Regulations

Enhanced mandatory disclosure rules

Jun 20, 2023

On June 20, 2023, Canada’s Bill C-47, Budget Implementation Act, 2023 No. 1, received a third reading in the House of Commons on June 8, 2023 and is expected to receive royal assent shortly, following consideration by the Senate.

Among other things, the bill implements certain measures from Budget 2023, including significant changes to the mandatory disclosure rules in the Income Tax Act (the “act”). These proposals, first announced in Budget 2021, impose significant changes to the disclosure of certain tax transactions for both taxpayers and their advisors. The changes would be effective for reportable or notifiable transactions entered into after royal assent, which is expected prior to Parliament’s last sitting day, currently scheduled for June 30, 2023.

Re­view the article on Deloitte’s tax@hand website.

Parliament Passes Bill S-211: The New Forced Labour and Supply Chain Reporting Law

May 30, 2023

On May 3, 2023, the Canadian Parliament passed Bill S-211, An Act to enact the Fighting Against Forced Labour and Child Labour in Supply Chains Act and to amend the Customs Tariff (Act). The Act is expected to receive royal assent shortly and will take effect on January 1, 2024, imposing significant reporting obligations on Canadian businesses and importers.

Reporting obligations will apply to any private-sector entity (defined below) that is: (i) producing, selling or distributing goods in Canada or elsewhere; (ii) importing into Canada goods produced outside Canada, or (iii) controlling an entity engaged in either of the above activities.

An "entity" is defined as a corporation or a trust, partnership or other unincorporated organization that: (i) Is listed on a stock exchange in Canada; (ii) has a place of business in Canada, does business in Canada or has assets in Canada and, based on its consolidated financial statements, has met at least two of the following three conditions in at least one of its last two financial years: (a) had at least C$20-million in assets; (b) generated at least C$40-million in revenue; (c) employed an average of at least 250 employees, or (iv) Is prescribed by regulations (although no such regulations have yet been promulgated)

Reporting obligations will also apply to all federal government institutions, ministries and departments, including Crown corporations and wholly owned subsidiaries, that are producing, purchasing or distributing goods in Canada or elsewhere.

The first report will be required to be filed on or before May 31, 2024.

Re­view the article on Blake, Cassels & Graydon LLP's website and the Act on the Parliament of Canada website.

What are companies saying in risk factors about their use of AI in their business?

May 24, 2023

On May 24, 2023, the law firm, Bryan Cave Leighton Paisner (BCLP) released an analysis of recent public disclosures by companies about their use of artificial intelligence in business. While new forms of artificial intelligence and machine-learning systems, or AI, have garnered headlines in the mainstream press, many companies are evaluating its use in their businesses. Perhaps to a greater extent than with previous technological developments, companies need to consider the materiality of risks and uncertainties presented by AI.

Several companies have begun to address the implications of AI in recent 10-K and 10-Q filings, although still less than 10% of companies in the major indices (S&P 500 and Russell 3000). Some companies have included standalone risk factors, while other companies variously address AI as one of a number of factors contained in broader risk disclosures. BCLP remind companies that, as with any other risks, they should include AI in their enterprise risk management systems, to the extent material, as well as their disclosure controls and procedures.

Re­view the analysis on the BCLP website.

Canada: Accessibility Compliance Milestone Coming June 1

May 22, 2023

Per an article in the Society for Human Resource Management (SHRM), many federally regulated businesses in Canada with at least 100 employees must publish an accessibility plan by June 1, 2023 detailing how they will remove barriers for employees and members of the public with disabilities. The date marks the first compliance milestone for the Accessible Canada Act (ACA), which seeks to make the country barrier-free by January 1, 2040.

The Canadian government is pursuing this goal so that individuals with disabilities can feel more comfortable using public services and working for federally regulated organizations. The Accessible Canada Act and the Accessible Canada Regulations strive to achieve this by identifying, removing and preventing barriers in employment, buildings and other public spaces Non-compliance can lead to steep penalties for employers.

The Act, which took effect in 2019, defines a barrier as anything that "hinders the full and equal participation in society of persons with an impairment”.

Re­view news release on SHRM's website.

PCAOB Revises Standard-Setting Agenda and Adds Rulemaking Projects to Enhance Investor Protection

May 16, 2023

On May 16, 2023, the staff of the Public Company Accounting Oversight Board (PCAOB) posted a revised standard-setting agenda that includes the addition of two projects slated for short-term action (relating to firm and engagement performance metrics and substantive analytical procedures). The PCAOB also announced four new projects aimed at improving PCAOB rules to protect investors. The rulemaking projects focus on enhancing investor transparency and enforcement of PCAOB rules and standards.

