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Self-regulated professions — Balancing competition and regulation

3. Accountants

Overview

Role and function

Accountants measure, disclose and provide assurance about financial information to help managers, investors, tax authorities and others make decisions about resource allocation. Accountants participate in a wide range of business activities, such as tax preparation, auditing, financial planning, business valuation, forensic investigation, strategic planning, financial management, operations, sales and marketing, and information technology and human resources management. Some accountants are also involved in ensuring corporate accountability and help organizations maintain their long-term competitive advantages.

For the purposes of this chapter, one important distinction to make is between public accountants and other types of accountants. In general, public accountants do independent audits or reviews of organizations' financial statements to ensure they are correct, fair, complete and reasonable, so that a third party will be able to rely on them . ¹ These services contrast with those other accountants, acting as internal auditors or management consultants, for example, provide.

How the profession is regulated

While there are generally no legal restrictions on who may practise accounting in Canada, some jurisdictions regulate public accounting. In addition, all accountants are subject to the rules and regulations of their respective designations. While there are numerous accounting designations worldwide, only three are generally recognized by provincial and territorial statute in Canada: Chartered Accountant (CA), Certified General Accountant (CGA) and Certified Management Accountant (CMA).

Provincial and territorial law gives a professional organization for each designation the power to govern the profession in that jurisdiction. ² For example, the Institute of Chartered Accountants of British Columbia may make bylaws on the following:

standards of professional conduct, competency or proficiency for students or a class of members;
qualifications and procedures for admission as a member, election as a fellow or enrolment as a student;
investigations and practice reviews;
insurance against professional liability claims; and
authorization of members to provide public accounting services through limited liability partnerships. ³

In addition, three national organizations—the Canadian Institute of Chartered Accountants (CICA), the Certified General Accountants Association of Canada (CGA-Canada) and the Society of Management Accountants of Canada (CMA Canada)—represent their members at the national level, conduct research and advocate for the profession. These groups also develop educational programs and examinations. For example, the CICA and the provincial and territorial accounting organizations jointly developed the CA qualifying evaluation, known as the Uniform Evaluation. ⁴ Similarly, CGA-Canada developed the CGA Program of Professional Studies, which comprises an educational program and the Professional Applications and Competence Evaluations. ⁵ CMA Canada developed the CMA entrance examination, Strategic Leadership Program and other accreditation programs. ⁶

Overlapping services

There is considerable overlap in the services accountants within the three designations provide. In addition, since most accounting services in Canada are not regulated, other service providers, such as bookkeepers, certified financial planners and tax attorneys, may provide services that overlap to some extent with those of accountants. These service providers face varying levels of regulation. For example, lawyers are more regulated than bookkeepers, who do not appear to have to be members of the Canadian Bookkeepers Association in order to practise. ⁷

Entering the profession

Individuals seeking to become accountants in Canada must have a university degree, pass the required professional education courses and accumulate a certain amount of work experience. Prospective accountants must also be accredited by the provincial or territorial accounting organization for their designation before they may use their professional designation. Registration typically involves submitting an application, with proof of qualifications, and paying a fee.

Individuals wishing to be licensed to provide public accounting services must fulfill the education and work experience requirements set by the regulator.

Market

Demand

The geographic market for accounting services depends on the client and the services being requested. For example, the market for the audit services large public accounting firms provide is national or possibly international, whereas it is likely more limited for the accounting services small businesses and individuals need.

Several factors affect the demand for accountants, particularly public accountants, including fluctuations in the business cycle, changes in legislation affecting tax and audit policy, new regulation (whether implemented by the profession itself or mandated by law), and changes in per capita wealth.Demand for public accounting services, such as preparing audited financial statements, increases in the first quarter of the calendar year, since the fiscal years of the majority of incorporated entities and trusts end on December 31. ⁸ Demand for other accounting services in Canada is seasonal and peaks in March or April each year in anticipation of the April 30 deadline for filing personal income tax returns. ⁹

Across Canada, the demand for accounting services appears to have fluctuated slightly in recent years, with accountants' operating revenues ranging in real terms between 2000 and 2004 from a low of $8.42 billion to a high of $9.06 billion . ¹⁰

Supply

CICA, together with the provincial and territorial CA organizations, represent approximately 72,000 CAs and 10,000 students in Canada and Bermuda, approximately 40 percent of whom work as public accountants. ¹¹ National, and provincial and territorial CGA organizations represent approximately 68,000 CGAs and students in Canada, Bermuda, the Caribbean, Hong Kong and China. ¹² CMA Canada represents 38,000 CMA and 10,000 students in Canada and around the world. ¹³ Even though CGA and CMA have not historically been allowed to offer the full extent of public accounting services in every province, there are more than 3,500 CGA and 1,000 CMA practising public accounting in Canada. ¹⁴

There are other accounting designations in Canada that, if recognized by provincial and territorial statute, could increase the supply of public accountants. For example, the Association of Chartered Certified Accountants (ACCA), which was founded in the U.K. in 1904 and established in Canada in the early 1970s, has 110,000 members and 260,000 students in 170 countries, of which 30,000 are in public practice. ACCA membership in Canada has increased approximately 25 percent over the last four years, bringing the number of members and students to 1,700. ¹⁵

In 2006, there were approximately 191,200 financial auditors and accountants in Canada's 10 provinces and 19,390 accounting offices across all the provinces and territories. ¹⁶ More than three quarters (77 percent) of all accountants are located in Ontario, Quebec and British Columbia. ¹⁷ According to Statistics Canada, 19 percent of all accountants are self-employed and 77 percent work full time. Table 1 shows the number of accountants by province in 2006.

