Financial Regulatory Audit Policy of the Canada Energy Regulator (CER)

27 September 2022

Financial Regulatory Audit Policy of the Canada Energy Regulator (CER)

Financial regulatory audits are one of the CER’s verification tools to ensure compliance with the Canadian Energy Regulator Act (CER Act), regulations, orders, and decisions. Audits also help the CER maintain its knowledge of regulated companies. The CER is issuing an updated Audit Policy as set out below which includes minor changes and updates. Financial regulatory audits will be carried out on the basis of the following objectives, confidentiality guidelines, approach and procedure.

A. Objectives

  1. To determine whether the company has complied with the CER Act, regulations, decisions, orders and other accounting and reporting directives as it relates to tolls and tariff matters, abandonment funding and financial resources.
  2. To verify that the financial information contained in various company applications or submissions to the CER is consistent with the company's records.
  3. To examine whether cross-subsidies have occurred.
  4. To obtain information on the company's current operations, management systems, financial resources, abandonment funding, procedures and internal controls.

B. Audit Confidentiality

While the CER will continue to make its final audit reports public, the following guidelines on audit confidentiality will be observed.

  1. Documents, or copies thereof, obtained from the company during an audit will not be placed on the public record.
  2. Confidentiality of audit working papers, including company documents, will be protected by strict internal CER protocol regarding access and by exemptions that may be applicable under the Access to Information Act. In the event that company documents are requested under the Access to Information Act, the CER is required to provide written notice to the company, giving an opportunity to object and provide reasons as to why the record should not be disclosed.
  3. The CER is open to considering various methods for accessing auditing records to ensure the CER does not retain control of the records after the audit is completed.
  4. For documents containing information of a sensitive nature, a company may request that only senior auditors of the CER shall have access.
  5. Documents obtained during an audit will not be used as direct evidence in a Commission proceeding. Rather, during the proceeding, the Commission may request such information directly from the company so that it would have an opportunity to respond as it sees fit.

C. Approach

The CER follows a risk-based approach when selecting companies to audit in a given year. It takes into account, among other things, significant changes in preceding years, the relationship between the company and its shippers and the availability of current financial information to the CER. The CER may also initiate an audit should it become aware of any violation of the CER Act, regulations, decisions, toll orders or other accounting and reporting directives. In some instances, the CER may also conduct multi-company “targeted” audits, focused on a particular aspect (or aspects) of tolling, financial regulation, or compliance.

The CER generally recognizes the opinions expressed by external auditors on the financial statements of a company and will not normally duplicate the work of external auditors. The CER will examine information related to issues raised by shippers and interested persons and matters of concern to the CER. The CER will also observe the extent to which companies have put in place management systems, procedures and internal controls to ensure that regulatory requirements are fully understood and complied with on an ongoing basis.

D. Procedure

  1. Before fieldwork commences, an audit plan is approved by the CER, the company is notified of the scope of the examination, and is consulted on timing for the audit.
  2. Best efforts will be made to conduct an audit of a particular company when there are no toll and tariff matters from that company before the Commission. However, should the CER find it necessary to conduct an audit when toll and tariff matters for a company are before the Commission, the CER would not typically examine issues that had been raised in those proceedings.
  3. Following the completion of the fieldwork, the CER will issue a draft audit report to the company for comment, which describes all Findings, Recommendations and significant observations. The company will be requested to propose a corrective action plan to address any Findings in the report.
  4. After considering any comments received from the company, the CER will issue its final audit report reflecting these comments as appropriate. The company will then be required to send copies of the final report to its shippers and interested persons. The final audit report will be a public document and will be posted on the CER’s website.
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