Practice Inspection General Information

Practice inspection is mandated by Regulation 18-1, adopted by the Council pursuant to our governing legislation and by-laws. 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).

Each year, practice inspection summarizes areas where standards adherence might be improved. The resulting Focus on Practice Inspection 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 if offices that perform assurance, compilation and other specified engagements comply with professional standards. In instances of non-compliance, appropriate follow-up or remedial action is taken. Practice inspection provides an educational experience to members, further protecting the public.

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.

An office can apply for an exemption from practice inspection by completing and submitting a Declaration for Exemption. Under Regulation 18-1, an office would qualify for an exemption if:

  • it has not engaged in the practice of public accounting or has not been providing accounting services to the public during the preceding 12 months
  • it is or will be discontinuing engaging in the practice of public accounting and providing accounting services to the public within 90 days of the date of the exemption declaration
  • it is a professional corporation whose sole purpose is to hold an interest in another public accounting practice, no public accounting services are performed directly under the name of the professional corporation and the public accounting services performed under the public accounting practice held by the professional corporation are subject to practice inspection as part of that other public accounting practice

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

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 Practice Inspection (PI) Contact with adequate lead time prior to the assigned inspection date. This communication will also indicate the type of inspection (visit or desk), and identify the inspector(s) assigned. 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)
  • 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, Practice Inspection.

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 communication 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 February. 

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 in accordance with Regulation 18-1. 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

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.

When applicable, 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 Handbook and the relevant portions of the CPA Ontario Member's Handbook.

All practice inspectors are members in good standing with CPA Ontario. A part-time practice inspector is a member who is currently, or was formerly, 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 communication to the office's PI Contact (see "Scheduling" above). A meeting between the inspector and a representative of your office, usually the PI Contact, will occur to discuss the draft inspection report at the conclusion of the inspection.

Offices are expected to provide:

  • access to files
  • 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 firm Action Plan
  • the inspection file, as well as the office’s response to the deficiencies raised, are subject to a detailed review at CPA Ontario
  • the Practice Inspection Committee will determine the outcome of the inspection
  • a communication outlining the outcome, along with the final report, will be sent to the PI Contact. The invoice with respect to the inspection will be sent separately

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
  • 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. Mandatory professional development courses deemed relevant to addressing the deficiencies raised may also be prescribed

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.