Table 1: Number of accountants by province, 2006
Province	Total employed	Self-employed	Firm-employed
	Employment type
Source : Statistics Canada, "Employee Statistics for NOCS B011, Financial Auditors and Accountants," custom request, 2006. From 2001 to 2006, the number of accountants increased 14 percent, from 167,080 to 191,200¹⁸.
Alberta	25,000	5,100	19,900
British Columbia	25,100	5,900	19,200
Manitoba	5,500	800	4,700
New Brunswick	3,300	500
Newfoundland and Labrador	1,900	n/a	1,600
Nova Scotia	3,300	n/a	2,900
Ontario	76,200	13,900	62,300
Prince Edward Island	700	n/a	600
Quebec	46,000	9,500	36,500
Saskatchewan	4,200	500	3,700
Canada (excluding the territories)	191,200	36,200	154,200

Restrictions and recommendations

Market entry restrictions

Entering the profession

To become designated as a CA, CGA or CMA, individuals must have a university degree. ¹⁹ In addition, all of the provincial and territorial accounting organizations require some amount of professional education. Professional education programs range in length from less than one year to more than two years, depending on the designation and the province or territory. For example, the professional programs for CAs in western Canada are generally more than two years long, while the corresponding programs in the Atlantic provinces are about a year shorter. ²⁰ Although some accountants complete their professional education in less time then others, all accountants within the various professional designations are considered competent. For this reason, it would be worthwhile for each jurisdiction to benchmark their professional education program against those of jurisdictions whose requirements take the least time to complete. Proof that these jurisdictions still ensure quality in the delivery of accounting services should provide incentive to those with lengthier requirements to shorten them.

Individuals wishing to be designated as accountants in Canada must also pass an examination either to gain entry into the professional training course or to successfully complete it. The length and content of the examination are different for each accounting designation. However, within each designation, they do not vary across the provinces and territories.

The final requirement for becoming a designated accountant in Canada is work experience, with candidates generally having to accumulate two to three years experience in accounting or a related field. The length and nature of the work experience required varies by designation, and province and territory. For example, CA candidates generally must accumulate three years of work experience but in Quebec only require two. ²¹ CMA and CGA candidates also need a minimum of two years of work experience. ²² Again, jurisdictions where accountants are able to reach the desired level of competence in less time should be viewed as good models to emulate for the jurisdictions whose requirements take longer to meet.

All the accounting designations also require their members to pursue continuing professional development. The requirements are comparable across the three designations.

The standards outlined above for education, training and experience that the provincial and territorial accounting organizations impose on individuals wishing to become designated accountants exist to ensure a level of competency and quality of service to the public. However, entry requirements increase prospective accountants' direct and opportunity costs. For this reason, the requirements that go beyond ensuring an acceptable level of quality may act as an unnecessary barrier to entry, thus potentially limiting the supply of accountants.

The requirement for candidates to demonstrate a certain level of competence before being admitted into a professional designation is legitimate. However, some jurisdictions succeed in achieving the desired competence level in substantially less time than others. Since all accountants from the same designations are presumed competent, there is no reason why the amount of time needed to complete each element of the qualification process should vary by jurisdiction.

Recommendation

The provincial and territorial accounting organizations should, when establishing or reviewing regulatory requirements, set the lowest acceptable time requirements for completing elements of the qualification process. In doing so, the organizations should benchmark their requirements against those in jurisdictions with the lowest time requirements that are still achieving the desired level of competence.

Mobility

Interprovincial mobility

The Bureau did not find in any of the provinces or territories any residency requirements for accountants, other than for those who work as public accountants. This means that many accountants may practise in provinces and territories where they do not live. Furthermore, CAs, CGA and CMA each have a mutual recognition agreement, which facilitates members moving between provinces and territories. Section 5 of the CGA mutual recognition agreement, for example, states that there are no residency requirements for practising as a CGA in Canada. ²³

These mutual recognition agreements, along with national standards for accounting designations, have increased mobility between provinces and territories; however, restrictions in some jurisdictions on who may practise public accounting can impair movement of accountants, which potentially renders the mutual recognition agreements meaningless for public accountants in some parts of Canada (see “Overlapping services and scope of practice,” below).

International mobility

Foreign accountants who wish to register as CAs, CMA or CGA in Canada face requirements ranging from passing an examination to completing a professional program and additional work experience, depending on whether they are members of recognized foreign accounting bodies.

