52-103 - Change of Auditor [NI Proposed - Lapsed]
| Published Date: | 1998-05-29 |
|---|
NATIONAL INSTRUMENT 52-103
CHANGE OF AUDITOR1
1 This proposed National Instrument is derived from National Policy Statement No. 31 ("NP 31") and is expected to be adopted as a rule in each of British Columbia, Alberta, Ontario and Nova Scotia, as a Commission regulation in Saskatchewan and as a policy in each of the other jurisdictions represented by the CSA.
PART 1 DEFINITIONS AND APPLICATION2
2 A national definition instrument has been adopted as National Instrument 14-101 Definitions. It contains definitions of certain terms used in more than one national instrument. National Instrument 14-101 also provides that a term used in a national instrument and defined in the statute relating to securities of the applicable jurisdiction, the definition of which is not restricted to a specific portion of the statute, will have the meaning given to it in that statute, unless the context otherwise requires. National Instrument 14-101 also provides that a provision or a reference within a provision of a national instrument that specifically refers by name to a jurisdiction, other than the local jurisdiction, shall not have any effect in the local jurisdiction, unless otherwise stated in the provision.
1.1 Definitions - In this Instrument
"appointment" means, in relation to an issuer, the earlier to occur of
(a) the appointment as its auditor of a different person or company than its former auditor, and
(b) a proposal by the issuer to holders of eligible securities to appoint as its auditor a different person or company than its former auditor;
"appointment date" means the date on which the appointment of an issuer's successor auditor occurs;
"consultation" means advice provided, whether or not in writing, to an issuer during the relevant period by a person or company that becomes an issuer's successor auditor concerning
(a) the application of accounting principles or policies to any transaction, whether or not completed,
(b) the audit report that might be provided on the issuer's financial statements,
(c) a matter of audit scope or procedure,
(d) a matter of financial statement disclosure, or
(e) a disagreement;
"disagreement" means
(a) a difference of opinion occurring at any time between an issuer and its former auditor that
(i) resulted in a reservation in the former auditor's report on the issuer's financial statements for any time or period during or after the relevant period, or
(ii) would have resulted in a reservation in the former auditor's report on the issuer's financial statements for any period during or after the relevant period if the difference of opinion had not been resolved to the former auditor's satisfaction,
in either case excluding any difference of opinion based on incomplete or preliminary information that is resolved to the satisfaction of the former auditor upon the receipt of further information, or
(b) the former auditor advised the issuer of a matter that, in the former auditor's opinion, had or could have had a material effect, as determined in accordance with paragraph 1000.17 of the Handbook3,
3 The term Handbook is defined in National Instrument 14-101 Definitions. The definition is "the Handbook of the Canadian Institute of Chartered Accountants, as amended from time to time". Paragraph 1000.17 of the Handbook discusses the determination of materiality.
on the issuer's financial statements for any time or period during or after the relevant period or on the former auditor's report on any of those financial statements, and
(i) the former auditor was no longer willing to be associated with any of those financial statements, or
(ii) the matter was not resolved to the former auditor's satisfaction before the former auditor's termination;
"eligible securities" means, for an issuer, securities that carry the right to participate in the appointment or removal of the issuer's auditor;
"former auditor" means the auditor of an issuer that is the subject of the most recent termination;
"issuer" means
(a) a reporting issuer, and
(b) despite paragraph (a), in Quebec means a reporting issuer and any other issuer that is required to file audited annual financial statements as a result of filing an offering memorandum;
"relevant information circular" means,
(a) if an issuer's constating documents or applicable law require holders of eligible securities to take action in order to remove the issuer's auditor or to appoint a successor auditor,
(i) the information circular required to accompany or form part of every notice of meeting at which that action is proposed to be taken, or
(ii) the disclosure document accompanying the text of the written resolution provided to holders of eligible securities, or
(b) if paragraph (a) does not apply, the information circular required to accompany or form part of the first notice of meeting to be sent to holders of eligible securities following the preparation of a reporting package concerning a termination;
"relevant period" means
(a) the two most recently completed financial years of an issuer, and
(b) any period after the period referred to in paragraph (a) and before the termination date;
"reportable event" means a disagreement or a consultation;
"reporting package" means the documents referred to in paragraphs 2.1(a) and (c), the letter received by the issuer pursuant to the request referred to in paragraph 2.1(b) and, to the extent received, the letter received by the issuer pursuant to the request referred to in paragraph 2.2(b);
"resignation" means circumstances in which an issuer's auditor has informed the issuer that the auditor has resigned or is declining to stand for re-appointment;
"successor auditor" means the person or company appointed or proposed by the issuer to be appointed as an issuer's auditor after the termination of the issuer's former auditor;
"termination" means, in relation to an issuer, the earliest to occur of
(a) the resignation of its auditor,
(b) the removal of its auditor before the expiration of the auditor's term of appointment, the expiration of its auditor's term of appointment without reappointment, or the appointment of a different person or company as its auditor upon expiration of its auditor's term of appointment, and
(c) a proposal by the issuer to holders of its eligible securities that its auditor be removed before, or that a different person or company be appointed as its auditor upon, the expiration of its auditor's term of appointment; and
"termination date" means the date on which the termination of an issuer's auditor occurs.