In commenting on these developments, PCAOB Chair Erica Y. Williams stated that “The PCAOB is pursuing one of the most ambitious standard-setting agendas in its history, and the updates reflect the solid progress that we are making to carry out that agenda. Our new rulemakings also show our commitment to making enhancements that will allow the PCAOB to execute our mission to protect investors more effectively and efficiently.”

Re­view the press release on PCAOB’s website.

PCAOB Releases its First 2022 Inspection Reports for Mainland China, Hong Kong Audit Firms

May 10, 2023

On May 10, 2023, Public Company Accounting Oversight Board (PCAOB) Chair Erica Y. Williams made a formal statement after the PCAOB released inspection reports for two firms inspected in 2022: KPMG Huazhen LLP in mainland China and PricewaterhouseCoopers in Hong Kong. These are the first ever full inspection reports by the PCAOB in respect of audit firms based in mainland China and Hong Kong and result from longtime efforts by the PCAOB to gain access to inspect firms in China.

Both reports show unacceptable rates of Part I.A deficiencies, which are deficiencies of such significance that PCAOB staff believe the audit firm failed to obtain sufficient appropriate audit evidence to support its work on the public company’s financial statements or internal control over financial reporting.

The PCAOB inspected a total of eight engagements in 2022 – four at each of the two firms – including the types of engagements to which People’s Republic of China (PRC) authorities had previously denied access, such as large state-owned enterprises and issuers in sensitive industries.

PCAOB inspectors found Part I.A deficiencies in 100% (four of four) of the audit engagements reviewed at KPMG Huazhen and 75% (three of four) of the audit engagements reviewed for PwC Hong Kong.

The two firms inspected by the PCAOB in 2022 audited 40% of the total market share of U.S.-listed companies audited by Hong Kong and mainland China firms. The PCAOB Believes that it is on track to hit 99% of the total market share by the end of 2023.

Re­view the news release on PCAOB’s website.

Parliament Passes Bill S-211: The New Forced Labour and Supply Chain Reporting Law

May 03, 2023

On May 3, 2023, the Canadian Parliament passed Bill S-211, An Act to enact the Fighting Against Forced Labour and Child Labour in Supply Chains Act and to amend the Customs Tariff (Act). The Act is expected to receive royal assent shortly and will take effect on January 1, 2024, imposing significant reporting obligations on Canadian businesses and importers.

Businesses that meet certain thresholds will be required to file detailed public reports on measures they have taken to identify, address and prevent forced labour, prison labour and child labour in their supply chains. The first report will be required to be filed on or before May 31, 2024.

Re­view the bill on the Parliament of Canada website.

IESBA staff releases database of Public Interest Entity definitions by jurisdiction to support local adoption and implementation efforts

Apr 27, 2023

On April 27, 2023, the In­ter­na­tional Ethics Stan­dards Board for Ac­coun­tants (IESBA) released a database of Public Interest Entity (PIE) definitions by jurisdiction (jurisdictional PIE database) to further support the adoption and effective implementation of the revisions to the definitions of listed entity and PIE (PIE revisions) in the International Code of Ethics for Professional Accountants (including International Independence Standards) (the Code).

The revised PIE provisions specify a broader list of categories of entities as PIEs whose audits should be subject to additional independence requirements to meet stakeholders’ heightened expectations concerning auditor independence when an entity is a PIE. The IESBA Staff has developed the jurisdictional PIE database as a resource to assist regulators, national standard setters, and other relevant bodies in developing or revising their definitions of PIE at the local level based on the IESBA’s PIE definition. This database covers 78 jurisdictions in the Americas, Europe, Africa, Asia, and Oceania.

The PIE revisions become effective for audits of financial statements for periods beginning on or after December 15, 2024. Early adoption is permitted and encouraged.

Re­view the database on the IESBA's web­site.

Speech by OSFI Superintendent at the Economic Club of Canada: Looming risks and long-term resilience

Apr 27, 2023

On April 27, 2023, Mr. Peter Routledge, the Superintendent of OSFI, gave a speech at the Economic Club of Canada. His focus was to speak about how risks facing Canada’s financial system have shifted and heightened the need for OSFI, as a prudential regulator, to act early in response to uncertainty.

The speech covered the following subtopics:

  • Re-asserting OSFI’s will to act;
  • Signals of trouble;
  • OSFI’s true north will guide us; and
  • Conclusion

Re­view the full speech on OFSI's web­site.

PCAOB Issues Publication on the Importance of Professional Competence and Skepticism in Performing Quality Audits

Apr 26, 2023

On April 26, 2023, Public Company Accounting Oversight Board (PCAOB) issued a Spotlight publication entitled, “Professional Competence and Skepticism Are Essential to Quality Audits”.

The Spotlight publication discusses the following topics:

  • Client acceptance or continuance.
  • Audit planning.
  • Identification and assessment of risks of material misstatement.
  • The use of due professional care in performing an audit.
  • Evaluation of the results of an audit.

Re­view the report on PCAOB’s website.

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