www.lexisnexis.ca Vol. 30, No. 14 November 2014
This Issue:

Want to learn more about this issue?

Selected Focus

CSA moves to change hostile takeover regime

The Canadian Securities Administrators will issue a proposal to give the boards of companies that become the targets of perceived hostile takeovers at least twice as long to develop a strategic response, such as conducting an auction, seeking alternative bids to maximize shareholder value, or negotiating with the bidder.

Although this potentially increases the board’s options, there are no guarantees the target company won’t ultimately be sold to bidders management views as hostile. And there are differing views on whether business competitiveness could be affected.

"We have worked to develop a harmonized takeover bid regime for all Canadian jurisdictions and have been successful in achieving national agreement," said Bill Rice, chair of the CSA and chief executive officer of the Alberta Securities Commission.

Enhanced audit testing sparking heated reaction

KPMG in the U.K. is testing new audit reportage that goes beyond what is mandated in that country, a move that is generating much attention around the world — and strong opinions positive and negative.

KPMG’s Restoring Trust paper not only reports on corporate risks and the firm’s audit responses to those risks — as mandated by new rules from the U.K.’s Financial Reporting Council (FRC) —it also reports on its audit finding about those risks. The firm’s poster child for its new disclosures is client Rolls-Royce, whose latest audit report on the 2013 fiscal year earned plaudits including "best practice" acclaim by investor group Citi Equity Research.

"This is one of the most refreshing results to come out of the audit standard-setting process for a long time in terms of investor and user interest," says Matt Waldron, director of financial reporting policy at the CFA Institute.

EY settles audit cases with OSC

Ernst & Young and the Ontario Securities Commission have reached an $8 million settlement agreement following the commission’s allegations that EY’s Canadian office failed to conduct its financial statement audits of Sino-Forest and Zungui Haixi in accordance with generally accepted auditing standards.

In agreeing to the settlement, EY Canada neither admitted nor denied the OSC allegations, which cover events related to the audit of Sino-Forest’s financial statements between 2007 and 2010 inclusive, and Zungui’s initial public offering in December 2009 and its 2010 financial statements.

EY Canada earlier agreed to settle class action lawsuits in relation to the audits by paying $119 million [$117 million for Sino-Forest and $2 million for Zungui] to the companies’ shareholders and noteholders.

Pressure on firms in U.S. over retirement

The U.S. Equal Employment Opportunity Commission (EEOC) has been pressing Deloitte and other major accounting firms to drop their longstanding mandatory retirement policies. Both the firms themselves and the American Institute of CPAs are asking the EEOC to stop.

In Canada, mandatory retirement for employees has been a thing of the past since 2006, although accounting, legal and other partnerships do have the right to make contractual arrangements with their partners that have them retire at a certain age. And that doesn’t sit well with some members of the accounting profession.

The latest salvo from the EEOC was directed at Deloitte LLP, beginning in 2010, as explained by the firm’s legal counsel William Lloyd when he testified during a congressional hearing on Sept. 19 in which U.S. lawmakers considered reining in various EEOC practices.

Subscribe Today!