CICA's International Qualifications Appraisal Board (IQAB) assesses the admission standards of foreign accounting bodies and recommends to the provincial and territorial CA organizations in Canada whether and under what conditions members may be designated as Canadian CAs. ²⁴ Regardless of which foreign accounting body they belong to, all foreign accountants wishing to be designated as Canadian CAs must pass the CA Reciprocity Examination and may be required to complete additional practical training.

Members of foreign accounting bodies that have standards and requirements similar to those of CGA-Canada who wish to register in Canada must be members in good standing of those bodies and have achieved their designation by passing the required examinations (rather than through mutual recognition or otherwise). CGA-Canada has classified foreign accounting bodies into two groups, and the requirements for admission depend on the classification. Nonetheless, all applicants must complete studies equivalent to the CGA educational requirements, pass two or three examinations, meet a minimum requirement for professional experience and meet degree requirements, unless certified in their home country prior to 1998. ²⁵

In December 2006, CGA-Canada and the Association of Chartered Certified Accountants signed a global mutual recognition agreement. It provides a route for qualified members of either body to become members of the other, as long as they meet initial admission requirements. As a result, members of both designations benefit from increased international recognition and mobility.

Members of the some 160 professional accounting bodies that belong to the International Federation of Accountants may be eligible for accelerated entry into the CMA designation in Canada through the Professional Advance Standing Program. ²⁶Depending on the requirements of the provincial and territorial accounting organization applicants wish to join, they may be eligible for various exemptions, based on their academic history and other professional studies. ²⁷

Ensuring quality is a legitimate reason for having minimal restrictions to international mobility. Accounting standards are not globally uniform, and the quality of the work of the members of other accounting designations is not necessarily equivalent to that of members of Canadian accounting designations. These restrictions on entry help protect the public interest by ensuring that individuals who present themselves to the public as designated accountants in Canada are qualified to do so. That is why ongoing assessment of foreign accounting designations is of such importance. Each additional foreign accounting designation that is classified as a qualified designation can increase mobility of qualified foreign accountants, while ensuring the quality of the services they provide. The result is ultimately healthy for effective competition. However, once another designation is recognized as equivalent, all further requirements, including examinations, should be kept to a minimum.

Recommendation

The provincial and territorial accounting organizations should continue to review foreign accounting designations in order to expand the list of qualified foreign accounting designations, while minimizing all barriers to the accreditation process.

Despite the various mutual recognition agreements, other restrictions can limit international mobility. For example, although foreign accountants wishing to be designated as accountants in Canada are generally not required to reside in the province or territory in which they intend to work, some provinces require that public accountants be permanent residents in Canada. ²⁸ Such restrictions can unnecessarily impede qualified foreign public accountants from doing business in Canada and therefore limit competition.

Recommendation

Regulators should consider removing residency requirements for foreign-trained accountants who wish to be public accountants in Canada.

Overlapping services and scope of practice

In some of the jurisdictions where public accounting is regulated, not all accounting designations are permitted to offer the full extent of this service. This is the case in Quebec, where provincial legislation only allows CGA and CMA to practise public accounting in limited circumstances. ²⁹

The CGA of New Brunswick challenged Quebec's restrictions on public accounting, alleging that Quebec law and regulation restricted interprovincial mobility of workers, thus contravening Chapter 7 of the Agreement on Internal Trade. ³⁰ The complaint also alleged that Quebec's regulations on the licensing, certification and registration of accountants from other jurisdictions do not principally concern those individuals' competence to practise public accounting, as required by the agreement. ³¹

An internal trade panel noted that “…as a party to the Agreement [on Internal Trade], the Respondent [Quebec] is required to recognize equivalent competencies in the occupation of public accounting acquired by accountants in other provinces.” ³² The panel went on as follows:

…to require that a non-CA accountant qualified to practice public accounting in his or her province simply apply to be a CA in Québec in order to practice public accounting in that province does not recognize the occupational qualifications of a worker from any other jurisdiction where those qualifications have already been recognized, nor does it give adequate recognition to the fact that the competencies required to practice public accounting can be acquired through a variety of combinations of training, education and experience. There does not appear to be any mechanism in Québec for recognizing the occupational qualifications of a non-CA accountant from another jurisdiction where those qualifications have already been recognized, nor for assessing the qualifications of non-CAs from other jurisdictions that would recognize that competencies can be acquired by different means. Without such mechanisms in place, it is difficult to conclude that Québec's public accounting measures relate principally to competence.

