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Chartered Accountants of Canada Submission in Response to Finance Canada's 2006 Review of Financial Sector Legislation:

June 1, 2005

Mr. Gerry Salembier
Director, Financial Institutions Division
Financial Sector Policy Branch
Department of Finance
L'Esplanade Laurier
20th Floor, East Tower
140 O'Connor Street
Ottawa, ON
K1A 0G5

Dear Mr. Salembier:

I am writing in response to the Government's invitation, in Annex 6 to its budget documents, for comments on allowing financial institutions to electronically process cheque images in place of paper cheques. The Canadian Institute of Chartered Accountants (CICA) supports the proposal by the Canadian Payments Association (CPA) to modernize the cheque clearing process through use of image technology.

The topic of cheque processing is of significant interest to the CICA. Together with the provincial CA institutes/ordre, the CICA represents approximately 68,000 chartered accountants and 8,000 students in Canada and Bermuda. We support the setting of accounting and auditing standards nationally and internationally for business, not-for-profit organizations and government. It issues guidance on control and governance. Last year, we looked into the possible implications, from an auditing viewpoint, of the CPA proposal to use image technology. We concluded that there would be no auditing standards hurdles regarding the use of digital images of paid cheques as audit evidence. Most accounting records are now computerized and auditors are well equipped to deal with electronic audit evidence.

We also noted that the electronic evidence generated by financial institutions or other entities responsible for the proposed digital imaging process for cheques would need to meet the following criteria:

  • Authentication (the entity undertaking the processing can be clearly identified).
  • Integrity (the imaging process (including the creation transmission, maintenance and storage/archiving) needs to be complete, accurate current and validated).
  • Authorization (all steps in the process must be performed by authorized people).
  • Non-repudiation (parties cannot repudiate origin, receipt or content of the digital cheque images).

The CPA indicated that the electronic evidence generated by its proposed cheque imaging process would have these required attributes.

We support eh CPA recommendations for amendments to the Bills of Exchange Act. We feel that they will facilitate a needed modernization of the cheque clearing process and help Canada keep pace with developments internationally.

Yours sincerely,


David W. Smith, FCA
President & CEO

Ref: DWS053/gps