The Ontario Securities Commission granted an exemption to an issuer from the requirement that audited financial statements must be accompanied by an auditor’s report with an unmodified opinion, as per National Instrument 52-107 Acceptable Accounting Principles and Auditing Standards. This decision was made in the context of the issuer’s acquisition of Trutina Pharmacy Inc., a subsidiary of Grey Wolf Animal Health Inc., and the subsequent need to include Trutina’s financial statements in a Filing Statement.
The exemption was considered because Trutina’s auditors could not provide an unmodified opinion on the inventory balances as of January 1, 2020, due to the lack of prior audits. This led to a modified opinion (scope limitation) on Trutina’s financial statements for the year ended December 31, 2020. However, the auditors were able to provide an unmodified opinion for the subsequent period ending August 31, 2021.
The exemption was granted under the condition that the Filing Statement includes Trutina’s audited financial statements for the year ended December 31, 2020, with the Inventory Qualification as the only modification, and the unmodified audited financial statements for the eight-month period ending August 31, 2021.
This decision was based on the test set out in the securities legislation and the guidance provided in Companion Policy 41-101CP to National Instrument 41-101, which allows for qualified opinions on opening inventory if there is a subsequent audited period with an unmodified opinion and the business is not seasonal.