Tax and the New Standards for the Certification of Professional Accountants

One of the key aspects of the recent discussions surrounding the unification of the accounting profession (CAs, CMAs, and CGAs) in Canada has been what the certification process for such a unified body might look like. In October 2012, CPA Canada released its much anticipated Competency Map (cpacanada.ca/certification-program), which sets out the knowledge, skills, and proficiency levels expected of chartered professional accountant (CPA) candidates. The map represents the most significant change to the certification process for professional accountants in many years. The most notable changes are (1) the integration of financial reporting and tax education and (2) a new flexibility that allows the level of tax knowledge required for certification to vary on the basis of choices made by the candidate. The changes are relevant for candidates who expect to write the 2015 CPA final examination. This means that employers and universities will need to start modifying their courses and pre-certification training programs for delivery as early as this fall in many parts of Canada, even though many details have yet to be released and discussions concerning the unification process are still ongoing in many provinces and territories.

First, the map describes the new modular nature of the professional education component of the CPA certification process. Candidates, after achieving certain academic prerequisites at the undergraduate level, will be admitted to a professional education program consisting of two common core modules, two of four elective modules, and two capstone modules. The academic prerequisite in tax could be either one or two courses, depending on the university; the approach is to specify a body of knowledge rather than specific prerequisites. The capstone modules focus on development of "enabling competencies," such as leadership and professional skills, and the preparation of candidates for the common final evaluation (CFE). The map refers to this "professional education program" as being at the graduate level. The professional education program will normally be delivered by the various regional professional accounting bodies; in some provinces, universities will deliver some modules.

All CPA candidates must complete the common core modules. Those modules focus on the development of competencies in financial reporting and management accounting and the integration of the six core technical competency areas, including taxation. This emphasis on integrating tax with the five other competency areas in the context of financial reporting--and at a particularly early stage in the professional education process--is the first change of special relevance to tax practitioners, and the change that is likely to have the biggest impact on the educational content delivered at both the undergraduate and the professional levels. Some degree of integration between tax and financial reporting has always been evident to practising professionals (for example, the preparation and auditing of tax provisions and the financial reporting of certain tax-motivated reorganizations); however, the existing UFE Candidates' Competency Map has not previously focused on this point, and thus there may have been a tendency on the part of candidates to view tax as a separate stand-alone competency.

Candidates wishing to practise in public accounting must choose both the assurance and the tax electives. A candidate who is interested in tax but does not intend to pursue a career in public accounting can opt for the tax elective and not the assurance elective. At this point, it is unclear whether candidates can enroll in more than two elective modules or whether they can take additional elective modules at a later date.

Candidates who do not take the tax elective will still have to have knowledge of a broad range of tax topics, because core module no. 1 requires the demonstration of tax competencies. However, these competencies need only be demonstrated at a B or C proficiency level rather than at the A level required of a candidate who takes the tax elective module. Briefly, the Knowledge Supplement describes level C proficiency as requiring a candidate to demonstrate and explain the basic theory underlying a topic. Level B requires a candidate to apply the theory to routine situations of low complexity. Finally, level A proficiency requires a candidate to demonstrate knowledge, analyze problems in sufficient depth, and draw conclusions in routine situations of low to moderate complexity. In non-routine situations of moderate complexity, candidates are expected to see some but not all of the interrelationships between concepts.

In a tax context, the Knowledge Supplement illustrates the different proficiency levels with reference to the concept of integration in an owner-manager context. Level C simply requires an understanding of personal and corporate tax rates, the concept of integration overall, and the existence of various compensation alternatives. Level A requires a detailed analysis of the different forms of compensation, including more complex concepts such as the use of trusts, and the recommendation of the optimal solution in the circumstances presented.

To date, CPA Canada has not released detailed information about the specific content that will be delivered in each module, and it is therefore not yet clear what will be involved in raising candidates' proficiency levels from C or B to A in the course of the core and elective tax modules. Such details are expected to be released in mid- to late 2013.

Unlike the existing CA candidate's Knowledge Reference List, the Knowledge Supplement to the CPA Competency Map does not include any reference to particular legislative provisions of the Act or the Regulations. Rather, the list simply refers to the topics that candidates are expected to cover in the course of demonstrating the various technical tax competencies. Some members of the profession view this change as positive insofar as it highlights the importance of candidates understanding overall topics rather than merely memorizing particular provisions to the exclusion of others. However, it may place a greater burden on instructors and facilitators at both the undergraduate and professional education levels to ensure that students are aware of the particular legislative provisions that address particular topics in the Knowledge Reference List.

Mark Dumalski
Deloitte LLP, Ottawa
mdumalski@deloitte.ca

Canadian Tax Focus
Volume 3, Number 1, February 2013
©2013, Canadian Tax Foundation