Objective and Scope of the Audit
The purpose of this letter is to confirm our acceptance and understanding of the terms of the audit engagement to report on the Financial Transactions Return (the Return) under the Canada Elections Act (the Act) relating to your association for the year ended December 31, 2018. The objective of our audit will be to express an opinion on the Return.
Subsection 475.6(1) of the Act states that an audit of the association's Financial Transactions Return is required if the association has, in a fiscal period, accepted contributions of $5,000 or more in total or incurred expenses of $5,000 or more in total.1 In order to assist us in planning the audit, you will inform us at the commencement of each fiscal period whether or not an audit will likely be required, based on your estimate of contributions that will be received and expenses that will be incurred during the period.
Our Responsibilities
As required by subsection 475.6(1) of the Act, our audit will be performed in accordance with Canadian generally accepted auditing standards, which require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the Return is free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the Return.
The procedures selected depend on the auditors' judgment, including the assessment of the risks of material misstatement of the Return, whether due to fraud or error. Our audit will also include evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by you or your financial agent in the preparation of the Return, as well as the overall presentation of the Return.
Because of the inherent limitations of an audit, together with the inherent limitations of internal control, there is an unavoidable risk that some material misstatements may not be detected, even though the audit is properly planned and performed in accordance with Canadian generally accepted auditing standards.
1 Subsections 364(2), (3) and (5)of the Act indicate that transfers from a registered party, another registered association, a candidate, a leadership contestant or a nomination contestant of the party that held the nomination contest in the association's electoral district to the association are not a contribution for the purposes of the Act. Elections Canada has indicated that transfers from the association to other political entities, to the extent permitted by the Act, are excluded from expenses for the purpose of arriving at the amount of $5,000.
In making our risk assessments, we consider internal control relevant to the entity's preparation of the Return in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. However, we will communicate to you in writing concerning any significant deficiencies in internal control relevant to the audit of the Return that we have identified during the audit.
It should be noted that the Act prescribes limitations on the timing, amount and sources of contributions. It is not practicable, however, for us to verify, from sources outside the accounting records, that all contributions are in accordance with the Act, nor does the Act require us to do so. Furthermore, although the Act does not require us to report that all financial transactions have been included in the accounting records, the Act requires that we conduct the audit of the Return in accordance with Canadian generally accepted auditing standards. Therefore, since there is a scope limitation due to the inherent nature of the transactions of registered electoral district associations, the completeness of contributions and other revenue and expenses is not susceptible of satisfactory audit verification. Accordingly, we shall state this fact in our report.
As required by the Act, our report will be addressed to the financial agent. Our report will also be addressed to the Chief Electoral Officer, Elections Canada to comply with Canadian auditing standards.
It has been determined and deemed acceptable that the applicable financial reporting framework for preparing the Return be a special purpose compliance framework. Accordingly, in order to comply with the CASs, the auditors' report will be based on the applicable financial reporting framework. In addition, to report under the Act, we shall include in the auditors' report a separate section for other reporting on legal and regulatory requirements to comply with subsection 475.6(1) The auditor of a registered association [] shall report to the association's financial agent on the association's financial transactions return and shall, in accordance with generally accepted auditing standards, make any examination that will enable the auditor to give an opinion in the report as to whether it presents fairly the information contained in the financial records on which it is based. we must include the following statement
in the auditors' report:
As required by subsection 475.6(1) of the Canada Elections Act, in our opinion,
the Return presents the information contained in the financial records on which it is based.
It should be noted that this additional paragraph does not include the term presents fairly because the nature of the financial reporting framework in the Act does not meet the requirements of a fair presentation framework.
Subsection 475.6(2) requires the auditor to include any statement that the auditor considers necessary if [] based on the examination, it appears that the registered association has not kept proper financial records. Although this requirement is not a requirement of the CASs (i.e., the CASs are to be applied in the audit of financial statements and other historical financial information), the CASs deal with other reporting responsibilities. If we determine, based on our examination, that the records have not been properly kept, we would include a statement to this effect in our report. This statement must be included in a separate section at the end of our auditors' report with a subtitle Report on Other Legal and Regulatory Requirements, or otherwise as appropriate to the content of the section. In addition, we shall add a subtitle Report on the Return before the Introductory paragraph to clearly distinguish the responsibility to report on the Return from the responsibility to report on other legal and regulatory requirements.
Canadian generally accepted auditing standards require us to comply with ethical requirements including a duty of confidentiality with respect to client affairs. Accordingly, we will not divulge information related to
your association that is not already in the public domain to any third party without your permission unless required to do so by legal authority or the rules of professional conduct/code of ethics of the professional accounting organization of which we am a member. In this respect, however, it should be noted that subsection 382(2) of the Act requires the Chief Electoral Officer to publish the Financial Transactions Return of the association as soon as practical after receiving it.
