BDO Canada pays $3.5 M for failing to comply with auditing standards

TORONTO – A Panel of the Ontario Securities Commission (OSC) has approved a settlement agreement in which BDO Canada LLP (BDO) admitted that it failed to comply with generally accepted auditing standards in the audits of the 2014 and 2015 financial statements of two privately-offered investment funds.

As part of the settlement, BDO has paid the Commission a $3.5 million administrative penalty and $500,000 towards the cost of OSC Staff’s investigation. The settlement reflects that, since the audits at issue, BDO has enhanced its policies and procedures to prevent the re-occurrence of similar failures in the future.

“Investors rely on auditors to carry out their work with professional skepticism and proper oversight. When auditors fall short, investors lose confidence in the integrity of financial reporting, a cornerstone of our capital markets.” said Jeff Kehoe, Director of Enforcement at the OSC. “This settlement holds BDO accountable for failing to adequately carry out its role as a gatekeeper.”

“In the midst of audit season, this settlement is a timely reminder for auditing firms to review their audit policies and procedures to ensure they comply with professional auditing standards and achieve the highest level of audit quality,” added Cameron McInnis, Chief Accountant at the OSC.

BDO has entered into a separate settlement agreement with Grant Thornton Limited, the court-appointed receiver for Crystal Wealth and its funds. Upon court approval of that settlement, OSC Staff will recommend to the Commission that $2.5 million of the $3.5 million administrative penalty be allocated to Crystal Wealth investors.

BDO was the auditor of Crystal Wealth and its investment funds.  In April 2017, the Ontario Superior Court of Justice put Crystal Wealth, its investment funds, and their directing mind, Clayton Smith, into receivership following an application by the Commission.     

In June 2018, a Panel of the Commission approved a settlement agreement between Smith and Staff in which he admitted to defrauding investors in the funds whose financial statements BDO audited.

The mandate of the OSC is to provide protection to investors from unfair, improper or fraudulent practices, to foster fair and efficient capital markets and confidence in the capital markets, and to contribute to the stability of the financial system and the reduction of systemic risk.  Investors are urged to check the registration of any persons or company offering an investment opportunity and to review the OSC investor materials available at www.osc.ca.

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