The Bottom Line April 2013 FOCUS 11

Challenging times call for inventive solutions

By GUNDI JEFFREY though Canadian business was n an almost copycat repeat of waiting to exhale.” the year before, fiscal 2012 Fortunately, adds Bill Thomas, Ifound Canada’s accounting CEO of KPMG LLP, “in Canada, firms grappling with an uncertain we’re seeing that global economic economy – mostly elsewhere, but volatility being offset somewhat affecting Canadian markets all the by the relative health of the coun- same – calls for audit reform and try’s conservatively managed and more intense competition in a regulated financial services sector congested audit market. and by the strong demand for Firms struggled to meet their Canada’s natural resources.” revenue targets as corporations Ernst & Young’s CEO Trent put off all but the essential special Henry agrees: “Canada is often projects, but all the same required the envy of developed markets the handholding while steering world over. Our own research and through a complicated and chal- surveys of the world’s leading lenging business environment. entrepreneurs and business execu- Not only are businesses being tives, including many Canadians, bombarded by new accounting show they expect to see more standards no matter what sector growth in 2013. In fact, in one of they operate in, they are facing our recent studies, Canada ranked more intense scrutiny from Can- third among countries with the adian tax authorities and other most positive view of their local regulators. economy compared to the global “The Eurozone crisis, the on- economy. And Canadian execu- again, off-again fiscal cliff issue tives were more focused on in the U.S., as well as sluggish growth than their U.S. and global growth everywhere in the counterparts.” a specific service in a specific that “every organization in Canada finding alternative ways to deliver developed economies, all acted as This mix of caution and opti- area, we are now being asked to is also looking for ways to be our services by asking questions a drag on market demand,” mism gave the firms plenty of help provide answers to signifi- more efficient and reduce costs — around who, how and where we do observes Frank Vettese, CEO of opportunities to get inventive with cant problems or significant to do more with less — which work,” McFarland says. Deloitte LLP. “Although Canada service offerings and new ways of opportunities by offering highly means we’re continuing to see fee Although Grant Thornton LLP weathered the recession well and presenting them. integrated solutions. So, we have pressure in all parts of our busi- has not introduced any service emerged relatively healthy, there Vettese describes “a funda- been investing considerably in ness. areas in the past year, Phil Noble, was an atmosphere of intense cau- mental change in the way organiz- innovative services.” “So we’re looking at ways to CEO and executive partner, tion in the business environment. ations are seeking assistance. At the same time, PwC LLP deliver our services by leveraging For much of the year, it felt as Instead of being asked to perform CEO Bill McFarland points out our strong global network and See Mix on page 20 MNP has highest revenue bump Editor’s note: MNP LLP posted the aggressive with its merger strategy in ness and energy to the public sector con- largest revenue increase among Canada's 2012, bringing only three firms into the sulting market in Southern Ontario, and 10 biggest firms. Its 15 per cent increase family. “We continued to focus on across Canada. We will now equal any of is also the second highest among all firms. growing the Toronto and Montreal the traditional consulting firms in terms n a year of continuing merger activity offices,” says MNP CEO Daryl Ritchie, of depth and expertise.” in pursuit of capturing a larger “entering only one new location.” Closer to home, MNP snapped up Imarket share in Ontario, one of MNP persuaded North York-based Tyce Carle-Thiesson, a professional ser- MNP’s other highlights was having Sacks LLP, a firm specializing in the real vices firm in Nanaimo, B.C., with the Richard Wise, valuation and litigation estate industry, to join the firm, aiming goal of augmenting service offerings in support partner in the Montreal office, to enhance services for real estate clients the Vancouver Island area. receive the Queen Elizabeth II Diamond across the country. MNP also merged Ritchie is delighted his firm met its Jubilee Medal in recognition of his 35 with PSRG, a public sector consulting growth targets for 2012 — 15 per cent, years of leadership in the field of busi- firm in Toronto, which Ritchie believes “which was fuelled by organic growth ness valuation. will “instantly bring a powerful set of across all service lines and the recent MNP did choose to be a little less capabilities and a much needed fresh- merger activity.”

Rank by Revenue Revenue Partners/ Professional Revenue per Number Revenue splitting Revenue 2012 change Principals Staff professional of offi ces A& A/MAS/ 2012 2011 Association/Year End/ Head Offi ce (‘000) (%) (+/-) (+/-) staff tax/other 11 Deloitte LLP 1 / June 2, 2012 / Toronto 1,881,000 +3.5 863 (+30) 5,461 (+243) 344,442 56 N/A 2 2 PricewaterhouseCoopers LLP / June 30, 2012 / Toronto 1,202,200 +1.9 531 (+111) 4,131 (+212) 291,019 25 N/A 3 3 KPMG LLP / September 30, 2012 / Toronto 1,162,734 +2.2 661 (+232) 3,555 (+96) 327,070 35 (+2) N/A 4 4 Ernst & Young LLP / June 29, 2012 / Toronto 911,000 +4.7 341 (+10) 2,826 (+97) 322,364 17 (+2) N/A 5 5 Grant Thornton Canada 2 / December 31, 2012 / Toronto 545,000 +5.8 409 (-7) 2,837 (+279) 192,104 135 (+17) N/A 6 6 BDO Canada LLP / December 31, 2012 / Toronto 446,000 +4.7 383 (+1) 2,787 (+627) 160,029 105 (-1) N/A 7 7 MNP LLP / December 31, 2012 / Calgary 430,000 +15.0 329 (+46) 918 (-6) 468,410 58 N/A

88Collins Barrow National Co-operative / Dec. 31, 2012 / Kitchener, Ont. 156,918 +9.8 183 (+6) 495 (+20) 317,006 37 65/7/23/5 9 9 Richter / December 31, 2012 / Montreal 80,000 -4.5 48 (-28) 337 (+119) 248,665 1 40/30/25/5 10 10 Mallette / August 31, 2012 / Quebec 56,600 +6.0 59 442 (+13) 128,054 22 65/10/15/10

1 Deloitte’s 2011 fi gures revised to: $1.817 billion revenue, 833 partners and 5,218 professional staff . 2 Includes Grant Thornton LLP and Raymond Chabot Grant Thornton (Quebec) 12 FOCUS The Bottom Line April 2013

