1. 54 University of Toronto Law Journal (2004) p. 1.
2. In the UK, corporate governance currently dominates the company law agenda with, e.g., the Higgs Review of the Role and Effectiveness of Non-Executive Directors (January 2003) [hereinafter, Higgs Report] and the 2002 executive pay reforms which have seen a surge in shareholder activism as institutional shareholder exercise their newly acquired powers to vote on executive pay (Directors’ Remuneration Report Regulations 2002, SI 2002/1986). At EU level, as the 1999 Financial Services Action Plan approaches completion, attention is turning to effective pan-EU corporate governance as a mechanism for promoting confidence in the EU marketplace. See Report of the High Level Group of Company Law Experts, A Modern Regulatory Framework for Company Law in Europe (November 2002) [hereinafter, Winter Report] and Commission Communication, Modernising Company Law and Enhancing Corporate Governance in the European Union, COM (2003) 284 [hereinafter, 2003 EU Company Law Action Plan]. Corporate governance reform has also come to the fore in Canada. In April 2003, the Ontario government passed Bill 198, Act to implement budget measures and other initiatives of the Government, 3d. Sess., 37th Leg., Ontario, 2002, which enhances the rule-making powers of the Ontario Securities Commission and contains enforcement provisions for the Ontario Securities Act, R.S.O. 1990, c. S.5. [hereinafter, Bill 198]. The Canadian Securities Administrators (CSA) have also issued a series of rules to promote investor confidence. The CSA issued Multilateral Instrument 52–110 and Companion Policy 52–110: Audit Committees [hereinafter, CSA Rule]; Multilateral Instrument 52–109: Certification of Disclosure in Issuers’ Annual and Interim Filings; Multilateral Instrument 52–108: Auditor Oversight; National Instrument 71–102: Continuous Disclosure and Other Exemptions Relating to Foreign Issuers; National Instrument 52–107: Acceptable Accounting Practices; and National Instrument 51–102: Continuous Disclosure Obligations. The CSA Rule and Multilateral Instrument 52–109 have been adopted in every Canadian jurisdiction except British Columbia. National Instruments 51–102, National Instrument 52–107 and National Instrument 71–102 have been adopted in every jurisdiction except Quebec. National Instrument 52–108 has been adopted in all Canadian jurisdictions. See Canadian Securities Administrators’ Press Release of 29 March 2004, online: ; see also Commission des valeurs mobilières, online: ; British Columbia Securities Commission, online . The CSA also issued Multilateral Instrument 58–101 Disclosure of Corporate Governance Practices, which proposes corporate governance guidelines and requires affected companies to disclose whether they have complied with the guidelines, and if not why not. Multilateral Instrument 58–101 is not yet in force in any Canadian jurisdiction. See infra note 169.
3. While this article uses the fall of Enron and subsequent legislative initiatives as a reference point for examining existing regulation pertaining to auditors, conflicts of interest have plagued accounting firms and undermined the integrity of the audits they perform for the past several years. For a summary from a North American perspective, see E.R. Greenstein and R.D. Bandman, ‘Post Enron: Auditor Independence, Regulation and Disclosure’, 1320 PLI/Corp (2002) p. 217 at p. 222.
4. Sarbanes-Oxley Act, Pub.L. No. 107-204 (2002) [hereinafter, SOX]. See, e.g., ss. 103, 302 and 906.
5. For the major Canadian reforms, see supra note 2. In the UK, January 2003 saw the unveiling of a package of proposed post-Enron reforms by the Department of Trade and Industry (DTI), including proposals to strengthen the audit profession and introduce more effective regulation and oversight of the profession. Secretary of State Hewitt stated that ‘The collapse of Enron and WorldCom — and the accountancy malpractice they revealed — appalled investors all over the world. We owe it to savers, investors and employees as well as honest business people to ensure that our defences are as robust as they sensibly can be.’ DTI News Release P/2003/32, 29 January 2003. The reforms are based on three key reports commissioned in the wake of the Enron/Worldcom failures: (i) Final Report of the Co-ordinating Group on Audit and Accounting Issues (2003) [hereinafter, 2003 CGAA Report] (ii) DTI, Review of the Regulatory Regime of the Accounting Profession Post Enron (2002) [hereinafter, 2003 Regulatory Review Report] and (iii) Audit Committees and Combined Code Guidance. A Report and Proposed Guidance by a Group Chaired by Sir Robert Smith [hereinafter, 2003 Smith Audit Committee Report]. On the post-Enron response generally see Treasury Committee, Sixth Report: The Regulation of Public Listed Companies, Volume I, Report and Proceedings of the Committee (June 2002). At EU level, focus has been trained directly on the statutory audit as part of the wider movement towards pan-EU corporate governance reform with the Commission Communication on Reinforcing the Statutory Audit in the EU, COM (2003) 286 [hereinafter, 2003 EU Statutory Audit Action Plan] and, most recently, the Commission’s March 2004 Proposal for a Directive on the statutory audit of annual accounts and consolidated accounts and amending the Eighth Company Law Directive on the Statutory Audit, COM (2004) 177 [hereinafter, Statutory Audit Proposal].