Canada's New Accounting Rules
While Congress continues to debate how to make sure that accounting is more accountable, Canada last week passed tough new accounting rules for corporations and auditing firms.

The new Canadian Public Accountability Board (CPAB) will review the country's six major auditing firms each year and impose sanctions when companies fail to comply. In addition, the auditing firms must adopt much tougher standards for auditor independence and consult fully on difficult, sensitive, or contentious issues, according to Reuters.

The new rules also require more frequent and rigorous inspections of corporations, regular rotation of lead auditors, and demands that a second partner review every audit, according to the report.

.Canada's major auditors agreed to meet the new rules on a voluntary basis, beginning this October, when the CPAB officially begins operation. The board will take over supervision of all of Canada's auditors by 2005, however.

The board will have 11 members, including seven from outside the accounting profession.

"The new oversight body is not controlled by the (chartered accounting) profession," said David Brown, head of the Ontario Securities Commission, according to Reuters. "The new system is based on independent, public oversight, tougher practice inspection and more rigorous quality control mechanisms."

Short Takes

• High-yield mutual funds saw an outflow of about $242 million in the week ended July 17, the sixth consecutive week of outflows, according to AMG Data Services. Since the week ending June 12, about $1.56 billion has come out of the high-yield mutual funds.
  
  

• SEC Chairman Harvey Pitt Friday night told Fox News Channel that the Commission plans to propose a new rule that would prohibit audit partners at companies from receiving compensation for selling non-audit services to audit clients. "We are going to propose a rule that says that no individual engagement partner, audit partner, can be compensated for cross-selling services other than the audit to his audit clients," Pitt said. "What happens now is -- if you're an engagement partner and you can get an extra $25,000 or $50,000 for bringing in more business that's not audit related, that may cause you to lose your focus. We're not willing to accept that."
  
  

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