Deloitte PwC Canada KPMG

lthough Deloitte did not meet all of its growth targets, wC grew almost 2 per cent in 2012, “which was PMG had a great start to fiscal 2012, with revenue says CEO Frank Vettese, “our revenues remained slightly below our expectations,” says CEO Bill and profit well ahead of the year before. But then the Afairly stable, which allowed us to maintain our leading PMcFarland, “as we had expected a rebound in deal KEuropean debt crisis cooled the economy along with market share in Canada.” activity that did not occur.” On the plus side, PwC experi- firm growth. Despite the difficult year, says CEO Bill Vettese was pleased that the firm won several awards rec- enced close to double-digit growth in Alberta. “This is now Thomas, “our audit practice remains number one in Canada, ognizing it as a great place to work, a best place for new Can- a key area of focus for us, given the shift of wealth to with 25 per cent market share.” adians and a best diversity employer, as well as winning the western Canada.” The firm’s 2011 investments in health care and the public Canadian General Counsel Association’s social responsibility McFarland was also proud to note that “growth in market sector consulting paid off, showing the biggest growth for the award. share, and being named one of Canada’s top 100 employers, year. The natural resources practice also saw good increases. In the spirit of team-building, the firm sent 23 of its people one of the top diversity employers and one of Canada’s Thomas says the newly formed Accounting Advisory Ser- to Brazil as part of the Deloitte Habitat Adventure, “to work greenest employers continues to help us attract and retain vices team “is already generating revenue in the majority of with Brazilian colleagues to repair homes for local families.” top talent.” our national accounts.” AAS sits at the crossroads of audit, Vettese is especially proud of “The Future of Productivity But he derives his greatest satisfaction from the tax, advisory and the professional practices, “which positions – Clear choices for a competitive Canada,” a report examining “stronger engagement from all of our people in what we are us to bring the right expertise to help our clients with tech- Canada’s productivity problem and the role leaders need to trying to do here at PwC, on how we can improve, having a nical and complex accounting matters.” play in reversing this alarming trend. “Deloitte’s 15 recom- little bit of fun but still being a high-performance place to Meanwhile, KPMG Enterprise rolled out a suite of enter- mendations for improving productivity are really helping to work. And, I am really energized when I hear stories about prise advisory services. drive the national agenda in this area,” he said. how our people are adding value to a client’s business.” Expansion was on the firm’s mind, as it acquired Velani Deloitte is now taking what Vettese calls a “life-cycle PwC introduced an innovation leader “because it is Consulting, immigration law firm Greenberg Turner, SECOR approach” to providing services. For example, for mergers and really important to identify what clients need, given how — Canada’s largest strategic management consulting firm — acquisitions, “we do everything from looking at what a client’s the world is constantly changing and evolving. Helping our and Ottawa-based accounting firm Merritt & Co. strategy should be, identifying targets, screening those targets, clients transform their business processes continues to be KPMG also re-opened an office in St. John’s after a 10-year doing the due diligence, right through to helping with post- the biggest focus for us. We are hiring non-traditional absence, and followed up with the acquisition of Plato Con- merger implementation. Even audits today are not delivered people with a lot more operational backgrounds than we sulting, also headquartered in St. John’s. “The combination of solely by the assurance and advisory practice; we are bringing traditionally did.” KPMG and Plato makes us one of the largest professional valuation, risk evaluation and forensic capabilities to our cli- As well, Nelson Switzer, former CEO of Asherleaf Con- service firms serving Newfoundland & Labrador.” ents every day.” sulting Inc., joined PwC to lead the Toronto-based sustain- At year’s end, KPMG was once again recognized as one of Services introduced last year included tax controversy, able business solutions practice, “strengthening our ability Canada’s top 100 employers, as well as one of the best immigration advisory, oil and gas technical advisory, advanced to help clients add value, reduce risk and enhance their diversity employers, top 20 family-friendly employers and analytic insights, innovation advisory and strategy consulting. reputation” in this area. greenest employer.

Rank by Revenue Revenue Partners/ Professional Revenue per Number Revenue splitting Revenue 2012 change Principals Staff professional of offi ces A& A/MAS/ 2012 2011 Association/Year End/ Head Offi ce (‘000) (%) (+/-) (+/-) staff tax/other 11 11 HLB/Schwartz Levitsky Feldman / Dec. 31, 2012 / Montreal 39,600 +0.7 48 (-2) 184 (+8) 215,217 7 68/6/17/9 12 12 MacKay LLP / December 31, 2012 / Vancouver 38,310 +3.3 36 (-2) 180 (+15) 212,833 7 66/10/17/7 13 13 Crowe Soberman LLP / December 31, 2012 / Toronto 35,442 +4.2 23 (-2) 109 (+15) 325,156 1 63/9/20/8 14 14 Welch LLP / January 28, 2013 / Ottawa 27,900 +5.3 46 (+2) 160 (+11) 174,375 12 74/4/18/4 15 -- PSB Boisjoli LLP / December 31, 2012 / Montreal 21,942 -- 17 57 384,947 1 32/32/22/14 16 15 Davidson & Company LLP / December 31, 2012 / Vancouver 21,000 -7.1 15 78 (+6) 269,231 1 80/0/20/0

17 17 Ginsberg Gluzman Fage & Levitz LLP/ Dec. 31, 2012 / Ottawa 20,240 +3.2 10 (-1) 75 (+3) 269,867 9 27/4/16/53

18 26 KNV Chartered Accountants LLP / Dec. 31, 2012 / Surrey, B.C. 20,100 +37.1 13 (-3) 101 (+11) 199,010 3 52/9/34/5 19 16 Manning Elliot LLP / December 31, 2012 / Vancouver 20,000 0 22 105 (+8) 190,476 2 80/4/16/0 20 18 DMCL LLP / December 31, 2012 / Vancouver 18,349 -0.8 15 (+1) 86 (-24) 213,360 3 70/1/29/0 The Bottom Line April 2013 FOCUS 13

Ernst & Young Grant Thornton Canada BDO Canada

hairman and CEO Trent Henry was pleased to EO and executive partner Phil Noble sees 2012 as hile fiscal 2012 wasn’t without challenges, report that the firm is “more unified and integrated “another successful year for Grant Thornton.” CEO Keith Farlinger says, BDO did manage to Cthan ever before, and that helped drive our growth, CDespite the challenges of the continued softness in Wchalk up 4.7 per cent growth, “and we are very particularly in advisory and in our key sector focus areas, the economy and pricing pressure in the audit and assurance satisfied with that.” such as financial services, energy, mining, government and market, the firm achieved a growth rate of almost 6 per cent, Even more satisfying, he added, was that the firm’s 106 public sector. As well, we’ve continued to deepen our foot- “with total net fees ending up just shy of our targets.” This offices across Canada are now operating as truly one firm print in the middle market, particularly through our fee growth was seen across all service lines, with the largest from coast to coast. “This was evident as our partners and growing private middle-market practices in Toronto and growth achieved in the advisory services group, particularly staff looked for opportunities to better the firm as a whole, Saskatoon.” in the restructuring and reorganization practice. and not just an individual office.” In June, 2012, Ernst & Young enticed Saskatoon’s Her- Grant Thornton has intentionally focused on the The firm introduced an “aggressive” strategic plan gott Duval Stack to join the family. “This move not only development of this practice over the past couple of years, “that sets BDO up for solid growth now and well into the cemented our presence in one of the fastest growing mar- he says, having most recently completed combinations future.” The plan includes a redesigned partner compensa- kets in the country, it also furthered our firm’s reach in the with A.C. Poirier Inc. and Green Hunt Wedlake Inc., both tion model, an advertising direction that has Canada and middle market from coast to coast. This was our third recovery and reorganization firms in Atlantic Canada. the U.S. projecting a North American message “focusing transaction in less than a year, and a definite step forward “We have successfully integrated these practices, and on the top industries the two countries are working on for Ernst & Young.” we are now positioned with a coast-to-coast footprint, together,” and an ambitious mergers and acquisitions pro- Henry was delighted to prepare for the 20th anniversary enabling us to execute on large, complex recovery or gram. of Ernst & Young’s entrepreneur of the year program, reorganization assignments that require on-the-ground In 2012, BDO looked to strengthen its presence in which will be feted this year. “We believe strongly in not coverage right across the country.” Quebec, merging with Ammar Cousineau Télio Hadid, the only celebrating, but also advocating for entrepreneurship He adds that partners were rewarded with increased Montreal accounting firm ranked 25th in the Quebec in Canada, which is why programs like this are so incomes and return on their investment, “an accomplish- market, and acquiring Decimal Technologies Inc.’s gov- important to us.” ment of which we are equally as proud. Based on these ernance, risk and compliance division, also in Montreal. The firm also chose to advance its brand and “show results, we would expect that our market share at the con- Early 2013 saw the strengthening of the consulting side of we’re a diverse and innovative firm,” by entering into a clusion of 2012 will have again grown in most sectors and the business, merging with Business Solutions Alliance multiyear sponsorship with Cirque de Soleil and launching service lines, with large gains in the R&R practice and Inc and Interis Consulting Inc. “a bold new advertising campaign.” Noting that Cirque growth in the mining and real estate sectors.” These transactions, Farlinger says, “have added depth founder Guy Laliberté was the World Ernst & Young Noble is also happy to report that the firm was recog- and breadth in areas where we were not as strongly repre- Entrepreneur of the Year in 2006, Henry says: “We’re nized as one of Canada’s best workplaces for the past five sented. As we move further into 2013, we will continue to delighted to align ourselves with Cirque’s unique and years, and also ranked high among professional service focus on areas that will result in stronger national coverage inventive brand.” firms. for BDO.”

