Performance Audit Manual
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1501 Causing/Carrying Out a Special Examination
Jul-2020
Overview
There is a distinction between “causing” a special examination to be carried out and “carrying out” a special examination as set out in the Financial Administration Act.
The purpose of this section is
- to clarify when a Crown corporation “causes” a special examination to be carried out;
- to set out the related OAG’s responsibilities; and
- to set out the OAG’s responsibilities when an additional special examination is to be carried out prior to the expiry of the 10-year statutory period when required by the Governor in Council, the appropriate Minister, the board of directors of the corporation, or the OAG.
Financial Administration Act Requirements for Special Examinations
Section 138(1) Each parent Crown corporation shall cause a special examination to be carried out in respect of itself and its wholly-owned subsidiaries, if any, to determine if the systems and practices referred to in paragraph 131(1)(b) were, in the period under examination, maintained in a manner that provided reasonable assurance that they met the requirements of paragraphs 131(2)(a) and (c).
Section 138(2) A special examination shall be carried out at least once every 10 years and at any additional times that the Governor in Council, the appropriate Minister, the board of directors of the corporation to be examined or the Auditor General of Canada may require.
OAG Guidance
Causing/carrying out
The assistant auditors general with responsibilities for special examinations of Crown corporations, as well as with the comptroller group, update at least annually, the special examinations schedule taking into account two main factors: the annual budgetary envelop over a 10-year period for the special examination practice and the requirement for special examinations to be finalized before their statutory reporting date.
There are two scenarios applicable to the timing of special examinations:
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Scenario 1—Causing a special examination to be carried out: Those performed once every 10 years, in time to meet the statutory reporting deadline; and
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Scenario 2—Carrying out a special examination: Those performed more than once every 10 years as required by the Governor in Council, the Minister, the corporation’s board of directors, or the OAG (e.g., where multiple significant deficiencies were reported in the previous special examination and a decision has been made to perform another special examination to follow up on the progress made by the Crown corporation).
Scenario 1—Causing a special examination to be carried out
It is a Crown corporation’s responsibility to “cause” a special examination to be carried out at least once every 10 years. However, it is important that the engagement leader initiates discussions with Crown corporations’ senior management, audit committee members, and board members well in advance of the expiry of the 10-year period so as to ensure that the Crown corporation will take the necessary steps to “cause” a special examination to be commenced at the appropriate time: that is, before the planning phase is scheduled to get under way. These consultations could also include discussions as to the possibility of carrying out a special examination in advance of the expiry of the 10-year period to address issues in the corporation or to accommodate the OAG’s desire to stagger the performance and delivery of special examinations to address resourcing considerations.
The audit team confirms that the Crown corporation has caused a special examination to be carried out by way of a board resolution (although a resolution is not necessary), the signed engagement letter, or other such documentation that could serve as evidence that the corporation has caused the special examination to be carried out.
If the audit team encounters any difficulty with the Crown corporation causing the special examination, it should contact Legal Services.
Scenario 2—Carrying out a special examination
“Carrying out” a special examination is a responsibility of the Office of the Auditor General of Canada. FAA subsection 138(2) gives the OAG, and the other listed parties, the authority to require the performance of a special examination more than once every 10 years (i.e., at some point prior to the expiry of the 10-year statutory period). The request can come from the
- Governor in Council via an Order in Council;
- Minister via a Ministerial direction;
- Board of directors via a board resolution; and
- Auditor General
In this circumstance, the audit team will need to discuss with the Crown corporation any Order in Council, Ministerial direction, or board resolution requiring that an additional special examination be carried out. Where the OAG requires the additional special examination, it will inform the Crown corporation accordingly.
In all four situations, the audit team communicates the OAG’s intention to carry out an additional special examination by way of sending the Crown corporation an OAG notification letter.
Early communication of an upcoming special examination is typically done by the OAG annual audit team at an audit committee meeting. This meeting should take place early enough to give the Crown corporation sufficient notice prior to the delivery of the notification letter.
If the audit team encounters any difficulty with the Crown corporation accepting the start of the special examination, it should contact Legal Services.