Securities Law & Instruments

Headnote

Multilateral Instrument 11-102 Passport System and National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions -- exemption granted from the requirement in section 2.1 of National Instrument 52-108 Auditor Oversight for a public accounting firm that prepares an auditor's report with respect to the financial statements of a designated foreign issuer to be, as of the date of the auditor's report, (a) a participating audit firm, and (b) in compliance with any restrictions or sanctions imposed by the Canadian Public Accountability Board -- the auditor is subject to substantially similar oversight in the United Kingdom.

Applicable Legislative Provisions

National Instrument 52-108 Auditor Oversight.

Citation: KPMG Audit plc, Re, 2009 ABASC 115

March 17, 2009

IN THE MATTER OF

THE SECURITIES LEGISLATION OF

ALBERTA AND ONTARIO

(THE JURISDICTIONS)

AND

IN THE MATTER OF

THE PROCESS FOR EXEMPTIVE RELIEF

APPLICATIONS IN MULTIPLE JURISDICTIONS

AND

IN THE MATTER OF

KPMG AUDIT PLC

(THE FILER)

 

DECISION

Background

The securities regulatory authority or regulator in each of the Jurisdictions (Decision Maker) has received an application from the Filer for a decision under the securities legislation of the Jurisdictions (the Legislation) exempting the Filer from the requirement in section 2.1 of the National Instrument 52-108 Auditor Oversight (NI 52-108) for a public accounting firm that prepares an auditor's report with respect to the financial statements of a reporting issuer to be, as of the date of the auditor's report, (a) a participating audit firm, and (b) in compliance with any restrictions or sanctions imposed by the Canadian Public Accountability Board (CPAB) (the Exemption Sought).

Under the Process for Exemptive Relief Applications in Multiple Jurisdictions (for a dual application):

(a) the Alberta Securities Commission is the principal regulator for this application;

(b) the Filer has provided notice that section 4.7(1) of Multilateral Instrument 11-102Passport System (MI 11-102) is intended to be relied upon in British Columbia; and

(c) the decision is the decision of the principal regulator and evidences the decision of the securities regulatory authority or regulator in Ontario.

Interpretation

Terms defined in National Instrument 14-101 Definitions and MI 11-102 have the same meaning if used in this decision, unless otherwise defined.

Representations

This decision is based on the following facts represented by the Filer:

1. The Filer is an accounting firm formed under the laws of the United Kingdom.

2. The Filer is not in default of securities legislation in any jurisdiction.

3. The Filer proposes to conduct audits of the annual financial statements of Heritage Oil Limited (Heritage), a Jersey, Channel Islands company.

4. Heritage is a reporting issuer in the provinces of Alberta, British Columbia and Ontario.

5. Heritage is a "designated foreign issuer" pursuant to National Instrument 71-102 Continuous Disclosure and Other Exemptions Relating to Foreign Issuers (NI 71-102).

6. Section 2.1 of NI 52-108 provides that a public accounting firm that prepares an auditor's report with respect to the financial statements of a reporting issuer must be, as of the date of the auditor's report, (a) a participating audit firm, and (b) in compliance with any restrictions or sanctions imposed by the CPAB.

7. A "participating audit firm" is defined in NI 52-108 as a public accounting firm that has entered into a written agreement with CPAB in connection with the CPAB's program of practice inspections and the establishment of practice requirements and has not had its participant status terminated.

8. The Filer is not a participating audit firm, but the Filer is subject to the oversight of the Audit Inspection Unit of the Financial Reporting Council in the United Kingdom (the AIU) which involves annual inspections and monitoring for compliance with the United Kingdom regulatory framework for auditing, including International Auditing Standards, Ethical Standards and Quality Control Standards for auditors issued by the Financial Reporting Council's Auditing Practices Board.

9. The oversight of the AIU is substantially similar to the oversight of CPAB.

10. On December 8, 2008, the AIU issued a public report on the 2007/8 inspection of the Filer. In the AIU's view, the Filer has appropriate policies and procedures in place for its size and the nature of its client base in the relevant areas which are subject to the AIU's review and has generally performed its audit work to a good or acceptable standard.

Decision

Each of the Decision Makers is satisfied that the decision meets the test set out in the Legislation for the Decision Maker to make the decision.

The decision of the Decision Makers under the Legislation is that the Exemption Sought is granted provided that:

(a) the Filer has obtained confirmation from each reporting issuer in respect of which the Filer is providing audit services that the issuer is a "designated foreign issuer";

(b) the Filer continues to be subject to the oversight of the Financial Reporting Council in the United Kingdom; and

(c) the Filer does not receive a report from the AIU that states that the Filer:

(i) does not have appropriate policies and procedures in place for the size and the nature of its client base in the relevant areas which are subject to the AIU review; or

(ii) has not generally performed its audit work to a good or acceptable standard.

The decision will terminate on the earlier of:

(a) six months after the effective date of:

(i) any amendment, unless the amendment is clerical or minor in nature, to a provision in NI 71-102 (or the companion policy thereto) or section 2.1 of NI 52-108 which relates to the requirement for a public accounting firm to be a participating audit firm; or

(ii) the addition of any provision to NI 52-108 which relates to the requirement for a public accounting firm to be a participating audit firm; and

(b) June 30, 2011.

"Glenda A. Campbell, QC"
Alberta Securities Commission
 
"Stephen R. Murison"
Alberta Securities Commission