Rank by Revenue Revenue Partners/ Professional Revenue per Number Revenue splitting Revenue 2012 change Principals Staff professional of offi ces A& A/MAS/ 2012 2011 Association/Year End/ Head Offi ce (‘000) (%) (+/-) (+/-) staff tax/other 21 19 Millard Rouse & Rosebrugh LLP / July 31, 2012 / Brantford, Ont. 18,547 +5.1 23 (+1) 64 289,797 6 68/8/22/2 22 20 Zeifmans LLP / January 31, 2013 / Toronto 17,500 -0.6 11 60 (+3) 291,667 1 54/16/30/0 23 22 Smythe Ratcliff e LLP / December 31, 2012 / Vancouver 17,085 +4.4 13 (-4) 121 (+31) 141,198 4 73/2/11/14 24 23 Demers Beaulne / December 31, 2012 / Montreal 16,325 +0.9 15 80 (-31) 204,063 1 49/19/32/0

25 25 Durward Jones Barkwell & Co. LLP / Dec. 31, 2012 / St. Catharines, Ont. 16,182 +4.4 29 (+2) 45 (-20) 359,600 8 62/15/23/0 26 24 MSCM LLP / December 31, 2012 / Toronto 14,744 -6.3 12 (-1) 43 (-8) 342,884 1 82/2/18/0 27 28 Kingston Ross Pasnak LLP / Dec. 31, 2012 / Edmonton 13,542 +7.8 16 58 (+8) 233,483 1 60/5/27/8 28 29 Lemieux Nolet / Aug. 31, 2012 / Levis, Que. 13,179 +10.5 19 (+2) 75 (+9) 175,720 4 70/2/12/16 29 27 Wolrige Mahon LLP / December 31, 2012 / Vancouver 12,400 -3.1 17 (+2) 70 177,143 1 65/15/20/0 30 -- RLB LLP / Dec. 31, 2012 / Guelph 12,286 -- 13 41 299,659 3 58/19/20/3 14 FOCUS The Bottom Line April 2013

Mid-market firms look for new growth

By GRANT CAMERON sector got squeezed hugely, and mall and medium-sized that impacted our overall growth accounting firms across within the firm. We’re still in the SCanada, facing a variety of same situation where most of our obstacles and economic chal- audits are junior resource explora- lenges, are employing myriad dif- tion stage companies and they’re ferent strategies to grow their the ones that seem to be having a business and boost profits in lot of trouble raising capital. 2013. “We’re all in a situation where Some are focused on tightening we’re sort of chasing the same their belts, delivering better ser- buck in Vancouver.” vice to existing clients, targeting The firm has responded by new clients in specific sectors or branching out into non-traditional expanding their reach into more areas of work, such as consulting. debt advisory and consulting “We’re being flexible in what work. Others, like those in we’re looking at in terms of new Alberta’s oil patch, are more business and where we might focused on the problem of want to go to get new business in retaining and attracting competent order to achieve our growth tar- staff. gets,” he said. “What you really need to do is With increased competition, understand your clients and the firm is also focused on you’ve got to give them high- improving the services it provides quality service and deliver con- to clients in hopes of getting sistency,” said Jerry Cukier, man- referrals. aging partner at Crowe Soberman “Competition is very steep in Toronto, a medium-sized among firms so for us to be prof- accounting firm that employs 165 industry is on the upswing and the service, and even now, more than While 2011 was a record year itable and grow we need to do people. housing market is recovering. ever, think about the client and for one of the top 10 mid-sized what we think we do best, which “You also have to go after your In the meantime, he said, firms give the client some value.” accounting firms in Vancouver, is give excellent client service.” target clients and learn what must ensure they keep an eye on In Vancouver, Larry Vicic, and 2012 had modest growth of 5 In Atlantic Canada, where they’re looking for and what keeps expenses and have the people in managing partner at Smythe per cent, Vicic said the audit many businesses are under pres- them up at night.” place to deliver services. Ratcliffe, said the sector of the sector didn’t fare as well because sure because of a slowdown in Cukier expects it will be a “We spend a lot of time accounting firm that focuses on the capital markets are very tight. exports to the U.S., small and tough year for the firm as the U.S. building the culture within our private owner-managed companies “There was very little, if any, medium-sized accounting firms economy remains soft, but he firm, finding the right people, the is holding its own, but its audit transactional work, no financings, are holding their own because believes there is light at the end of best, the brightest, and we need to sector has been affected as a result no money being raised, no capital the tunnel with signs the auto continue to deliver a high-quality of global economic conditions. being raised, and therefore that See Soft on page 18

Rank by Revenue Revenue Partners/ Professional Revenue per Number Revenue splitting Revenue 2012 change Principals Staff professional of offi ces A& A/MAS/ 2012 2011 Association / Year End / Head Offi ce (‘000s) (%) (+/-) (+/-) staff tax/other 11 DFK Canada Inc. 3 / December. 31, 2012 / Edmonton 132,469 -7.8 141 (-14) 587 (-45) 225,671 30 (-1) 54/9/24/15

22 PKF North America 4 / December 31, 2012 / Atlanta 121,190 +6.0 129 (+1) 533 (+77) 227,373 32 (-5) 65/9/20/6

3 3 BHD Association 5 / December 31, 2012 / Vancouver 81,583 +4.8 85 (-2) 358 (-3) 227,885 15 (+1) 63/12/23/2

4 4 BKR International 6 / June 30, 2012 / New York City 58,000 -1.7 49 (-4) 1075 (-95) 53,953 23 75/0/20/5

5 5 Nexia Canada 7 / December. 31, 2012 / Toronto 56,200 -2.8 48 (-5) 221 (+18) 254,299 6 66/8/24/2

