with peers.
This one-day conference will focus on your professional development needs, with plenary and breakout sessions covering both technical knowledge and personal skills. The plenary topics scheduled are “Economic Outlook” and “Stress and Change,” while breakout session choices include “Planning for a Financially Secure Retirement,” “Advanced Internet Research Techniques,” “Tax in the Current Time Zone,” and “Lenders, Banking, and Your Client.”
Come join us for this information-packed PD day!
Oct 18 8:40am-5pm Grand Okanagan, Kelowna
Selected Upcoming Seminars
A to Z of a Risk Based Audit
By the end of 2006, all professional staff members who perform audits will have to be fully trained on how to comply with the new risk-based approach to auditing. The changes to the way audits will be performed are dramatic. The objective of this two-day seminar is to cover the entire audit process in accordance with the new standards.
Nov 06-07 9am-5pm Sutton Place, Vancouver
Nov 06-07 9am-5pm Dunsmuir Lodge, Victoria
Dec 11-12 9am-5pm Sutton Place, Vancouver
Assessing Risk – Understanding This New Audit Requirement
This seminar will provide practical guidance on how to identify and assess the risk of material misstatement in financial statements and how to develop an appropriate response. It will be useful to practitioners and professional staff. CAs in industry may also use the principles explained here to develop risk management practices within their entities.
Oct 16 9am-5pm Four Seasons, Vancouver
Oct 19 9am-5pm Quality Bayside, Parksville
Nov 2 9am-5pm Grand Okanagan, Kelowna
Nov 15 9am-5pm Sheraton Guildford, Surrey
Dec 4 9am-5pm Conference Centre, Victoria
Review Engagements – A Refresher
This course will provide practitioners with a refreshed skill set for completing review engagements. It is designed for experienced practitioners who want to improve their review engagement knowledge to increase the effectiveness of their practices. This course is not about completing checklists, but rather the extensive judgment required to complete a review. However, a review of some standard checklists will be included, along with case studies.
Oct 13 9am-5pm Best Western, Abbotsford
Oct 27 9am-5pm Four Seasons, Vancouver
Nov 17 9am-5pm Conference Centre, Victoria
Public Company Reporting: Annual Update
Changes in accounting standards and professional conduct rules are continuing at a fast and furious pace. If you do any work related to public companies, you know the challenges you face are not getting any easier. Whether you are in public practice or in industry, you need to know these changes so you can do your job properly.
This annual update will be beneficial to you regardless of whether you are in public practice or in industry. You will learn about recent accounting and regulatory developments affecting you, your clients, or your employers.
Nov 16 7:30am-11am Pan Pacific, Vancouver
Wealth Management
A Creative Review of Compensation Topics in the Small Business Context
Providing effective, tax-efficient compensation can be a real challenge for many small business owners/managers. Many opportunities are fraught with legislative requirements and legal “grey areas.” As tax rates fall, the advisor’s challenge increases with a greater due diligence required to review costs, as well as benefits of each idea. This seminar will outline the practical requirements and applications for implementation of a number of tax and compensation strategies.
Oct 18 9am-5pm Hotel Grand Pacific, Victoria
Oct 19 9am-5pm Four Seasons, Vancouver
Integrated Estate Planning – Financial, Legal and Tax Issues
The main focus of this seminar is on behavioural finance theory; the effect of income tax on estates and the law’s effects on estates. This theory will then be used in case studies to illustrate the impact. You will obtain practical knowledge to better give direction to your clients in what is a legally complicated, potentially heavily tax-burdened, and intensely emotional aspect of your professional practice.
Oct 26 9am-12:30pm Pan Pacific, Vancouver
Understanding Portfolio Investments and Taxation
This seminar will update your understanding of the more common portfolio investments available in the marketplace and the related income tax issues. In addition to focusing on the taxation of the investments, the seminar will discuss practical planning issues to increase tax efficiency within a portfolio.
