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Council Interpretation 201.1
Maintenance of Reputation of Profession
Compliance with Regulatory Legislation
201.1/1 Provincial as well as federal legislation often requires licensing and may govern activities involving dealing in securities, mortgage brokering, real estate brokering, practising law, acting as an employment agency, and handling trust monies.
201.1/2 A member should be cognizant of and comply with the provisions of any federal and provincial legislation regulating activities in the various service areas of the member's public practice.
201.1/3 A member not engaged in public practice should be cognizant of and comply with the provisions of any legislative requirements pertaining to the member's activities.
Criticism of a Professional Colleague, Firm or Other Public Accountant
201.1/5 In the course of professional work, a member or firm may on occasion criticize a professional colleague, firm or other public accountant; such criticism may be direct, or may be implied by material adjustments to a client's accounts considered necessary to correct work performed by the professional colleague, firm or other public accountant. It may be, however, that there are facts or explanations known to the professional colleague, firm or other public accountant concerned which could have a bearing on the matter.
201.1/6 Unless limited or restricted in writing by the terms of the engagement, it is recommended that the member or firm first communicate any proposed criticism to the professional colleague, firm or other public accountant involved so that any eventual criticism takes into account all the available information. This is a step dictated by considerations both of professional courtesy and simple prudence.
201.1/7 Paragraphs 5 and 6 apply to criticisms of a general nature as well as to criticisms of specific professional work of another professional colleague, firm or other public accountant.
201.1/8 Paragraph 6 does not apply to a member or firm bringing to the attention of the Professional Conduct Committee any apparent breach of the rules or any instance involving doubt as to the competence, reputation or integrity of a member, student, applicant or firm, as required by Rule 211.
201.1/9 Reserved for future use.
Resignation of Auditors
201.1/10 The auditor of a company is appointed to represent the shareholders and has a duty to them. The auditor should never lightly resign an appointment before reporting and should not resign at all before reporting if there is reason to suspect that the auditor's resignation is required by reason of any impropriety or concealment, upon which it is the auditor's duty to report. Subject to that general statement, however, there may be exceptional circumstances in a particular case which would justify the auditor's resignation. This will be a matter of individual judgment in each case.
201.1/11 On occasion, the question arises of the duty of a member appointed auditor of an entity, who is asked to resign before reporting. While the following paragraphs deal with corporations, the nature of the guidance should be helpful in a similar situation with a non-corporate entity.
201.1/12 Statutory provisions with regard to auditors form a very important part of legislation. The whole background of corporation legislation makes it clear that the auditor fulfils an essential statutory and independent function and assumes statutory duties when accepting an appointment. As a general rule, the proper course for an appointed auditor to follow is the completion of the auditor's statutory duties: having been appointed by the shareholders the auditor should report, as required in the legislation. The auditor should cease to act on behalf of a client only after a successor has been properly appointed and the auditor has been relieved or disqualified.
201.1/13 The question remains whether there are exceptions when a duly appointed auditor may resign at the request of a board of directors without fulfilling the auditor's statutory duties. The answer depends on the circumstances. Certainly, the auditor of a company should not lightly resign under such circumstances, and should not resign at all, before reporting to the shareholders, if the auditor has any reason to believe that the resignation is required by reason of any impropriety or concealment which it is his or her duty to report upon.
201.1/14 However, exceptional circumstances may exist in a particular case which would justify an appointed auditor in acceding to a request for resignation. One example, appropriate only if a minority interest would not be prejudiced, would be where there is reason to believe that if a special meeting of the shareholders were to be called to relieve the auditor of the appointment the necessary percentage of shareholders specified in the governing statute would require the auditor's resignation. In such a case it may not be necessary for the auditor to insist on a special meeting being called.
201.1/15 An auditor should not voluntarily cease to act on behalf of a client after commencement of an audit engagement except for good and sufficient reason. Reasons may include:
(a) loss of trust in the client;
(b) the fact that the auditor is placed in a situation of conflict of interest or in circumstances where the auditor's objectivity could reasonably be questioned; or
(c) inducement by the client to perform illegal, unjust or fraudulent acts.
201.1/16 When an auditor is asked to resign or is contemplating resignation, it would be prudent for the auditor to consider obtaining legal advice on the course of action to follow.
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