6 7 PrimeGlobal 8 / May 2012 / Duluth, Minnesota 52,043 +23.7 51 (-3) 219 (+2) 237,639 5 (-2) 61/9/22/8 7 9 EPR Canada Group Inc. / Dec. 31, 2012 / Maple Ridge, B.C. 41,227 +2.1 61 244 168,963 42 (-1) 65/9/21/5

8 8 Moore Stephens International 9 / Dec. 31, 2012 / London, U.K. 40,654 -2.1 32 (-1) 171 (-31) 237,743 5 75/4/21/0

9 6 Crowe Horwath International 10 / Dec. 31, 2012 / New York City 36,192 -18.8 26 (-7) 111 (-31) 326,054 3 62/11/19/8 10 10 Porter Hetu International / September 30, 2011 / Winnipeg 34,900 +2.3 60 (-4) 153 (+2) 228,105 40 (+2) 59/9/23/9 11 11 The AC Group / October 31, 2012 / Amherst, N.S. 22,900 -3.8 39 (-3) 160 (+6) 143,125 18 (+2) 61/14/23/2

3 DFK Canada Inc. includes the fi rms of KNV Chartered Accountants (Surrey, B.C.), Kingston Ross Pasnak LLP (Edmonton), Kenway Mack Slusarchuk Stewart LLP (Calgary), Pope & Brookes LLP (Winni- peg), Davis Martindale LLP (London, Ont.), Taylor Leibow LLP (Hamilton, Ont.), Segal LLP (Toronto), Ginsberg Gluzman Fage & Levitz LLP (Ottawa), Levy Pilotte LLP (Montréal), Dallaire Forest Kirouac CA, s.e.n.c.r.l. (Québec City), Teed Saunders Doyle & Co. (Saint John, NB), WBLI Chartered Accountants (Halifax), MRSB Chartered Accountants (Charlottetown), Noseworthy Chapman Chartered Accountants (St. John’s) 4 PKF North America’s Canadian fi rms include Catalyst LLP Chartered Accountants (Calgary), Heywood Holmes & Partners LLP (Red Deer, Alta.), Kouri Berezan Heinrichs (Edmonton), Young Parkyn McNab LLP (Lethbridge, Alta.), Smythe Ratcliff e LLP (Vancouver), Walsh King LLP (Vancouver), Scarrow & Donald LLP (Winnipeg), Durward Jones Barkwell & Company LLP (St. Catharines, Ont.), Kraft Berger LLP (Markham, Ont.), NPT LLP (London, Ont.), RLB LLP (Guelph, Ont.), Fauteux, Bruno, Bussiere, Leewarden (Montreal), Virtus Group LLP (Saskatoon) 5 BHD Association fi gures include fi rms D&H Group (Vancouver); Buchanan Barry LLP (Calgary); Thomson Jaspar & Associates (Saskatoon), PKBW Group (Winnipeg); Millard Deslauriers Shoemaker LLP (Toronto); Hyatt Lassaline, LLP (Windsor); Marcil Lavallée (Ottawa); Demersbeaulne (Montreal); Choquette Corriveau (Québec City); Hilborn Ellis Grant LLP (Toronto); Nadeau Picard & Associes (Grand Falls, N.B.) 6 BKR International’s Canadian fi rms include Blanchette Vachon Comptables Agréés & Gestion-Conseil (Sainte-Marie), Lohn Caulder LLP (Vancouver), Thornton VanTassel Chartered Accountants (Perth- Andover, N.B.), Villeneuve Venne CA, S.E.N.C.R.L. (Montreal), Welch LLP (Ottawa), SF Partnership, LLP (Toronto). 7 Nexia Canada fi gures include fi rms Davidson & Company LLP (Vancouver), Zeifmans LLP (Toronto), Nexia Friedman LLP (Montreal), Perreault, Wolman, Grzywacz & Co. (Montreal) and Lyle Tilley Davidson (Halifax) 8 PrimeGlobal fi gures include the fi rms of Manning Elliott LLP (Vancouver), Clarke Henning Group (Toronto) PSB Boisjoli LLP (Montreal) and Shimmerman Penn LLP (Toronto) 9 Moore Stephens International’s Canadian fi rms include DMCL LLP (Vancouver), MSCM LLP (Toronto) and Mowbrey Gil LLP (Edmonton) 10 Crowe Horwarth International’s Canadian frims include Crowe Soberman LLP (Toronto) and Horwath HTL (Montreal) The Bottom Line April 2013 FOCUS 15

Consultancy issue boils in U.S., Canada stays cool

By GUNDI JEFFREY he thorny issue of “Although we care about this issue, there are so many accounting firms drumming Tup business through client other auditor independence issues on the table, consulting and other non-trad- itional services — and the per- particularly in Europe and the U.S.” ceived conflicts and loss of focus that that entails — has reared its Brian Hunt, Canadian Public Accountability Board head again in the United States. But in Canada, so far, it’s a which are “fairly removed from the he said. “We have to work through appear, have been creeping back back-burner issue with regulators accountant’s professional mandate those other issues first.” into services that many abandoned saying there are more pressing to perform quality audits. The Canadian Securities more than a decade ago, when matters to attend to — although at “Revenue and profit pressures Administrators is silent on the three of the Big 4 sold off their least one critic of the accounting at an accounting firm can give rise issue, and the Ontario Securities consulting practices in the face of profession believes U.S. concerns to conflicting incentives, but the Commission declined to comment. similar concerns. When Ernst & are well warranted. accountant’s obligation to the But Al Rosen, of Toronto-based Young sold its consulting practice The matter of large audit firms public trust cannot change,” he Rosen & Associates, an to Cap Gemini in 2000, for deriving more and more revenue added. independent litigation and investi- example, it said the sale “neatly from consulting services was The issue is not yet on the Can- gative accounting firm, believes closes up the conflict of interest raised at a recent symposium by HUNT adian radar screen. the growth of consultancy practices issues that the consulting side and the American Institute of CPAs. “Although we care about this in “supposed independent” aud- accounting side were inevitably “Audit fees have stagnated at, Accounting Oversight Board. issue, there are so many other aud- iting firms is “a major problem” going to face.” basically, the inflation rate. Thus “This threatens to weaken the itor independence issues on the worth examining. “Securities com- Only what is now Deloitte LLP audit practices have shrunk in com- strength of the audit practice in the table, particularly in Europe and missions and other regulatory chose to stay in the game, but the parison to audit firms’ other client firm overall.” the U.S.,” said Brian Hunt, CEO of bodies in Canada are paying little, firm declined to comment on what service lines — not all of which are Paul Beswick, chief accountant the Canadian Public Accountability if any, attention to the worsening prompted that decision and how it schooled in, or depend upon, the of the Securities and Exchange Board. Europe, for example, is trend and disturbing complaints we has played out. fundamental exercise of scepti- Commission, also observed that looking at audit-only firms, man- receive from affected corporations Now, the other large firms cism,” said James Doty, chairman firms are moving into new areas of datory auditor rotation, term limits, and individuals.” of the U.S. Public Company consultancy practice, some of expanded audit reports and more, Accounting firms, it would See Firms on page 18

