Auditing The Audit

This article originally published in the March 2010 issue of Canadian Lawyer Magazine

Most jurisdictions in Canada require the unanimous consent of all shareholders, including non-voting shareholders, in order for a non-distributing corporation to dispense with an audit. The requirement is absolute and mandatory – there are no other exemptions or qualifications. The public policy rationale behind the rule is laudable; however, the implementation in practice can be austere. It is time to revisit the universal audit requirement as it applies to non-distributing corporations.

The Canada Business Corporations Act, and its provincial counterparts, generally provides that shareholders of non-distributing corporations may resolve not to appoint an auditor provided that such resolution is consented to by all shareholders, including shareholders not otherwise entitled to vote. Although the Companies Act of Prince Edward Island is silent on point, it does stipulate however