In the absence of circumstances that would prevent us from expressing an opinion without further modification or additional statement, our report will be substantially follow per attached form presented in the Appendix of this letter.
Your Responsibilities
Our audit will be conducted on the basis that you, as financial agent, acknowledge and understand that you are responsible for the following:
1. preparing the Financial Transactions Return in accordance with the requirements of the Act;
2. such internal control as you and your financial agent determine is necessary to enable the preparation of the Return in a manner that is free from material misstatement, whether due to fraud or error
3. providing us with access to all information of which you and your financial agent are aware that is relevant for the preparation of the Return such as records, documentation and other matters. This would include providing us with information such as:
a. any illegal or possibly illegal acts, and all facts related thereto
b. claims and possible claims, whether or not they have been discussed with the registered association's legal counsel
c. identification of all related parties and the nature and amount of any related-party transactions
d. any known or probable instances of non-compliance with legislative or regulatory requirements, including reporting requirements under the Act
e. an assessment of the reasonableness of any significant assumptions underlying valuations and disclosures in the Return
f. a note to be attached to the Return describing the financial reporting framework applied for preparing the Return (see Exhibit 4 for a sample note)
g. any plans or intentions that may affect the carrying value or classification of assets or liabilities
h. other liabilities or contingent gains or losses, including those associated with guarantees, whether written or oral, relating to the association under which you are contingently liable
i. subsequent events
4. providing us with additional information that we may request from you and your financial agent for the purpose of the audit
5. providing us with unrestricted access to persons within the association from whom we determine it necessary to obtain audit evidence
As part of our audit process, we will request from you written confirmation concerning representations made to us in connection to the audit engagement.
You are responsible for the timely preparation and completeness of the accounting records and the Return, which is to be prepared in accordance with the financial reporting provisions of the Act, including the Statement of Assets and Liabilities and the Statement of Revenues and Expenses set out in Part 4 of the Return, which are to be prepared in accordance with generally accepted accounting principles as interpreted by Elections Canada.2
2. Elections Canada has interpreted generally accepted accounting principles as being the recognition and measurement requirements in Part III of the CPA Canada Handbook Accounting, Accounting Standards for Not-for-Profit Organizations specifically related to the statements in Part 4 of the Financial Transactions Return, but not the presentation principles( i.e., the obligation to present all the financial statements and note disclosures required by generally accepted accounting principles for a complete set of financial statements).
Our responsibility as auditor does not extend beyond the reporting function outlined above and accordingly does not include ensuring that you and your financial agent comply with all the requirements of the Act.
You have also agreed that you will ensure that invoices for property and services will state the current market price when this price is more than the price charged to your association and, if necessary, will arrange for suppliers to certify as to the commercial value of goods and services provided.
The Act provides that suppliers should render accounts within three months after the expense has been incurred and requires payment within six months after payment is due. As the Act requires our examination to be completed and our report issued within five months after the end of the fiscal period, it is essential that the suppliers' accounts be recorded and the accounting records completed in time to allow us a reasonable period to complete our examination. We anticipate that we will be able to report by the date required by the Act if your Return is completed and available for final audit on or before February 28th of each year. You have agreed that you will provide us with the completed Financial Transactions Return, including the note describing the financial reporting framework applied for preparing the Financial Transactions Return by that date.
Working Papers
The working papers, files, other materials, reports and work created, developed or performed by us during the course of the engagement are the property of our firm, constitute confidential information and will be retained by us in accordance with our firm's policies and procedures.
File Inspections
In accordance with professional regulations and our firm's policy, our client files may periodically be reviewed by practice inspectors, and by quality control reviewers to ensure that we am adhering to the standards of our profession and of our firm. File quality control reviewers are required to maintain the confidentiality of client information.
Time Frames
I will make every reasonable effort to complete the engagement as described in this letter within the agreed-upon time frames. However, we shall not be liable for failures or delays in performance that arise from causes beyond our control, including the untimely performance of your obligations.
Fees
Fees will be determined on the basis of time spent on this engagement at our standard rates, and any disbursements incurred will be added to the billing. The Act provides that the Receiver General will reimburse audit fees up to a maximum amount; any amounts in excess thereof are your responsibility.
The Receiver General's reimbursement is conditional upon the production of all the documents referred to in subsection 475.4(1) of the Act, including the audit report and the invoice for audit fees. Otherwise you will be responsible for the full payment of the fees.
