The Canadian Public Accountability Board (CPAB) has announced changes to its oversight of smaller audit firms, with the first phase beginning in the 2027 inspection cycle. The revised approach will target inspection activity according to public interest risk and provide greater flexibility in inspections of smaller firms and reporting issuers. Certain inspections will focus on an audit firm’s system of quality management without selecting individual audit engagements for review. Selection processes will incorporate additional qualitative and quantitative factors, including trading activity, market capitalization and shareholder distribution. These measures will help identify lower risk audits where a file inspection may not be necessary. A dedicated smaller firms inspection team will support implementation, while a new Smaller Audit Firm Insights Group will inform oversight through engagement on developments, challenges and emerging issues in this market segment. Longer term initiatives will include consideration of potential changes to CPAB’s rules to provide further flexibility in oversight.
Canadian Public Accountability Board announces more targeted inspections of smaller audit firms from 2027
The Canadian Public Accountability Board will begin a more targeted approach to overseeing smaller audit firms in its 2027 inspection cycle. Some inspections will examine only firms’ quality management systems, while additional risk factors will help identify audits that may not require file reviews. A dedicated inspection team and a new Smaller Audit Firm Insights Group will support implementation and inform oversight.