1.2 Application - This Instrument applies to a change of auditor of an issuer, unless the change of auditor is required by the legislation under which the issuer exists or carries on its activities.
PART 2 CHANGE OF AUDITOR DISCLOSURE
2.1 Disclosure of Termination - Upon a termination of its auditor, an issuer shall
(a) within 10 days after the termination date, prepare a change of auditor notice in accordance with section 2.3 and deliver a copy of it to the former auditor;
(b) within 10 days after the termination date, make the request of the former auditor specified in section 2.4;
(c) within 30 days after the termination date, obtain from the audit committee of its board of directors or, in the absence of such a committee, its board of directors, written confirmation that the committee or board, as the case may be, has reviewed the change of auditor notice and any auditor response;
(d) within 30 days after the termination date, file a copy of the reporting package;
(e) within 30 days after the termination date, deliver a copy of the reporting package to the former auditor;
(f) within 30 days after the termination date, if there are any reportable events, issue and file a news release describing the information in the reporting package; and
(g) include in each relevant information circular
(i) a copy of the reporting package as an appendix, and
(ii) a summary of the contents of the reporting package with a cross-reference to the appendix.
2.2 Disclosure of Appointment - Upon an appointment of a successor auditor, an issuer shall
(a) within 10 days after the appointment date, deliver a copy of the change of auditor notice prepared in accordance with section 2.3 to the successor auditor;
(b) within 10 days after the appointment date, make the request of the successor auditor specified in section 2.5;
(c) within 30 days after the appointment date, file a copy of the reporting package including the letter received by the issuer pursuant to the request referred to in paragraph (b);
(d) within 30 days after the appointment date, deliver a copy of the reporting package to the successor auditor; and
(e) within 30 days after the appointment date, if there are any reportable events, issue and file a news release disclosing the appointment of the successor auditor.
2.3 Change of Auditor Notice
(1) A change of auditor notice shall disclose
(a) the termination date;
(b) whether the former auditor
(i) resigned or declined to stand for reappointment of the former auditor's own initiative or at the issuer's request,
(ii) was removed or is proposed to be removed during the former auditor's current term of appointment, or
(iii) was not reappointed or is proposed not to be reappointed;
(c) whether the termination of the former auditor and any appointment of the successor auditor were considered or approved by the audit committee of the issuer's board of directors or the issuer's board of directors;
(d) whether the former auditor's report on any of the issuer's financial statements relating to the relevant period contained any reservation and, if so, a description of each reservation;
(e) whether there were any reportable events and, if so
(i) for disagreements,
(A) a description of the disagreement,
(B) whether any audit committee of the issuer's board of directors or the issuer's board of directors discussed the disagreement with the former auditor, and
(C) whether the issuer authorized the former auditor to respond fully to inquiries by any successor auditor concerning the disagreement and, if not, a description of the nature of any limitation and the reasons for it; and
(ii) for consultations,
(A) a description of the issue that was the subject of a consultation,
(B) a summary of the successor auditor's advice provided to the issuer concerning the issue, and
(C) whether the issuer consulted with the former auditor concerning the issue and, if so, a summary of the former auditor's advice concerning the issue; and
(f) if, in the issuer's opinion, there were no reportable events, a statement to that effect.