Accordingly, the Panel finds that the Respondent's application of the CA occupational standard for public accounting to non-CA accountants from other jurisdictions where those qualifications have already been recognized does not relate principally to competence and is inconsistent with Articles 707(1)(a) and 708 of the Agreement. ³³

The panel went on to conclude that “public accounting measures that restrict access to the practice of public accounting by non-CA accountants recognized in other jurisdictions as qualified to practice public accounting have impaired internal trade and have caused injury.” ³⁴ In October 2005, the Quebec government made a public commitment to work with all three accounting designations to resolve this conflict. ³⁵ On December 14, 2006, it tabled a Bill in the National Assembly that would allow CGA and CMA to practise the full extent of public accounting in Quebec, but it died on the order paper on February 21, 2007, when the legislature was dissolved for the March 2007 election. ³⁶ On November 13, 2007, the Quebec government tabled Bill 46, which, if passed, could resolve this issue. ³⁷

Limiting who can perform public accounting effectively limits competition among accountants for this important service. Given the observed opening of the market to other designations in some jurisdictions, it appears that it is possible to do the same in Quebec without jeopardizing the public interest.

Recommendation

Provincial regulators should give all members of accounting designations who have the appropriate level of competence the right to practise the full extent of public accounting.

In Ontario, CGA and CMA were not permitted to practise public accounting until November 2005, when the Public Accounting Act, 2004 , came into effect. ³⁸ This legislation is the result of the work of a 2001 panel established under the provisions of the Agreement on Internal Trade to consider a complaint by the CGA of Manitoba. The panel found that Ontario's public accountant licensing system operated as a barrier to mobility because it effectively prevented qualified CGA who practised public accounting in other jurisdictions from being licensed in Ontario. ³⁹

Once the Public Accountants Council has set standards and the CA, CGA and CMA organizations have shown they can meet them, they will be authorized to license and govern their members as public accountants in Ontario. ⁴⁰ Members of the Association of Chartered Certified Accountants will also be given a chance to demonstrate they meet the standards, but the association will first need to apply to the Attorney General of Ontario to become a designated body. ⁴¹ It remains to be seen whether adopting these standards will fulfill the intent of the Public Accounting Act and abolish unnecessary barriers to entry for competing accounting designations.

Although limiting who may perform public accounting is intended to maintain professional standards, some Canadian and international jurisdictions have been able to protect the public and still open the market to allow members of other designations to offer public accounting services. ⁴²

The maintenance of high accounting standards does not require imposing one accounting body's detailed mandatory curriculum on others in a manner that raises the costs of entry to members of those bodies and effectively excludes members of other designations from competing. Doing so would effectively limit competition from other designations.

Recommendation

The Ontario Public Accountants Council should be flexible when applying the new standards under the Public Accounting Act in order to give members of all designations who have the equivalent training and education the right to practise public accounting.

Market conduct restrictions

Advertising

Each accounting designation has its own set of advertising restrictions, although many similarities exist among them, including, in most cases, provisions forbidding the following:

false or misleading advertising; ⁴³
declarations that cannot be substantiated; ⁴⁴ and
soliciting for engagements in a persistent, coercive or harassing manner. ⁴⁵

These restrictions are similar to ones in the Competition Act and could be seen as duplication. However, the Bureau recognizes that the designations' accounting-specific expertise is of added value in protecting the public from false and misleading advertising. Moreover, restrictions of this type are considered to be consumer protection measures and, as a result, do not pose any competition problems.

However, other types of advertising restrictions, such as those that set parameters on firm names and limit the information accountants may put on their business cards, stationery and business signs, do not appear to be necessary to protect consumers. ⁴⁶ The same can be said of restrictions on extravagant or self-laudatory advertising and restrictions that limit the media in which advertisements may appear. ⁴⁷

Although some restrictions on advertising are designed to maintain the good reputation of the profession and to protect the public from false or misleading claims, the provincial and territorial accounting organizations should remember that, in general, there are great benefits to be gained from professionals freely advertising their services. Advertising can result in better-informed clients and, therefore, reduce instances of asymmetric information, as well as give accountants incentive to innovate and offer better quality services to the public.

Recommendation

Provincial and territorial restrictions on advertising by accountants should start from the premise that all advertisements are permitted except those that mislead or misinform the public. Provincial and territorial accounting organizations should consider removing any restriction that does not explicitly serve this purpose.

In the course of this study, the Bureau found other restrictions on the way accountants may solicit clients. For instance, many provinces and territories have restrictions that prevent members from soliciting clients from other member or non-member accountants or that limit the services they provide to clients of other accountants. ⁴⁸

There are benefits to be gained when professionals aggressively pursue clients, including, ultimately, lower prices. The elimination of solicitation restrictions could result in increased price competition between professionals, which would not necessarily result in a loss of professional integrity, particularly since all accounting designations have a strict code of conduct to which their members must adhere.

Recommendation

The provincial and territorial accounting organizations should consider eliminating all solicitation restrictions that go beyond protecting the public from persistent, coercive or harassing solicitation.

Pricing and compensation

Rules limiting specific pricing practices generally vary by accounting designation rather than by province and territory. Some rules were put in place to discourage accountants from lowering the quality of their services for the sake of competing on price. This is the case with Rule 204.4(34) of the CA Rules of Professional Conduct and Related Guidelines , which states that CAs may only perform engagements for a significantly lower fee than what their predecessors charged when qualified members do the work in accordance with professional standards. While this type of restriction may be justified on the grounds that it helps protect the public, it can discourage competition based on price and therefore restrict competition by cost-efficient firms. Eventually, such a restriction can lead to members of the profession charging the highest price recorded in the market, which ultimately results in less price competition. Given these effects on competition, it is important for regulators to consider whether there are other policy responses that would protect the public but do less harm to competition.