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Shortage of skills plagues Western Canada

By GEOFF KIRBYSON tion, Bernakevitch says. estern Canada’s booming “I can’t think of a profession economies, a tight labour that is more exciting and with more Wmarket and unpreced- opportunities than accounting ented numbers of business owners today and into the future. We’re in search of succession plans have dealing with succession and baby created for accountants and the pro- boomers. There will always be a fession what the Twitterverse would need for financial advice and there describe as #firstworldproblems. will be a higher degree of reliance Simply put, there’s too much placed on auditors. Those things work out there and not enough create opportunities,” he says. people – in many cases, qualified “With the baby boomers turning and experienced professionals – to 65, they’re thinking about retire- do it. ment issues, needing more health “The potential for growth has care and prescriptions, golf course exceeded our hiring,” says David memberships and travel. Forty Prost, a Regina-based partner at years ago, they were having fam- Virtus Group, Saskatchewan’s lar- ilies, now they’re dealing with suc- gest independent accounting firm. cession.” “Our growth is directly tied to our One serious fly in Alberta’s people. We’re a time-based busi- ointment is the record $4-billion ness. If you don’t have people to deficit projected in the upcoming put the time in, you don’t grow.” budget, which is four times the The longstanding problem for initial projection. The uncertainty it accounting firms during the eco- will undoubtedly cause could have nomic days of wine and roses is a noticeable drag effect on the that industry lures away many of its “The potential for growth has exceeded our hiring. economy. The upcoming provincial youngest, best and brightest people election in B.C. has the potential to by dangling higher salaries. Joel Our growth is directly tied to our people. do the same, depending on what Lazer, senior partner of Winnipeg- We’re a time-based business. If you don’t have people the market thinks of the result. based Lazer Grant, says those who A black cloud that could loom jump at such opportunities are to put the time in, you don’t grow.” on the Saskatchewan horizon is guilty of short-term thinking. excessive government spending. “The really bright people will David Prost, Virtus Group Prost says the province hasn’t had a figure it out. When somebody goes good record of living within its to industry, it’s often because they Getting experienced top per- grow and we have. We find every northwestern Ontario at MNP, says means of late and that can trickle want to make $10,000 or $15,000 formers immediately involves some year that we could have hired even Alberta’s oil and gas sector con- down in the form of higher tax more per year,” said Lazer. “What aggressive recruiting, which isn’t more people and had them busy.” tinues to chug along as does agri- rates or fewer services. they don’t realize is they’re giving easy when you’re dealing with a Even though Saskatchewan has culture, both in terms of crops and “There shouldn’t be a year up higher earning potential six or scarce resource. been one of the most successful livestock. Meanwhile, the B.C. where they spend in a deficit and seven years out. The lack of bench strength provinces on so many economic economy hasn’t been as robust, but have that be the benchmark for the “The only way the guys in means that firms can have diffi- fronts over the last decade – it’s it’s showing signs of improvement following year,” he says. industry will surpass the guys in culty fitting in unanticipated work also about to introduce a second with mining and forestry per- There’s also a risk in Saskatch- public practice is if they have an on short notice. area code (639) to complement 306 forming well along with tourism ewan with an economy that ownership interest.” “If we had more senior — Prost suspects there is still some and construction. depends so heavily on a few core Then there’s the delicate balance “historical baggage” that keeps sectors, such as oil and gas, mining of telling the young generation some potential workers from con- and agriculture, that a prolonged about the exciting work that can lie sidering the province as a destina- downturn in any of them could ahead for them, without freaking tion. slam the brakes on growth. them out about the workload. Lazer That baggage has plagued Manitoba is facing the same says that while recruits will relish Manitoba for many years, too, but balanced budget challenges, par- hearing how they could take a new it’s nothing that the arrival — or in ticularly after a bill in excess of $1 service area and run with it, others this case, the return — of a billion from the 2011 flood. Its could also find that prospect a little National Hockey League couldn’t wide diversification of sectors frightening. cure. ensures that while the economy is “We come along and say: ‘Here “There are a lot of things hap- unlikely to go bust, it’s just as you go, we’ll help you.’ Our job is pening in Winnipeg, including the unlikely to boom. to help our people grow with sup- new Manitoba Hydro building, the Regardless of what’s coming, port and guidance. It’s like raising new airport terminal building and the chances are good you’ll hear your kids. If you love them with an the Canadian Museum for Human about it through social media first. open hand, they can fly, but if you Rights, but the return of the Jets [in The presence of Facebook and love them with a closed hand, it can May 2011] was a big public state- Twitter is another factor that be really difficult. (The trouble is) ment that made everybody in Win- accounting firms have to deal with loving them with an open hand is nipeg proud,” says Lazer. “People that didn’t exist a decade ago. more difficult for them,” he says. noticed Winnipeg more. As we With half of MNP’s employees LAZER Lazer says his firm has 35 PROST travelled across the country, we’d under the age of 35, dealing with people today but in the next three to hear: ‘You got your team back, way But a lot of that simply might social media in the workplace is a five years, he wants to expand by resources, we’d be able to respond to go!’ ” not matter much due to the power must, says Bernakevitch, because more than 50 per cent, to 54. more quickly,” Prost says. If that wasn’t enough to shake of demographics. Baby boomers young people communicate far dif- Unfortunately, meeting the Virtus tracks every assignment things up, consider that for the are retiring in greater numbers ferently than previous generations. people challenge isn’t as easy as it gets and it has seen the average first time in many years, the two every year and that’s only going to “Social media is part of their hiring great students from the local length of time to start a new project westernmost provinces could be increase for the next decade and a lifestyle, it’s in the DNA. You can’t universities because it takes time rise to 47 days from 44 days over looking up at their two closest half or so. lock up cellphones and have them for them to gain experience and the past couple of years. neighbours to the east from an The passing down of businesses picked up at the end of the day, develop a specialty or two, such as “We can see exactly where it’s economic point of view. from parents to children is going to that’s not the way you do business. taxation or business valuation, two coming from,” Prost says. “We hire Kelly Bernakevitch, executive transfer an enormous amount of You have to embrace it and work high-demand areas. in anticipation of being able to vice-president for the Prairies and wealth down to younger genera- with it, ” he says. The Bottom Line April 2013 FOCUS 17

Newfoundland leads way in Atlantic forecast

By DONALEE MOULTON RBC Economics predicts the n economic roller coaster province will experience a major ride is expected for Can- economic impact, thanks to a Aada’s East Coast this year, rebound in oil production and with Newfoundland and Labrador mining output. Together, they generally expected to fare better will provide “a significant one- than Nova Scotia, New Bruns- shot boost to economic growth in wick and Prince Edward Island, the coming year (4.4 per cent) — according to experts. elevating Newfoundland and “It hinges around the national Labrador to the top spot in the resources sector,” said Warren provincial growth rankings,” Jestin, chief economist with Sco- RBC reported in its most recent tiabank in Toronto. “Newfound- Provincial Outlook. land and Labrador will double or There are economic chal- more the growth rate of the other lenges, however, that will temper Maritime provinces.” the province’s fortunes. The Newfoundland is currently hit- fishery and forestry sectors con- ting a high note thanks to its nat- tinue to struggle, and the prov- ural resources, said Steve Bel- ince faces a large deficit due to a anger, a partner with BDO reduction in Atlantic Accord Canada in St. John’s. “The oil transfer payments from Ottawa. industry continues to forge ahead “This in tandem with lower oil with the development of the prices — hence royalties — pro- Hebron project, which will see vides for an interesting fiscal rig-building in Marystown and position,” said Belanger. Bull Arm. Hydro development at In Nova Scotia, hope for a Labrador’s Muskrat Falls is for- brighter economy rests with ging ahead also, with some base wages as high as $46 per hour.” See Growth on page 19

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With offices in Montreal and Toronto, Richter is continuing to grow and evolve alongside its clients. Our business, finance and accounting strategists provide industry-specific insight and expertise to entrepreneurial businesses, helping them reach new heights.

