Audit exemption (private corporation)

A buyer reading a private company’s financial statements may find they are not audited. That can be lawful because the shareholders gave up the audit. This entry covers federal corporations and Ontario; the rules differ by statute, so check the one that governs the company.

Federal corporations

Section 163 of the Canada Business Corporations Act says the shareholders of a corporation that is not a distributing corporation may resolve not to appoint an auditor. The resolution is valid only until the next annual meeting of shareholders. It is not valid unless all the shareholders consent, including shareholders not otherwise entitled to vote.

Ontario

Under section 148 of the Ontario Business Corporations Act, a corporation is exempt, in respect of a financial year, from the Act’s requirements on the appointment and duties of an auditor if it is not an offering corporation and all of the shareholders consent in writing to the exemption for that year.

Ask whether an exemption was in place for each year and where the consents are kept. An exemption removes the audit, not the need for reliable numbers; see when to require a review or audit engagement and compilation, review and audit engagements.