George J. Murphy UNIVERSITY OF SASKATCHEWAN
SOME ASPECTS OF AUDITING EVOLUTION IN CANADA
Abstract: A chronology of significant changes in Canadian auditing legislation, pronouncements and practices, from the late nineteenth century to the present, reveals the strong influence of English and American sources. The evolution of mandatory audits, of profit and loss audits, and of the wording of the standard audit report demonstrates these influences.
The sources of influence that have shaped auditing in Canada are an interesting interplay of English and American influence acting upon, and together with, the unique elements of the Canadian scene. The English influence is felt largely in the tradition of legislation found in the Canadian Companies Acts that have prescribed the role of the auditor. The American influence is felt through the proximity and pronouncements of the American Institute of Certified Public Accountants. The uniquely Canadian influence is manifested through the recommendations and pronouncements of the Institutes of Chartered Accountants, the various income tax acts, and the business and financial critics responding to corporate reporting in-adequacies and business failures.
This paper will attempt to chronicle the changes that have taken place over time and to indicate, where possible, the sources of that influence. Attention is directed to the Canadian federal legislation and its forerunner in the province of Ontario. The aspects of auditing which are studied and which it is hoped will be illustrative of the in-fluences are the evolution of the legislation that made audits man-datory, including the profit and loss (income statement) audit, and the evolution of the content of the auditor's standard report. The study begins with the Canadian legislation of the late nineteenth century and ends in the 1970s with the latest changes in the stan-dard audit report. Evidence of the background and processes that have influenced change are obtained from the various incorporating statutes, debates of the House of Commons and the Senate that relate to incorporating legislation, committee reports—together
The author appreciates the helpful comments of his colleagues, Professors V. B. Irvine and R. Long.