Update On Auditing The Audit

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 with very limited exceptions (namely, non-reporting issuer status and unanimous consent). While the public policy rationale behind the rule may be laudable, its implementation in practice can be austere. As previously written in Auditing the Audit, it is time to revisit the universal audit requirement as it applies to non-distributing corporations.

The Canada Business Corporations Act (and most of 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, case law there