Recommendation

All Chartered Accountant organizations should consider eliminating Rule 204.4(34) of the CA Rules of Professional Conduct and Related Guidelines , which gives conditions as to when CAs may perform engagements for a significantly lower fee than that charged by predecessors.

While each accounting designation has its own set of rules, many of these rules are similar. For example, all three recognized accounting designations prohibit members engaged in the practice of public accounting from offering or receiving compensation for referrals. ⁴⁹

Although this type of restriction may serve to protect the public by ensuring the independence of public accountants, some jurisdictions have found it possible to protect the public without such a restriction. For example, in countries where members of the Association of Chartered Certified Accountants are authorized to practise public accounting, members are allowed to offer or receive compensation for referrals when they have established safeguards to eliminate threats to compliance with principles of professional conduct or reduce them to an acceptable level. ⁵⁰

Recommendation

The provincial and territorial accounting organizations should consider whether restrictions on compensation for referrals are needed to maintain and preserve public accountants' independence. If so, the organizations should consider whether this restriction could be replaced with self-imposed safeguards.

Business structure

The following three tables, which were provided by the three national accounting organizations, set out various restrictions on business structure in a number of provinces and territories.

Table 2.1: Restrictions on business structure and multidisciplinary partnerships for CAs
	Alta.²	B.C.	Man.⁴	N.L.	N.S.⁵	Ont.⁶	Que.^7,8	Sask.
Source : CICA, questionnaire response, and consultation submission, July 20, 2007. Notes Provided that they are not operating as public accountants, CAs are not restricted from conducting other business in conjunction with other professionals and conducting such other business using various commercial forms, including incorporated entities . Professional corporations and general partnerships are also restricted. Multidisciplinary co-operation is acceptable, but incorporation is not. In Manitoba, member CAs may not be in partnership with non-members, although this is not an explicit rule. When work is being done by a related business such as a consulting firm, the members are responsible for the actions of the non-members in the related business. There are restrictions on private companies that are not professional corporations. There are restrictions on professional corporations and general partnerships. The Regulation respecting the practice of the chartered accountancy profession within a partnership or a joint stock company when members practice within those structures and offer assurance services stipulates that at all times more than 50 percent of the voting rights must be held by members of the Ordre des comptables agréés du Québec or members of CICA. There is no limitation on multidisciplinary partnerships, except with respect to the voting rights concerning assurance services (described in note 6).
Restrictions to forms of business structure or ownership
Sole practitioners
Limited liability partnerships are generally forbidden					X
Public limited companies are generally forbidden	X	X	X	X	X	X		X
Private companies are generally forbidden	X		X	X		X		X
Limitation to multidisciplinary partnerships with other professionals 1
Any form is generally forbidden		X		X	X	X		X
Incorporation is generally forbidden	X	X		X		X		X
Some comparable licensed professions are allowed to co-operate in various commercial forms (including incorporation)	X³	X		X		X	X
Incorporation is allowed only with comparable licensed professions but incorporation is forbidden with non-comparable licensed professions		X		X		X

Table 2.2: Restrictions on business structure and multidisciplinary partnerships for CGA
	Alta.	B.C.	Man.	N.L.	N.S.	N.S.	Que.	Sask.
Source : CGA-Canada Notes LLPs are allowed with other CGA. CGA are permitted to incorporate. They must waive their limited liability for acts and debts. Only CGA may hold voting shares. Immediate family members or family trusts are permitted to hold non-voting shares. CGA are permitted to partner with other designated accountants (CA, CMA) but may not call their firm a firm of Certified General Accountants. They are not permitted to partner with other professionals (i.e. lawyers, doctors).
Restrictions to forms of business structure or ownership
Sole practitioners			X				X
Limited liability partnerships are generally forbidden		¹	X	X			X
Public limited companies are generally forbidden	X		X	X		X	X	X
Private companies are generally forbidden	X	²		X		X	X
Limitation to multidisciplinary partnerships with other professionals
Any form is generally forbidden		³		X
Incorporation is generally forbidden	X	²	X	X		X		X
Some comparable licensed professions are allowed to co-operate in various commercial forms (including incorporation)				X			X	X
Incorporation is allowed only with comparable licensed professions but incorporation is forbidden with non-comparable licensed professions	X		X	X

