Missing the forest and the trees.

This article comments on new policy from the Canadian Securities Administrators. It's virtually pointless to audit a corporate financial-reporting control system in Canada when the company can simply turn to a multitude of weak accounting rules to fleece investors. Nevertheless, the Canadian Securities Administrators are barging ahead with assorted misguided proposals in the apparent belief that a control-system audit is a monumental step toward preventing financial-statement fraud. While most of the proposals have been adopted from post-Enron U.S. legislation, they show little or no recognition of how Canadian circumstances are vastly different, and require a grassroots change in thinking. Under Canadian accounting vagary, a financial-reporting control system could be airtight but still produce materially misleading financial statements. One reason Canada has a uniquely flawed process is that our politicians have allowed auditors to set their own accounting and auditing rules.