USE OF INFORMATION
It is acknowledged that we will have access to all personal information in your custody that we require to complete our engagement. Our services are provided on the basis that:
1. you or your financial agent have obtained any required consents for collection, use and disclosure to us of all personal information required under applicable privacy legislation
2. we will hold all personal information in compliance with our firm's Privacy Statement. If the services outlined are in accordance with your requirements and if the above terms are acceptable to you, please sign the copy of this letter in the space provided and return it to us after obtaining your financial agent's signed acknowledgment that he or she understands the terms.
Yours truly,
Election Finances International Inc.
Suyi Cao, CPA-CGA
I acknowledge that I understand the above terms of your engagement and confirm your appointment my auditor on the terms set out in this letter.
Appendix
Sample Independent Auditor's Report
To [Name] Financial Agent for [ED Name] Federal NDP Electoral District Association
for submission to the Chief Electoral Officer of Canada in accordance with section 475.6 of the Canada Elections Act.
Report on the Return
We have audited the accompanying Registered Association Financial Transactions Return (the Return) of the [ED Name] Federal NDP Electoral District Association, which comprises
Part 2a: Statement of Contributions Received
Part 2b: Statement of New Loans During the Fiscal Period
Part 2c: Statement of Contributions Returned to Contributors or Remitted to the Chief Electoral Officer
Part 2d: Statement of Transfers Received
Part 2e: Summary of Contributions, Loans and Transfers
Part 3a: Statement of Transfers Sent
Part 3b: Statement of Unpaid Claims and Loans
Part 3c: Previously Reported Unpaid Claims and Loans That Have Been Paid in Full Since Last Fiscal Period
Part 3d: Statement of Unpaid Claims and Loans 18 and 36 Months Past Due
Part 3e: Statement of Expenses Incurred for Voter Contact Calling Services for Calls Made During an Election Period
Part 3f: Statement of Candidate Loans Assumed by the Registered Association
Part 4: Registered Association Financial Transactions Return Statement of Revenues and Expenses and Statement of Assets and Liabilities for the year ended December 31, 2018.
This Return has been prepared by the financial agent of the association in accordance with the financial reporting provisions of section 475.4 of the Canada Elections Act and in the prescribed form issued by Elections Canada.
The Financial Agent's Responsibility for the Return
The financial agent of the association is responsible for the preparation of the Return in accordance with the financial reporting provisions of section 475.4 of the Canada Elections Act and in the prescribed form issued by Elections Canada and for such internal control as the financial agent determines is necessary to enable the preparation of a Return that is free from material misstatement, whether due to fraud or error.
Auditors' Responsibility
Our responsibility is to express an opinion on the Return based on our audit. We conducted our audit in accordance with Canadian generally accepted auditing standards. Those standards require that we comply with ethical requirements, and plan and perform the audit to obtain reasonable assurance whether the Return is free of material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the Return. The procedures selected depend on the auditors' judgment, including the assessment of the risks of material misstatement of the Return, whether
due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation of the Return in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal controls. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the financial agent, as well as evaluating the overall presentation of the Return. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our qualified audit opinion.
Basis for Qualified Opinion
Due to the inherent nature of the transactions of registered electoral district associations, the completeness of contributions, loans and loan guarantees and other revenue and expenses is not susceptible of satisfactory audit verification. Accordingly, our verification of these amounts was limited to the amounts recorded in the registered association's accounting records and we was not able to determine whether any adjustments might be necessary to contributions, loans and loan guarantees and other revenue, expenses, assets, liabilities and net assets.
Qualified Opinion
In our opinion, except for the possible effects of the matter described in the Basis for Qualified Opinion paragraph, the Financial Transactions Return of the [ED Name] Federal NDP Electoral District Association for the year ended December 31, 2018 is prepared, in all material respects in accordance with the financial reporting provisions of section 475.4 of the Canada Elections Act and in the prescribed form issued by Elections Canada.
Other Matter
The financial statements of [ED Name] Federal NDP Electoral District Association for the year ended December 31, 2018 were audited by another professional accountant who expressed a similarly worded qualified opinion and have only been presented in the 2018 financial statements for comparative purposes only.
Basis of Accounting and Restriction on Use
Without modifying our opinion, we draw attention to Note 1 to the Return, which describes the basis of accounting. The Return is prepared to assist the financial agent of the registered association to meet the requirements of the Canada Elections Act. As a result, the Return may not be suitable for another purpose. Our report is intended solely for the financial agent and the chief electoral officer, and should not be used by parties other than the financial agent or the chief electoral officer.
Report on Other Legal and Regulatory Requirements
As required by subsection 475.6(1) of the Canada Elections Act, in our opinion, the Return presents the information contained in the financial records on which it is based.
____________________
Date
Suyi Cao, CPA-CGA
Election Finances International Inc.
Toronto, Ontario