EVOLUTION OF EXCELLENCE richter.ca 18 FOCUS The Bottom Line April 2013

Firms point to demand for ‘one-stop shop’

Continued from page 15 “Securities commissions and other regulatory bodies worldwide are once more investing heavily in consulting growth and in Canada are paying little, if any, attention are acquiring a variety of non-trad- itional service providers. The same to the worsening trend and disturbing complaints has been occurring in Canada in the past year: we receive from affected corporations and individuals.” • Deloitte picked up Monitor, one of the world’s leading strategy Al Rosen, Rosen & Associates consulting firms. • KPMG acquired Plato Con- appropriate attention to their audit “Our advisory acquisitions are grow consulting is a poor one. sulting Inc. in St. John’s, the practice.” completely aligned with, and in “We are seeing the following Toronto immigration law practice But Hunt does not share these fact in certain instances directly types of court cases in our for- Greenburg Turner and Canada’s concerns. “In Canada, we have support the needs of our audit ensic accounting practice all the largest independent strategic man- very strict rules on what you can practice,” he added. For instance, time,” he says, citing “blatant agement consulting firm Secor Inc. do for an audit client and what you the firm recently acquired an actu- non-arm’s length transactions,” • BDO Canada merged with can’t. There are rules that say you arial practice that supports the merger and acquisition advice Interis Consulting Inc., which has can’t audit your own work.” audit team in dealing with the provided by the auditor, tax-plan- in-depth experience in serving ROSEN He points out that a lot of these actuarial work required to audit ning advice from the auditor, public sector and financial services services are being offered to non- insurance companies. cross-selling by auditors, “aud- clients, and Business Solutions accountants’ expanding practices audit clients and that, he believes, The acquisition of the immigra- itor-approved business, and intan- Alliance Inc., as well as acquired into areas unrelated to their pri- builds expertise for a firm when it tion law firm bolsters the work gible asset, valuations obtained Decimal Technologies Inc.’s gov- mary competencies weakens does do audits. “One of the values KPMG does for global-minded from in-house auditor-owned ernance, risk and compliance div- public trust. “I’m disheartened of having a tax department that clients. “We have a large inter- consulting practices that are ision. when I read an article in the press does tax returns and tax planning national executives services prac- grossly in excess of fair values, • MNP LLP attracted Toronto- that raises questions about the pro- for non-audit clients, the expertise tice and our clients are saying they thereby avoiding financial state- based public sector consulting firm priety of non-audit services that you pick up is a benefit when you want a one-stop shop where we ment write-downs,” and more. PSTG and Toronto real estate bou- accountants provide to their audit shift over to an audit client. If you can help them not only with the “These situations are occurring tique firm Sacks LLP. clients. … Independence is needed tell firms they cannot do the tax tax aspects of their global mobility weekly in Canada. Nobody is in both fact and appearance,” he planning or other services they needs, but also support their expat minding the oversight/regulatory “At a minimum, these trans- told the symposium. “As you all provide to non-audit clients, that executives around the world with store.” actions can raise transitional issues know, perception is reality, and would hurt the level of expertise their immigration requirements. Hunt does not agree. “When it with respect to compliance with negative perceptions can under- within a firm to really deal with Well, now we can.” comes to independence, there are a the auditor independence rules,” mine investor confidence in some of the issues encountered Brouwer stresses, though, that lot of things that people are dis- according to Beswick. “However, audits.” with audit clients.” “our audit practice is at the core of cussing today, such as firm rota- in my mind, more important is He was also concerned that Rob Brouwer, KPMG’s Can- what we are and what we do. Our tion, mandatory tendering and how the accounting firm views its expanding into businesses “that adian manager of clients and mar- leadership team is extraordinarily mandatory comprehensive reviews non-audit services practice, and have little relevance to the account- kets, says clients are demanding focused on maintaining the of auditors by the audit committee. whether this results in the ant’s primary competencies prob- these new services and strengths. strength and health of our audit If independence is the issue here, accounting firm devoting the ably does little to promote audit “We are in the client service busi- practice and staying onside of all there seems to be enough discus- appropriate resources to its audit quality, and it has the potential to ness and we are committed to independence rules. That’s a sion going on with regards to safe- and attest practice.” distract a firm’s leadership and understanding and addressing the given.” guards so that this particular issue He questioned whether other personnel from providing evolving needs of our clients. Rosen fears the decision to re- may not be a problem.” Soft U.S. economy hurting smaller firms as well

Continued from page 14 shops are getting older and Advisors, said the economy has “The limiting factor is the looking to sell or retire. remained relatively healthy due to number of young people that they’ve capitalized on the situa- Judging by the experiences of the demand for oil, while the big- choose to seek commerce degrees tion by branching out. firms in AC Group, and from gest impediment to the growth of and get into some form of the Susan McIsaac, president and hearing what those at other small and medium-sized accounting profession. If that executive officer of AC Group of accounting firms are saying, accounting firms is finding quali- number doesn’t step up, all the big Independent Accounting Firms McIsaac expects business to fied accountants. companies and accounting firms Ltd., an association of 13 smaller remain stable. He said accountants in Alberta are going after the same people.” firms in Atlantic Canada, said “I think things have been going have a slight advantage over the Smith was at a recruitment small and medium-sized firms well and things will continue to rest of Canada. Although the U.S. event last fall and some very large may have some clients that are go well. It’s a little surprising, slowdown has had an impact, the Alberta companies were looking facing challenges – in particular considering what you’re hearing oil patch was not affected like for university grads from the same those in the forestry industry, overall in the broad economy, but other parts of the country as pipe- talent pool as the accounting which exports to the U.S. The flip I’d say all of the firms are very lines and facilities still had to be firms. side is that those clients may be busy with lots of work.” maintained.“Being located in He said accounting firms can relying more on their professional McIsaac said small and Alberta, there’s a significant dif- try to fill the gap by recruiting and advisors – such as CAs – which medium-sized accounting firms ference and advantage from being hiring more people who can do creates more work. must listen to their clients to in many other spots in Canada.” specific jobs and aren’t in pro- “So there are different types of thrive in future. Because of the steady employ- grams to get their accounting work that we’re doing beyond the “If we can understand the ment, he said the biggest chal- designations, but the problem is MCISAAC compliance work. I think that’s challenges and obstacles that lenge facing small and medium- they can never take the place of a part of what’s keeping our firms they’re facing then there are estly suited to help them through sized accounting firms is ensuring real accountant. busy.” more ways we can help them the challenging times.” they have the right talent to do the “We do have a couple of tech- Another factor is demo- beyond tax compliance and In Alberta, Don Smith, man- work. The problem, he said, is that nicians but they can’t replace our graphics, with work moving to accounting compliance. If we aging director of the Edmonton many of today’s young people are articling staff on our large audits remaining firms as many practi- spend time listening to what their office of MacKay Chartered pursuing business degrees and not and we are a firm with a large per- tioners who operate smaller CA issues are then I think we’re hon- Accountants and Business accounting designations. centage of fees being from audits.” The Bottom Line April 2013 FOCUS 19