Table 2.3: Restrictions on business structure and multidisciplinary partnerships for CMA
	Alta.¹	Man.⁴	N.L.	N.S.	Que.⁷	Ont.⁸	Sask.
Source : CMA Canada. Notes Professional corporations and general partnerships are also restricted. Multidisciplinary co-operation is acceptable, but incorporation is not. There are restrictions on private companies that are not professional corporations. The Public Accountants Act , R.S.N.S. 1989, c. 369, permits incorporation as long as licensed public accountants hold the majority of voting shares. The Public Accountants Act , R.S.N.S. 1989, c. 369, permits practising "along (sic) or in partnership with others"; however, "others" is not specified. In the absence of a specific prohibition in the Public Accountants Act , there would be no restriction against a multidisciplinary partnership unless the other professions involved restrict it. Incorporation with other licensed public accountants is possible; however, incorporation with other disciplines is not, as each set of governing rules requires its own profession to control the company. The Public Accountants Act , R.S.N.S. 1989, c. 369, requires that a licensed public accountant hold the majority of voting shares; the Legal Profession Act , S.N.S. 2004, c. 28, requires that a lawyer hold all voting shares. Both are not possible at the same time. CMA in Ontario may incorporate commercially but professional corporations are not permitted at this time. In accordance with Rule 187.11 of the Professional Code, R.S.Q. c. C-26 , the By-Law permitting the practice of professional activities within a limited liability partnership or a joint-stock company is currently under study at the Office des professions du Québec.
Restrictions to forms of business structure or ownership
Sole practitioners
Limited liability partnerships are generally forbidden			X	X	X	X
Public limited companies are generally forbidden	X	X	X	X ⁴		X	X
Private companies are generally forbidden	X	³	X			X	X
Limitation to multidisciplinary partnerships with other professionals ¹
Any form is generally forbidden			X	⁵			X
Incorporation is generally forbidden	X	X	X	⁶			X
Some comparable licensed professions are allowed to co-operate in various commercial forms (including incorporation)	X ²	X ²	X		X

A close look at the tables above reveals a wide range of restrictions on business structure by the three accounting designations and across the provinces. It is reasonable to ask whether the variation brings any benefit, not only to consumers but also to individual accountants and the industry as a whole. It is also reasonable to suggest that there may be instances when the jurisdiction with the least restrictions in a particular area has just as solid a track record of protecting the public interest as the jurisdiction with the most.

Recommendation

Given the variance in business structure restrictions between provinces, each regulator should consider whether its current rules on business structure and ownership are necessary. Those that go beyond the minimum necessary to achieve a clearly defined public interest objective should be removed.

A notable set of restrictions are those on the business structure of professional services firms, including rules about who may form public limited companies, limited liability partnerships, private companies and multidisciplinary partnerships. For example, limited liability partnerships are forbidden for CAs only in Newfoundland and Labrador, while public limited companies are generally forbidden for CAs in all provinces, except Quebec. In addition, many provinces impose restrictions on who may own accounting practices. For example, when members of an accounting designation wish to set up a professional corporation they must ensure that one or more members own all the voting shares. ⁵¹

The CICA states that restrictions on business structure maintain the proper balance between reasonably protecting public accountants against liability (except when they commit negligent or wrongful acts or omissions) and protecting the public interest. Specifically, restricting multidisciplinary partnerships enables CA organizations to discipline member firms for misconduct, whereas they would not necessarily be allowed to discipline the members of another profession in a multidisciplinary firm. ⁵²

From a competition standpoint, restrictions on firms' business structure do not allow accounting firms to profit from the possible efficiencies that stem from multidisciplinary firms. These restrictions can also discourage the entry of new accountants into the market and may act to protect higher cost firms from competition from newer, more cost-efficient firms.

Recommendation

Regulators should look at ways to allow public accountants to work with non-accountants without jeopardizing the public interest.

Conclusion

In Canada, although the market entry and conduct restrictions that provincial and territorial accounting organizations have put in place are similar in many regards, significant differences exist among them.

One of these discrepancies is the limit that certain provinces put on who may perform public accounting, which hinders the mobility of accountants and limits competition in this market. To facilitate competition in public accounting services, the regulators in each province and territory should consider establishing the minimum necessary competencies that public accountants should have and allowing the members of all domestic and foreign accounting designations that meet this standard to offer public accounting services.

Advertising regulation also varies depending on the province and territory, and some specific restrictions appear unnecessary to protect the public. If professionals were free to advertise their services and aggressively pursue clients, consumers would benefit from increased competition for accounting services.

In addition, the Bureau questions why certain provinces have business structure restrictions but others do not. If the restrictions are not necessary, and the public interest is protected, they should be eliminated.

Even though these discrepancies exist, accounting designations have made many strides in standardizing their rules and bylaws. However, the provincial and territorial accounting organizations should review them regularly and take into consideration the track record of jurisdictions with fewer restrictions in maintaining service quality and protecting the public. This will help lower the cost of entry for future accountants and ensure more competition in this market.

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Footenotes

¹ The precise definition of public accounting varies across Canada. The description here is taken from Ontario's Public Accounting Act , 2004, S.O. 2004, c. 8, s. 2(1).

² The professional organizations for the three designations generally have similar powers and serve similar functions, although there may be some variation in the standards they establish. In this chapter, these organizations are referred to generally as provincial and territorial accounting organizations. Regulators refers to provincial and territorial regulatory bodies.