(2) A change of auditor notice shall be signed on behalf of the board of directors of the issuer by any two directors authorized to sign.
2.4 Former Auditor's Letter
(1) An issuer shall request the former auditor to
(a) review the issuer's change of auditor notice;
(b) prepare a letter in accordance with subsection (2); and
(c) deliver that letter to the issuer and a copy of the letter to the successor auditor within 20 days after the termination date.
(2) The former auditor's letter shall
(a) be addressed to the securities regulatory authority;4 and
4 The term "securities regulatory authority" is defined in National Instrument 14-101 Definitions as meaning, for a local jurisdiction, the securities commission or similar regulatory authority set out in an appendix to that instrument opposite the name of the local jurisdiction. The term "local jurisdiction" is defined in National Instrument 14-101 Definitions. The definition is "in a national instrument adopted or made by a Canadian securities regulatory authority, the jurisdiction in which the Canadian securities regulatory authority is situate". The term "Canadian securities regulatory authorities" is defined in National Instrument 14-101 Definitions as meaning the securities commissions or similar regulatory authorities set out in an appendix to that instrument. The term "jurisdiction" is defined in National Instrument 14-101 Definitions as meaning a province or territory of Canada, except when used in the term foreign jurisdiction.
(b) state, to the former auditor's knowledge, whether or not the change of auditor notice states correctly all information required under subsection 2.3(1) and if not, the information required under subsection 2.3(1) that has not been stated correctly.
2.5 Successor Auditor's Letter
(1) An issuer shall request the successor auditor to
(a) review the issuer's change of auditor notice;
(b) prepare a letter in accordance with subsection (2); and
(c) deliver that letter to the issuer and a copy of the letter to the former auditor within 20 days after the appointment date.
(2) The successor auditor's letter shall
(a) be addressed to the securities regulatory authority; and
(b) state, to the successor auditor's knowledge, whether or not the change of auditor notice states correctly all information required under subsection 2.3(1) and if not, the information required under subsection 2.3(1) that has not been stated correctly.
PART 3 EXEMPTION
3.1 Prior Disclosure - An issuer is not required to comply with Part 2 if
(a) a termination and appointment occur in connection with an amalgamation, arrangement, take-over bid or similar transaction involving the issuer or a reorganization of the business of the issuer;
(b) the termination and appointment have been disclosed in a news release that has been filed or in a disclosure document that has been delivered to securityholders and filed; and
(c) no reportable event has occurred.
3.2 SEC Registrants - An issuer that has either securities registered under section 12, or a reporting obligation under section 15(d), of the 1934 Act is not subject to the requirements of Part 2 if it
(a) complies with the requirements of item 304 of regulation S-K made under the 1933 Act and the 1934 Act; and
(b) files the same information that is provided to the SEC, not later than when the information is provided to the SEC.5
5 The term "SEC" is defined in National Instrument 14-101 Definitions. The definition is "the Securities and Exchange Commission of the United States of America". The term "1933 Act" is defined in National Instrument 14-101 Definitions. The definition is "the Securities Act of 1933 of the United States of America". The term "1934 Act" is defined in National Instrument 14-101 Definitions. The definition is "the Securities Exchange Act of 1934 of the United States of America".
3.3 Exemption
(1) The regulator6
6 The term "regulator" is defined in National Instrument 14-101 Definitions as meaning, in a local jurisdiction, the person set out in an appendix to that instrument opposite the name of the local jurisdiction.
or the securities regulatory authority may grant an exemption to this Instrument, in whole or in part, subject to such conditions or restrictions as may be imposed in the exemption.
(2) Despite subsection (1), in Ontario only the regulator may grant such an exemption.
PART 4 EFFECTIVE DATE
4.1 Effective Date - This National Instrument comes into force on , 1998.