Growth estimates moderate in Maritimes

Continued from page 17 “It hinges around the national resources sector. Irving Shipbuilding’s $25-billion federal contract to construct the Newfoundland and Labrador will double or more Canadian navy’s next fleet of combat ships. The Conference the growth rate of the other Maritime provinces.” Board of Canada predicts that contract will add more than 8,000 Warren Jestin, Scotiabank people to Nova Scotia’s employ- ment rolls, and bump gross town-based accounting firm. For accounting firms on per cent this year, almost a full domestic product more than The PEI accountant believes Prince Edward Island, business percentage point higher than in $700-million annually. The the province could also benefit has been good, said Fitzpatrick, 2012 and the overall forecast for impact of the 30-year deal, how- from some business savvy — whose company has grown from the province. “But businesses in ever, will not be felt significantly starting with the young people two employees in 2008 to 25 many smaller communities in 2013. who live here. “I would like to people today. The problem is struggle,” said Withers, “and no While GDP for 2013 will one knows this better than their bounce back somewhat from accountants.” 2012, it is predicted to hit only “I would like to see growth in For accountants in Newfound- 1.5 per cent “at most,” said Jestin. entrepreneurial individuals coming land and Labrador, the roller However, he said, “Nova Scotia’s coaster ride is more lucrative future is brighter post-2013.” out of high school and university.” and pleasurable than it has been JESTIN New Brunswick struggled in many years. economically in 2012 but things Gerard Fitzpatrick, Fitzpatrick & Co. “By and large, profitable stopped going to pick up a mor- are looking up, if only slightly, companies are far more preva- ning coffee on my way to work for this year. RBC predicts that as lent than was the case 10 years because of the number of vacant the U.S. economy gains see growth in entrepreneurial collections, he said. ago,” said Belanger. “After the and closed-up businesses. That momentum, the province’s export individuals coming out of high “The demand is the same or cod moratorium, which was over is no longer the case. Now, the sector will reap the benefits and school and university,” he said. higher. The question is whether 20 years ago, I never thought we downtown commercial sector is contribute to a faster pace of That’s essential for the entire you’re going to get paid to do would ever recover. In fact, I flourishing in every regard.” expansion. That pace will still be region, said Jestin. “You need [the work]. The receivables issue moderate, however, at a fore- more entrepreneurial industries. is significant.” casted 1.7-per-cent growth. That hasn’t tended to be the cul- There are few options to Some areas of the province are ture in Atlantic Canada.” address the situation, he added. gaining momentum. Moncton, Instead of looking inside to “We’re trying to work with Halifax weathers storm the province’s largest city, is its own resources for economic people as best we can. That’s all expected to break into the top 10 metropolitan economies in and enhances profile Canada by economic growth this “By and large, profitable companies year, with real GDP expected to increase by 2.5 per cent. Its pace are far more prevalent than was ne gem in Nova Scotia’s turmoil and have moved back will actually put it slightly ahead the case 10 years ago.” economic crown is into growth mode,” said Stephen of Halifax and St. John’s Ofinancial services. The Lund, president and CEO of according to Conference Board Steve Belanger, BDO Canada sector has been a focal point for Nova Scotia Business Inc., the of Canada’s Metropolitan Out- the government, and today province’s business development look. accounts for 5 per cent of gross arm. Prince Edward Island is also domestic product – more than That growth is being pro- gaining some economic energy. fishing, farming and forestry pelled by a growing inter- RBC predicts 1.8 per cent real combined. national reputation, Lund said. GDP growth in 2013, an increase While the recession took a “There’s a lot more knowledge from both 2012 and 2011. toll on the financial services about what’s going on in “Exports continue to perform sector, firms in Nova Scotia Halifax. Our reputation as a well, up 25 per cent year-over- weathered the storm. “Of the financial centre has started to be year through October [2012], led companies that came here, all recognized globally.” by a surge in aerospace ship- stayed here. They survived the • Donalee Moulton ments,” said Robert Kavcic, senior economist with BMO Capital Markets in Toronto. “The province also recently Getting older, announced that the Aerospace Tax Rebate Program for com- panies maintaining 20 employees on a payroll in excess of getting smarter $700,000 a year will be extended for another 10 years.” FITZPATRICK BELANGER tlantic Canada’s aging and skilled workers, govern- Businesses in PEI will have talent pool poses sig- ments will scramble to replace received a boost with the arrival strength, the region has tended you can do.” Anificant problems for shrinking tax revenues, and the of the 14-per-cent harmonized to rely on the traditional north- Nova Scotia’s rural commun- local economies. Nova Scotia, health care system will fight to sales tax on April 1. The blended south trade routes for its long- ities are also struggling, said Ted for example, now has the keep from buckling under tax is expected to lower the cost term success, and the lure of big Withers, a chartered accountant highest percentage of seniors – increasing demands for ser- of doing business and that, in business has proved irresistible in Windsor, N.S. “For many more than 16 per cent in 2011. vices. turn, should help companies – and unfortunate. small businesses, the road to Newfoundland and Labrador is The region, said Scotia- expand and offer more competi- “That is not the source of recovery has been difficult.” expected to surpass its East bank’s chief economist Warren tive prices. prosperity for Atlantic Canada There is often a marked dif- Coast neighbour and take over Jestin, “will need to look for “From a business perspective, and Canada in the future. At the ference between Halifax and the first spot by 2036. market niches that have not the HST will be strong,” said end of the day, strength lies in rest of the province. Real gross In the meantime, businesses been exploited.” Gerard Fitzpatrick, co-owner of [the region’s] human capital,” domestic product for the capital will struggle to find qualified • Donalee Moulton Fitzpatrick & Co., a Charlotte- said Jestin. city is expected to improve 2.3 20 FOCUS The Bottom Line April 2013