³ Accountants (Chartered) Act , [R.S.B.C. 1996] c. 3, s. 8(2).

⁴ CICA, consultation submission, July 4, 2007.

⁵ CGA-Canada questionnaire response, question 4.10, October 2006.

⁶ CMA Canada, consultation submission, June 27, 2007.

⁷ Canadian Information Centre for International Credentials, “Information for foreign-trained bookkeepers,” www.cicic.ca/en/professions.aspx?sortcode=2.19.21&prof=1231 .

⁸ CICA, consultation submission, July 4, 2007.

⁹ From 1991 to 2006. Statistics Canada, CANSIM Table 281-0023, “ Employment (SEPH), unadjusted for seasonal variation, by type of employee for selected industries classified using the North American Industry Classification System (NAICS), monthly (persons).”

¹⁰ Statistics Canada, CANSIM Table 360-0007 , “ Summary statistics for accounting services (all establishments), by North American Industry Classification System (NAICS), annual,”
http://cansim2.statcan.ca/cgi-win/cnsmcgi.exe?Lang=E&RootDir=CII/
&ResultTemplate=CII/CII_pick&Array_Pick=1&ArrayId=360-0007 .

¹¹ Generally, these organizations are called institutes; in Quebec, the CA professional organization is known as the Ordre des comptables agréés du Québec . Figures on CAs and students from CICA, “CICA,” at www.cica.ca/index.cfm/ci_id/12/la_id/1.htm . Figure on public practice from CICA, “What Do CAs Do?” www.cica.ca/index.cfm/ci_id/57/la_id/1.htm .

¹² CGA-Canada, consultation submission, July 9, 2007. Generally, the provincial and territorial CGA organizations are called associations; in Quebec, the CGA professional organization is known as the Ordre des CGA du Québec.

¹³CMA Canada, consultation submission, June 27, 2007. CMA Canada is a partnership of the Society of Management Accountants of Canada and the provincial and territorial CMA organizations, generally called societies; in Quebec, the CMA professional organization is known as the Ordre des comptables en management accrédités du Québec (CMA Canada, “Provinces,”
www.cma-canada.org/1/8/8/6/index1.shtml ).

¹⁴ Figure for CGA from CGA-Canada, consultation submission, July 9, 2007. Figure for CMA from Competition Bureau communication with Steve F. Vieweg, President and CEO of CMA Canada, July 11, 2007.

¹⁵ ACCA questionnaire response, cover letter, July 12, 2006.

¹⁶Statistics Canada, “Employment Size Ranges for NAICS 541212, Offices of Accountants,” custom request, 2006. There were 19,351 accounting offices across the 10 provinces and 39 offices in the territories.

¹⁷ Information in this section is for “Financial Auditors and Accountants” as defined by Statistics Canada in the National Occupational Classification for Statistics 2001 (NOC-S 2001) B011. This is the most disaggregated level of data available for Canada. This category comprises the following: financial auditors who “examine and analyze the accounting and financial records of individuals and establishments to ensure accuracy and compliance with established accounting standards and procedures,” accountants who “plan, organize and administer accounting systems for individuals and establishments,” and articling students in accounting firms.

¹⁸ Statistics Canada, “Earnings Data for NOCS B011, Financial Auditors and Accountants,” custom request, 2006, and 2001 census.

¹⁹ CICA, “How to become a CA,” www.cica.ca/index.cfm/ci_id/133/la_id/1.htm ;
CGA-Canada, “Education,”
www.cga-canada.org/en-ca/Pages/default.aspx;
CMA Canada, “Become a CMA,”
www.cma-canada.org/.

²⁰ CICA, questionnaire response, question 4.7, November 15, 2006.

²¹ Ibid.

²² CGA-Canada, consultation submission, July 9, 2007 ; CMA Canada, “FAQs,” question 8,
www.cma-canada.org/index.cfm/ci_id/4128/la_id/1.htm .

²³ CGA-Canada, questionnaire response, Appendix 13, October 2006.

²⁴ Based on this assessment, the IQAB places foreign accounting bodies into one of three categories (designated bodies, non-designated bodies or non-assessed bodies). Candidates' specific entry requirements vary depending on which type of body they belong to (CICA, “International Qualifications Appraisal Board,” www.cica.ca/index.cfm/ci_id/618/la_id/1/ ) .

²⁵ Competition Bureau communication with CGA-Canada, December 6, 2006.

²⁶ For a list of the member bodies of the International Federation of Accountants, see International Federation of Accountants, “Member Bodies,” www.ifac.org/About/MemberBodies.tmpl .

²⁷ For an example of the requirements foreign accountants wishing to become CMA in Ontario must meet, see Certified Management Accountants of Ontario, “University Degree Holders—Internationally Trained Professionals,”
http://www.cma-ontario.org/.

²⁸ Newfoundland and Labrador, for example. Public Accountancy Act, R.S.N.L. 1990, c. P-35, s. 10.