Oct 30 9am-12:30pm Grand Okanagan, Kelowna
Nov 15 9am-12:30pm Conference Centre, Victoria
Nov 17 9am-12:30pm Pan Pacific, Vancouver
General Practitioners “Need to Know…”
There are important income tax issues that a general practitioner needs to be able to identify, but might miss because he or she hasn't learned about the matter, doesn't appreciate the importance of the matter or hasn't considered the matter in relevant contexts. At the end of this seminar, the participant will have a better understanding of and ability to identify and manage certain potential problem income tax areas.
Oct 20 9am-12:30pm Ramada Plaza, Abbotsford
Oct 24 9am-12:30pm Best Western, Kamloops
Nov 17 1:30pm-5pm Pan Pacific, Vancouver
GST Refresher for Professionals
This seminar will provide an overview and general refresher on a selection of GST issues a practitioner may encounter when working with clients in various industries.
Oct 17 9am-5pm Quality Bayside, Parksville
Oct 18 9am-5pm Hotel Grand Pacific, Victoria
Oct 25 9am-5pm Grand Okanagan, Kelowna
Nov 03 9am-5pm Ramada Plaza, Abbotsford
Nov 23 9am-5pm Sutton Place, Vancouver
A frequent comment from members over the past few years has been the lack of advertising for the CA brand in comparison to our competition. That has just changed: the rollout of the new CA advertising campaign continues with the launch of the TV campaign in mid-September. You may have already seen the ads featured across Canada during the news broadcasts of the major stations, on specialized channels and in-flight news.
At the same time, the "CA Advantage" ad will be posted in several airports, on building elevator screens in downtown Vancouver, Calgary and Toronto, and on major Canadian Internet information sites.
For a complete review of the advertising campaign, click on the following link
www.CAadvantage.ca/tv and enter the username: CA and the password: television (both are case sensitive). Your comments on the CA advertising campaign are welcome. Please send them to Lesley MacGregor, the Institute’s senior director of external affairs at macgregor@ica.bc.ca .
If you’re looking for a business research database, CA Research Plus may be just what you need. This is a new service offered by CICA for CAs only where you can search and view the full text of current archived issues of 3,000 leading Canadian and international business journals and magazines, and access 10,000 company profiles, 7,500 industry and market research, and 8,000 business books.
Considering how much one magazine subscription alone would cost you, the annual subscription of $100 for CA Research Plus is a real bargain! Right now, CICA is offering a free three-month trial subscription, so please visit www.knotia.ca/store/carpfree where you will be prompted to log on. You must be logged on as a member to access this service.
CICA has launched an online board of directors matching service. Directors Source is a service to help CAs find positions on the boards of directors of for-profit and not-for-profit organizations. This could be useful for you or your clients. Check it out at www.directorssource.com and sign up for the free electronic newsletter to keep up-to-date on the latest in governance.
We’ve been asked to update practitioners on service delivery changes that are continuing to take place in the Canada Revenue Agency (CRA).
As previously advised, in-person service enquiry counters in the tax services offices (TSO) have been replaced with self-serve Internet kiosks and telephones linked directly to call centres. Taxpayers who need a printout from their account can do so via the Internet or the call centres.
As of July 2006, walk in service has been replaced with appointment service where taxpayers and their authorized representatives book an appointment by calling 1-800-959-8281.
As of October 3, 2006, CRA will no longer accept mail or other correspondence in-person at their TSO front counters. Receipts will no longer be issued for dropping off correspondence to the CRA. CRA is encouraging taxfilers to make use of electronic filing services, which automatically provide a confirmation number.
A complete explanation of the changes can be found on the CRA Web site at www.cra.gc.ca/contact/counters-e.html.
"To insure good health: eat lightly, breathe deeply, live moderately, cultivate cheerfulness, and maintain an interest in life." - William Londen
Interlock (http://www.interlock-eap.com) provides confidential counselling and referral services for members, students and their families throughout BC. There is no charge for the service and your privacy is respected at all times. However, if long-term or specialized counselling is required, you will be referred to a community resource that is affordable to you. Call (604) 431-8200 or 1-800-663-9099 (outside the Lower Mainland) for an appointment and the location nearest you.