Canada’s provincial chartered accounting institutes have endorsed a national task force report that provides a blueprint for rebuilding the reputation of a proud old profession left shaken by corporate scandal.

“In the wake of a number of high-profile business failures, the Canadian chartered acc-ountant (CA) profession has taken several steps to build public trust and confidence,” says the report, Strategic Crossroads for the CA Profession, published in July.

“These include new independence standards and the creation of the Canadian Public Accountability Board to oversee public-company auditors.”

The 66-page report, written by senior executives with provincial associations that make up the Institute of Chartered Accountants of Canada, says the profession has strengthened public oversight of corporate auditing and assurance standards. Public representatives also play key roles on institute councils and licensing bodies, it says.

Steve Glover says new regulations spur demand.

The report recommends prompt strategic action in the following areas:

* Define the characteristics of the CA “brand” and how that brand is to be positioned and promoted in the corporate world.

* Develop a certification process to help practitioners get a lock on the corporate financial positions and advisory roles targeted by the profession.

* Create programs and learning that will inspire practitioners to value their CA membership and look to it as their source of intellectual capital.

* Develop activities and programs that support fundamental CA values and uphold the profession’s commitment to protect the public interest.

The strategic planning report is the Canadian CA profession’s response to multibillion-dollar scandals involving such companies as Enron and WorldCom and the regulatory backlash that has occurred in Canada and the United States.

Enron, an energy trader, was accused of hiding its imminent collapse in 2001 from investors and creditors.

Arthur Andersen LLP, Enron’s auditor and the world’s fifth- largest accounting firm, went out of business in 2002 in the wake of the scandal. Some other accounting firms are accused of similarly questionable ethics.

“It certainly had the impact of questioning the reputation and integrity of the profession,” Richard Rees of Vancouver, CEO of the Institute of Chartered Accountants of British Columbia (ICABC), told Business Edge.

Rees said Andersen’s failure to do the job properly was only one contributing factor in the mega-collapses. “There was a huge governance failure as well,” he said. “Possibly there was also some fraudulent activity.”

Nonetheless, the task force report is optimistic about the CA profession’s prospects of retaining independence and control over its traditional auditing role, despite being subject to more public oversight.

“Audit and assurance will continue to be one of the cornerstones of the CA brand,” it says. “Canada’s accounting professionals must continue to work together to ensure confidence and transparency in financial statements and capital markets.”

Steven Glover of Edmonton, executive-director of the Institute of Chartered Accountants of Alberta and chair of the task force, said Canada’s 200 largest publicly traded companies are listed on stock exchanges in the U.S. as well as in Canada.

This means these Canadian companies – which provide the CA profession much of its work – are subject to the U.S. federal Sarbanes-Oxley acc- ounting reform act and the regulation of that country’s powerful Securities and Exchange Commission.

Glover said public companies in Canada are now subject to tougher auditing requirements and accounting standards.

To promote this, the CA profession – with the Canadian securities administrators and federal government – created the Canadian Public Accountability Board. Public companies are required to have their audits done by auditors registered with the board.

“That’s created a whole lot of new work for the accountants who work for the accounting firms and the accountants on the corporate side,” Glover said. “There’s just a phenomenal demand for accountants right now.”

Canada’s CA profession has scrambled for more than two years to keep itself proactive in adapting to the new regulatory environment, meeting with legislators and communicating changes in statute and policy to its members.

“There’s been a deluge of new regulation both in the U.S. and Canada,” said ICABC’s Rees. “As a result, all our firms are as busy as hell trying to keep up with all of the new requirements.”

Previously, said Rees, outside auditors would only look at the company’s financial statements. Today, companies must formally attest to the soundness of their internal control systems as well – a huge new area for auditors to verify.

“A new level of regulation involving external auditors has been added to the public companies,” Rees said.

Auditors no longer are allowed to do management consulting work for their clients. To comply, some international firms have sold their consulting divisions.

Quebec consultant Michel Zins, who provided research and conducted interviews for the CA report, wrote in a paper to the ICABC that there is renewed focus on accounting, auditing and corporate governance in the wake of the corporate failures.

“In order to remain competitive, organizations are being required to provide more timely, accurate and reliable information, and are allocating more resources to comply with statutory requirements and governance changes.”

One other challenge identified in the task force report is business processing outsourcing (BPO), a phenomenon in which internal corporate accounting functions are being transferred overseas to countries such as India where the work can be done at a fraction of the cost.

BPO is made possible by high-speed secure network connections in which data are stored in servers at one location and access is gained from another location. Scanning allows documents to be indexed in a database and easily retrieved from elsewhere.

“CAs involved in lower-end analytical work may be facing a significant threat to their livelihoods, and comptrollers and CEOs need to be aware that their competitors may be taking advantage of lower operating costs,” the report says.

Glover said this phenomenon poses no serious threat to the profession’s prime targeted area of senior management. “It would be difficult to outsource the high-level management work,” he said.

Rees noted that BC Hydro recently outsourced its accounting department work to the U.S. consulting giant Accenture LLP. But the employees hardly noticed – they continued working out of the same office, he said.

“To even think about outsourcing, you need to be pretty big,” Rees said. “Anybody who’s of any scale wouldn’t use a CA firm to keep their records.”

The CA report says many CA firms, particularly small and medium-sized ones, are hedging their bets through specialized services – a trend that emerged during the mid-1990s.

These specialties include forensic accounting, business valuation, financial planning, IT consulting and insolvency work. “Some firms have become very boutique,” Glover said.

“To be a full-fledged general practice can be difficult.”

Rees said the technology boom of the late 1990s inspired students to turn away from chartered accounting and seek management positions they hoped would make them instant millionaires.

Today’s strong demand for chartered accountants has made recruitment a lot easier, he said. “It’s almost like there’s a renaissance going on in the whole role of the auditor. Audit committees are taking auditors a lot more seriously.”

(Brock Ketcham can be reached at brock@businessedge.ca)