²⁹ Chartered Accountants Act , R.S.Q., c. C-48, s. 24, 28, 29.

³⁰Report of the Article 1716 Panel Concerning a Dispute by the Certified General Accountants Association of New Brunswick with Quebec regarding Quebec's Measures Restricting Access to the Practice of Public Accounting , August 19, 2005, www.ait-aci.ca/en/dispute/1_eng.pdf , p. 3. Chapter 7 of the Agreement on Internal Trade includes a series of obligations intended to ensure that workers qualified to work in one province or territory have access to employment opportunities in any other part of the country. Labour mobility barriers typically affect the approximately 15 to 20 percent of the workforce employed in regulated professions and trades. These barriers are rooted in provincial and territorial differences in the definitions of various occupations and the qualifications for entering the professions. Under the Agreement, regulators must comply with Chapter 7 obligations by April 1, 2009. Regulators must compare their occupational standards and, where a high level of commonality is found to exist, agree to recognize workers already qualified in another province without any additional assessments, testing or training. When any significant differences are found, regulators must reconcile or accommodate them, to minimize their impact on workers.

³¹ Ibid.

³² Ibid, p. 17.

³³Ibid, p. 18.

³⁴Ibid, p. 23.

³⁵ Quebec, “Différend entre l'Association des comptables généraux accrédités du Nouveau-Brunswick et le Québec,”
http://communiques.gouv.qc.ca/gouvqc/communiques/GPQF/
Octobre2005/18/c2653.html.

³⁶An Act to amend the Professional Code and the Chartered Accountants Act in respect of public accountancy , see
www.assnat.qc.ca/en/travaux-parlementaires/projets-loi/projet-loi-64-37-2.html.

³⁷An Act to amend the Professional Code and the Chartered Accountants Act in respect of public accountancy , see
www.assnat.qc.ca/en/travaux-parlementaires/projets-loi/projet-loi-46-38-1.html.

³⁸ Ministry of the Attorney General, “ Ontario Government Modernizes Accounting Profession,” news release, November 1, 2005,
www.attorneygeneral.jus.gov.on.ca/english/news/2005/20051101-pubacct.asp .

³⁹ The panel found that because chartered accountants dominated the membership of Ontario's Public Accountants Council, it could not objectively assess the competence of members of competing bodies to practise public accounting. Report of the Article 1716 Panel Concerning the Dispute Between the Certified General Accountants Association of Manitoba and Ontario Regarding the Public Accountancy Act (R.S.O., 1990, Chapter P-37) and Regulations , October 5, 2007, p. 17,
www.ait-aci.ca/en/dispute/6_eng.pdf .

⁴⁰ The revamped council comprises 17 members: four CAs, two CGA, two CMA and nine public members appointed by the government. Ministry of the Attorney General, news release, note 38, above.

⁴¹ Association of Certified Chartered Accountants, consultation submission, July 5, 2007.

⁴²For example, in the U.K. members of four separate bodies may provide public accounting services.

⁴³ For example, Rule 217.1(a) of the CA Rules of Professional Conduct and Related Guidelines , Rule 509(a) of the CGA Code of Ethical Principles and Rules of Conduct , and Rule 217.1(a) of the B.C. CMA Rules of Professional Conduct .

⁴⁴ For example, Rule 217.1(d) of the CA Rules, Rule 509(d) of the CGA Code , and Rule 217.1(d) of the B.C. CMA Rules.

⁴⁵ For example, Rule 217.2 of the CA Rules and Rule 509(b) of the CGA Code .

⁴⁶ An example of a restriction on firm names is Rule 510 of the CGA Code of Ethical Principles and Rules of Conduct . An example of limitations on information on business cards, stationery and signs is section 2.01 of the Regulation respecting advertising by certified general accountants R.Q. c. C-26, r.37.

⁴⁷ Interpretation of Rule 217 of the CA Rules.

⁴⁸ For example, in Northwest Territories, CAs may not solicit work from clients already working with other CAs ( Rule 301 of the Northwest Territories CA Rules) . When taking special assignments CGA may not do anything that impairs their client's existing relationship with any other accountants (Rule 502 of the CGA Code) . In Alberta, CMA taking special assignments as the result of referrals must not offer services beyond those the clients hire them to provide ( Article 3, IIIG-4, Alberta CMA Code) .

⁴⁹ See Rule 216 of the CA Rules, Rule 507 of the CGA Code, and Rule 216 of the B.C. CMA Rules .

⁵⁰ The ACCA Code of Ethics and Conduct, section 3.2, rules 4 to 31, lists threats to compliance with the fundamental principles of integrity, objectivity, professional competence and due care, confidentiality and professional behaviour.

⁵¹ See, for example, Society of Management Accountants of Saskatchewan, Bylaws , Bylaw 10.02(b); Institute of Chartered Accountants of Ontario, Bylaws, Bylaw 308(1); Manitoba, Certified General Accountants Act , C.C.S.M. c. C46, s. 11.3(1)(d).

⁵² CICA, consultation submission, July 4, 2007.