Institute Of Chartered Accountants Of Ontario

Institute Of Chartered Accountants Of Ontario

September 18, 2007 12:28 ET

CAs Put Legal Liability Reform "On the Radar" at Financial Services Debate

A serious issue, candidates say

TORONTO, ONTARIO--(Marketwire - Sept. 18, 2007) - Candidates from all three major Ontario parties agreed that legal liability reform is a topic that needs to be examined when the issue was raised at today's All Candidates Debate on financial services. Sponsored by the Toronto Financial Services Alliance (TFSA), the debate allowed each party to present its views on issues of pressing concern to the financial services sector.

"Legal liability reform is a huge question and one that calls for dialogue," said the Hon. Greg Sorbara, Minister of Finance and Liberal MPP for Vaughan-King-Aurora. "That dialogue will be based on balancing the competing interests of consumers and business interests."

Ontario's outdated liability regime threatens the province's competitive edge because of the higher risks involved in doing essential audit and assurance work here. Today, under the current joint and several liability system, even if an auditor is judged to be only one per cent responsible for a financial loss owing to error, the auditor can be made to pay the full 100 per cent share of damages.

"This is a important question and one that needs to be looked at," said Rick Byers, the Progressive Conservative candidate for Oakville. "It is not only important for accounting firms but for the businesses that need the confidence that they'll be able to get their needs serviced. Competing jurisdictions are looking at this issue and, of course, we'll work with the industry on this issue."

"The issue of the need for legal liability reform is one that affects not just the accounting profession," said Julian Heller, a lawyer running for the New Democratic Party in St. Paul's. He noted other professions also face litigation risks tied to legal liability.

The impact of the current state of auditor liability in Ontario has meant:

- It is harder for Ontario-based audit firms to attract and retain the top talent needed to keep the province competitive

- Firms both large and small are being driven out of the audit and assurance services market because of skyrocketing insurance costs and exposure to disproportionate liability

- Access to vital audit and assurance services for enterprises of all sizes is becoming more expensive or unavailable and, as a result

- Companies are being deprived of the investment capital they need to grow, compete and create jobs

The last point is critical to Ontario's overall competitiveness: When auditors cannot sign off on a company's financial statements or business deals, the impact takes the form of competitive opportunities missed, lost investment, jobs not created and, in some cases, business failure.

While Ontario has delayed examining the impact of its out-of-date legal environment, sound policy changes have already been made in many U.S. states, with progress also rapidly being made in the United Kingdom, European Union and Australia. Many are considering or have adopted proportionate liability, where responsibility for a financial loss is apportioned according to the extent of an individual party's responsibility for that loss. The Province of Ontario must now make the strategic policy changes needed to remain competitive with the global leaders in liability reform.

"We thank the Toronto Financial Services Alliance for organizing this very important debate and for enabling us to highlight this crucial competitive issue that is affecting the business community in our province," said Peter Varley, Vice-President Public Affairs with the Institute of Chartered Accountants of Ontario. "Auditors expect to be held responsible for their work, but can no longer afford to be the de facto insurers of Ontario's capital markets. We look forward to working with the Government of Ontario on the issue of legal liability reform after the upcoming election."

The Institute website is: www.icao.on.ca and information on this issue can be found by clicking on "Legal Liability Reform."

About the Institute of Chartered Accountants of Ontario:

The Institute of Chartered Accountants of Ontario is the qualifying and regulatory body of Ontario's more than 32,000 CAs and 4,000 CA students. Since 1879, the Institute has protected the public interest through the CA profession's high standards of qualification and the enforcement of its rules of professional conduct. Recognized internationally, the CA designation denotes financial expertise, strategic thinking, business insight and leadership.

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