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Practice Inspection General Information

Practice Inspection General Information

Practice Inspection is mandated by Regulation 10-1, adopted by the Council pursuant to our governing legislation and bylaws. Initiatives by the provincial bodies have resulted in the implementation of a harmonized approach to the performance of inspections and the evaluation of inspection results (i.e., provincial/Ordre Practice Inspection Committees).

In addition to assessing compliance with prescribed professional standards, Practice Inspection requests, on behalf of the Public Accounting Licensing Board, information with respect to members' chargeable hours obtained in the provision of assurance and other services, to facilitate the Board's assessment of members' compliance with the minimum requirements for maintaining a public accounting licence. 

Each year, Practice Inspection summarizes areas where standards adherence might be improved. The resulting Focus on Practice Inspection Reportable Deficiencies communication to all offices serves to encourage them to assess their own standards and ensure that the deficiencies set out in the communication do not apply to their offices.


Objective and Scope of Practice Inspection

The objective of Practice Inspection is the protection of the public by assessing the compliance with professional standards of offices that perform assurance, compilation, and other specified engagements, and by taking appropriate follow-up or remedial action in instances of non-compliance. The public is further protected by Practice Inspection providing an educational experience to members.

Essentially, through an assessment of quality controls and a review of current assurance and compilation engagement files, Practice Inspection identifies areas where an office may require assistance in maintaining prescribed professional standards. Practice Inspection does not set standards, nor is it a part of the disciplinary process of CPA Ontario.

You can apply for an exemption from practice inspection by completing and submitting a Declaration for Exemption. Under Regulation 10-1, Section 3, a member would qualify for an exemption if:

  • the member has not engaged in the practice of public accounting or provided accounting services to the public during the preceding 12 months; or
  • the member is or will be discontinuing engaging in the practice of public accounting and providing accounting services to the public within three months from the date of a notice of inspection; or
  • the member is a shareholder of a professional corporation whose sole purpose is to hold the member’s interest in another public accounting practice, AND the member performs no public accounting services within the professional corporation other than through the aforementioned other public accounting practice, which practice is subject to selection for inspection in the normal course of a practice inspection cycle.

Please refer to Frequently Asked Questions (FAQs) for additional guidance on other situations when exemption from inspection might be appropriate.


Files Subject to Inspection

All engagements addressed by the standards in the CPA Canada Handbook – Assurance are subject to inspection, including, but not limited to:

  • Audits and reviews of financial statements
  • Other assurance engagements
  • Compilation engagements (see FAQs for further guidance, re: tax work)
  • Quality assurance standards*

* Note that the standard on quality control (CSQC-1) applies only to offices that perform assurance engagements; it does not apply to offices performing only compilation engagements.


Selection of Offices for Inspection

All members and offices engaged in the practice of public accounting or providing accounting services to the public are subject to practice inspection.

Each office selected for inspection is notified of its selection in a letter sent by CPA Ontario in January (or in limited cases, in May) of the current year.  Offices are asked to complete a planning questionnaire OR a declaration for exemption (if the requirements for exemption set out above are met).  Information from the completed planning questionnaires is used to schedule inspections.  Inspections take place between May and March. 

All offices are inspected a minimum of once every three years, over a three-year risk-adjusted cycle.  A new firm, or office of a firm, that has not yet undergone a practice inspection will be selected for inspection after having been in operation for one year.  Risk factors are considered and practice inspections may occur more frequently if considered necessary. Factors which might necessitate an accelerated cycle include:

  • Practice is newly registered with the Canadian Public Accountability Board (CPAB) and/or the Public Company Accounting Oversight Board (PCAOB).
  • Significant increase in the number of reporting issuer clients.
  • Change in practice profile of the office, such as taking on new types of engagements.
  • Merger;  the loss of a significant number of partners; or the addition of new partners.
  • Other relevant information coming to the attention of CPA Ontario.


Scheduling the Practice Inspection

Practice Inspection will assign an inspection date and inspector(s) based upon the information submitted. The inspection date will be communicated to the office's PI Contact during the period of May to January, by a letter sent at least thirty (30) days prior to the assigned visit inspection date, or at least twenty-one (21) days prior to the assigned desk inspection date. This letter will also indicate the type of inspection (visit or desk), and identify the inspector(s) assigned in the case of a visit. Refer to FAQs for the definition of a visit inspection and desk inspection.

The inspector assignment takes into account information included in the Planning Questionnaire submitted by the office: the size and composition of the office; the nature of the office's clientele (e.g., types of businesses/industries and financial reporting frameworks used); and the blackout period, to a maximum of eight (8) weeks, which the office may designate as not available for the scheduling of the inspection.

Note that the assigned inspection date can only be changed in exceptional circumstances with the consent of CPA Ontario’s director of practice inspection.


The Practice Inspection

The files selected for inspection will be chosen from a client listing provided by the office. This listing should include the engagement partner responsible for each engagement, the engagement type (i.e., audit, review, compilation), and other relevant information as set out in our letter confirming the date of the inspection.

If assurance engagements are performed, the inspection will also include the office’s quality control policies and procedures. All inspections assess compliance with professional standards as set out in the CPA Canada Handbooks and the CPA Code of Professional Conduct.

All practice inspectors are members in good standing with CPA Ontario. A part-time practice inspector is a member who is currently, or was recently, in public practice, contracted to perform inspections for CPA Ontario. A full-time practice inspector is a member formerly in public practice, and now employed full-time by CPA Ontario. All practice inspectors are required to be independent of the offices that they inspect.

The inspection will occur on the date(s) set out in our letter to the office's PI Contact (see "Scheduling" above).  A meeting (or phone call, in the case of a desk inspection) between the inspector and a representative of your office, usually the PI Contact, will occur after the inspection to discuss the draft inspection report if a representative is readily available at the conclusion of the inspection. All reports are confidential.

Offices are expected to provide:

  • Access to files. If the inspection is a visit and the office's files are stored electronically, then access to a computer with firm software to facilitate the inspector's review of the files is required.
  • Access to the office’s quality assurance manual (if applicable).
  • An opportunity to meet with the PI Contact (or another representative of your office)  to discuss the draft inspection report.

The following occurs post-inspection for either a visit or desk inspection:

The office has 21 days to respond in writing to the deficiencies raised in the draft report. An Action Plan template is available to assist offices in structuring their responses to the deficiencies raised. If the office disagrees with items raised in the draft report, supporting documentation may be submitted along with the Action Plan.

The inspection file, as well as the office’s response to the reportable deficiencies, are subject to a detailed review at CPA Ontario.

The Practice Inspection Committee will determine the outcome of the inspection.

A letter outlining the outcome, along with the final report and invoice, will be sent to the PI Contact.


Practice Inspection Committee Decisions

The Practice Inspection Committee will determine whether:

  • The office has met the requirements of Practice Inspection in the current cycle.  The office will be subject to inspection again in approximately three years, during the next cycle of inspections;
  • The office needs to take a specified course of action, such as the submission of an acceptable action plan, to meet the requirements of Practice Inspection in the current cycle; or
  • The office has not met the requirements of Practice Inspection in the current cycle and remedial action is required, ranging from a partial or full reinspection, to a referral of the matter to the Professional Conduct Committee.

Please note that your only opportunity to submit a response to the Practice Inspection Committee is during the twenty-one (21) day period after you have received the draft report from your inspector. All decisions of the committee are final, and there is no appeals process on the committee's decision.

For further information, please access our Practice Inspection Program Webinar.