Mix of caution, optimism guides firms

Continued from page 11 to dramatically increase the 2014. The same applies to com- ceived to be plaguing the audit what the boards describe as “audit number of staff that handle panies using private entity GAAP arena. Three papers released in failures.” explains that “we continue to transfer pricing in recent years, and planning to go public.” late 2012 and early 2013 rejected CPAB CEO Brian Hunt says innovate and expand our current and we expect this trend to con- In any case, Vettese says, mandatory auditor rotation and that, in Canada, it’s not bad aud- services to take advantage of tinue for the foreseeable future,” “many of our clients are still on a tendering, along with other more iting as much as “consistency of demand from companies for value he says. learning curve with IFRS. It’s a draconian measures. Instead, they execution in the audits. That’s and a new experience. This is the Henry at E&Y adds that a complex framework that is still proposed that audit committees where firms should focus their primary reason why our advisory number of U.S.-based regulations undergoing significant changes to perform mandatory comprehen- attention.” services grew by approximately are also of significant concern to core standards. Our clients con- sive audit firm reviews every five Audit quality in Canada is 26 per cent in 2012.” Canadian financial services tinue to look to us to help them years, and then publicly disclose high, observes Daryl Ritchie, Under current economic condi- clients with U.S. operations. The navigate this new territory, both their justification for retaining or CEO of MNP LLP. “The regula- tions, “clients seek to reduce Foreign Account Tax Compliance for new standards and also to help replacing their auditors. tors continue to raise the bar. We expenses by cancelling or delaying must ensure that we perform non-essential administrative activ- audits an the highest quality at all ities resulting in a reduction in the “Although Canada weathered the recession well times.” quantity of special assurance work What is not communicated that is typically performed,” says and emerged relatively healthy, there was an atmosphere often enough, adds Noble, “is the Keith Farlinger, CEO of BDO of intense caution in the business environment. significant progress that has been Canada. “So, over the last few achieved in audit quality in years, our focus has been on For much of the year, it felt as though Canadian Canada over the past number of expanding our existing business years. This is as a result of the lines and building depth. Recently, business was waiting to exhale.” efforts of both the regulator, our clients have been seeking CPAB, and the audit firms advice on streamlining their Frank Vettese, Deloitte working in a collaborative manner. organizations as they look to We all share the same goal of operate more efficiently and cost Act, for example, which comes them assess how IFRS will impact “The end objective is to improving the quality of audit in effectively. We have also seen into full effect in 2014, makes new and/or complex transactions.” enhance audit quality,” Vettese Canada.” growth in our risk advisory ser- substantial changes to information While advisory services are points out, “and Deloitte has been The economic outlook for 2013 vices as clients tend to cautiously reporting and compliance require- booming, audit and assurance ser- actively engaged with other firms continues to be full of uncertainty. plot their growth.” ments for offshore accounts. “We vices are not. “We continue to in Canada in that joint initiative … “Some of the fundamentals One opportunity for growth have been working closely with experience significant pricing We believe transparency is funda- that plagued us for the last five last year was what Thomas our clients to help them navigate pressure in our audit and assur- mental to protecting the interests months of 2012 continue into the describes as Canada Revenue important issues and business ance practice,” says Noble, “which of shareholders and to continuing current year,” says Thomas. Authority’s “new way of doing decisions in preparation.” has limited somewhat our organic to build strong capital markets in “Clarity needs to be provided business.” Large taxpayers are As well, he says, the 2010 growth success in that area.” Canada – an important role we around the U.S. economy in a being graded as low, medium or Dodd-Frank Wall Street Reform “The competitive landscape play in this country. Forging ahead post-election environment, Europe high risk, and C-suite executives and Consumer Protection Act con- continues to be challenging,” with new perspectives will lead to needs to systematically deal with are being asked to meet with tinues to affect the financial ser- agrees Farlinger. “With fewer positive cultural changes in our its debt issues and China’s new senior CRA officials to discuss vices sector, “with new and businesses seeking to change firm, which will positively impact regime needs to provide the neces- this process, with a particular updated regulations happening all accounting firms, the market our role as independent auditor.” sary stimulus to kick-start that focus on executive governance the time.” becomes more congested. This Certain of the alternatives economy again.” and oversight of tax matters, he Adds Noble: “Competing suc- says. “It can be increasingly diffi- “The competitive landscape continues to be challenging. cessfully in our highly competi- cult for entities facing a shrinking tive marketplace while simultan- head count to manage the CRA With fewer businesses seeking to change accounting firms, eously coping with the rapid pace relationship. It is, however, vital to of professional change, particu- engage effectively with CRA to the market becomes more congested.” larly within the assurance prac- minimize risks and achieve tice, are the primary issues favourable outcomes.” Keith Farlinger, BDO Canada driving 2013.” This initiative prompted the That competition is about to firms to launch services such as Even though Canada transi- has resulted in some firms being considered, such as a man- get hotter. Collins Barrow tax controversy management and tioned to international financial reducing their audit fees, which datory comprehensive review of National Co-operative, which tax dispute resolution, which are reporting standards at the begin- has a negative impact on the the external auditor, says Henry, ranks No. 8 in this year’s Top 30, thriving. “Tax growth was par- ning of 2011, this area still offers bottom line for all firms.” “provide different perspectives to has embarked on an ambitious tially due to governments being opportunities for growth. The But beyond competition, aud- other global initiatives, which we growth strategy that will launch it more aggressive in collecting IASB and FASB are completing itors are facing increasing regula- believe gives a more balanced per- into “a period of unsurpassed taxes,” says McFarland. “Many convergence projects on financial tory pressure for reforming the spective to improving audit quality growth, both organically and companies now face the most instruments, revenue recognition, audit market. While most of the overall.” through regional firm recruit- challenging tax environment they leases and insurance, which will harsher proposals for change came McFarland adds that “coming ment,” says Harry Blum, national have ever known. Governments result in standards in the near out of Europe, Britain and the up with a Canadian solution also chair of member firm recruit- have big deficits and are looking future. As well, the IASB has United States — with mandatory gives us a strong voice at the ment. to increase their tax revenues. So, released standards on consolida- auditor rotation, term limits, man- global standard-setting table.” The campaign focuses on we have strengthened our services tions, joint ventures and fair value datory tendering, audit-only Not only are some new regula- attracting full-service audit and in this area, by recruiting former disclosures that Canadian public firms, and increased auditor tions bound to change the way tax firms that have achieved Top CRA officials and experts, companies must implement this reporting being just some of the auditors conduct their business, 10 status within their local including lawyers, to assist our year. According to Thomas, “Can- proposals on the table — Canada but audit quality has been under marketplace, Blum explains. clients manage tax controversy adian issuers will again be faced has floated some more middle-of- fire. The OSC and CPAB released “Our partners and professionals and dispute resolution.” with changing standards in the the-road approaches. reports last year dunning, in par- take a spread-the-wealth Farlinger says transfer pricing, coming years, some of which may Last summer, the Canadian ticular, the work of Canadian aud- approach to business, working in particular, was one of the most raise significant implementation Institute of Chartered Accountants itors in emerging countries, espe- together to maximize expertise controversial international tax and reporting concerns in the near and the Canadian Public Account- cially China. And the 2012 public on hand at each of our member issues, as tax authorities seek future.” ability Board jointly launched the inspection reports of CPAB and firms. This being the case, we are more sources of revenue, giving And there will be opportunities Enhancing Audit Quality project, the U.S. Public Company interested in firms with entrepre- rise to more transfer pricing to work with clients that haven’t to sift through the various ideas Accounting Oversight Board — neurial cultures and mindsets audits. This has led to a signifi- converted yet, Henry adds, such as and proposals released elsewhere which inspects audits of SEC- much like our own, which stand cant area of growth for accounting investment entities. “Their and devise some made-in-Canada listed Canadian companies — to gain from Collins Barrow’s and advisory firms. “We have had changeover date is January 1, solutions to the problems per- turned up an increasing number of national presence.”