Change of Auditor

(1) Definitions – In this section

“appointment” means, in relation to a reporting issuer, the earlier of

(a) the appointment as its auditor of a different person or company than its predecessor auditor; and

(b) the decision by the board of directors of the reporting issuer to propose to holders of qualified securities to appoint as its auditor a different person or company than its predecessor auditor;

“consultation” means advice provided by a successor auditor, whether or not in writing, to a reporting issuer during the relevant period, which the successor auditor concluded was an important factor considered by the reporting issuer in reaching a decision concerning

(a) the application of accounting principles or policies to a transaction, whether or not the transaction is completed;

(b) a report provided by an auditor on the reporting issuer’s financial statements;

(d) financial statement disclosure;

“disagreement” means a difference of opinion between personnel of a reporting issuer responsible for finalizing the reporting issuer’s financial statements and the personnel of a predecessor auditor responsible for authorizing the issuance of audit reports on the reporting issuer’s financial statements or authorizing the communication of the results of the auditor’s review of the reporting issuer’s interim financial report, if the difference of opinion

(a) resulted in a modified opinion in the predecessor auditor’s audit report on the reporting issuer’s financial statements for any period during the relevant period;

(b) would have resulted in a modified opinion in the predecessor auditor’s audit report on the reporting issuer’s financial statements for any period during the relevant period if the difference of opinion had not been resolved to the predecessor auditor’s satisfaction, not including a difference of opinion based on incomplete or preliminary information that was resolved to the satisfaction of the predecessor auditor upon the receipt of further information;

(c) resulted in a qualified or adverse communication or denial of assurance in respect of the predecessor auditor’s review of the reporting issuer’s interim financial report for any interim period during the relevant period; or

(d) would have resulted in a qualified or adverse communication or denial of assurance in respect of the predecessor auditor’s review of the reporting issuer’s interim financial report for any interim period during the relevant period if the difference of opinion had not been resolved to the predecessor auditor’s satisfaction, not including a difference of opinion based on incomplete or preliminary information that was resolved to the satisfaction of the predecessor auditor upon the receipt of further information;

“predecessor auditor” means the auditor of a reporting issuer that is the subject of the most recent termination or resignation;

“qualified securities” means securities of a reporting issuer that carry the right to participate in voting on the appointment or removal of the reporting issuer’s auditor; “relevant information circular” means

(a) if a reporting issuer’s constating documents or applicable law require holders of qualified securities to take action to remove the reporting issuer’s auditor or to appoint a successor auditor

(i) the information circular required to accompany or form part of every notice of meeting at which that action is proposed to be taken; or

(ii) the disclosure document accompanying the text of the written resolution provided to holders of qualified securities; or

(b) if paragraph (a) does not apply, the information circular required to accompany or form part of the first notice of meeting to be sent to holders of qualified securities following the preparation of a reporting package concerning a termination or resignation;

“relevant period” means the period

(a) commencing at the beginning of the reporting issuer’s two most recently completed financial years and ending on the date of termination or resignation; or

(b) during which the predecessor auditor was the reporting issuer’s auditor, if the predecessor auditor was not the reporting issuer’s auditor throughout the period described in paragraph (a);

“reportable event” means a disagreement, a consultation, or an unresolved issue;

“reporting package” means

(a) the documents referred to in subparagraphs (5)(a)(i) and (6)(a)(i);

(b) the letter referred to in clause (5)(a)(ii)(B), if received by the reporting issuer, unless an updated letter referred to in clause (6)(a)(iii)(B) has been received by the reporting issuer;

(d) any updated letter referred to in clause (6)(a)(iii)(B) received by the reporting issuer;

“resignation” means notification from an auditor to a reporting issuer of the auditor’s decision to resign or decline to stand for reappointment;

“successor auditor” means the person or company

(a) appointed;

(b) that the board of directors have proposed to holders of qualified securities be appointed; or

as the reporting issuer’s auditor after the termination or resignation of the reporting issuer’s predecessor auditor;

“termination” means, in relation to a reporting issuer, the earlier of

(a) the removal of its auditor before the expiry of the auditor’s term of appointment, the expiry of its auditor’s term of appointment without reappointment, or the appointment of a different person or company as its auditor upon expiry of its auditor’s term of appointment; and

(b) the decision by the board of directors of the reporting issuer to propose to holders of its qualified securities that its auditor be removed before, or that a different person or company be appointed as its auditor upon, the expiry of its auditor’s term of appointment;

“unresolved issue” means any matter that, in the predecessor auditor’s opinion, has, or could have, a material impact on the financial statements, or reports provided by the auditor relating to the financial statements, for any financial period during the relevant period, and about which the predecessor auditor has advised the reporting issuer if

(a) the predecessor auditor was unable to reach a conclusion as to the matter’s implications before the date of termination or resignation;

(b) the matter was not resolved to the predecessor auditor’s satisfaction before the date of termination or resignation; or

(2) Meaning of “Material” – For the purposes of this section, the term “material” has a meaning consistent with the discussion of the term “materiality” in the issuer`s GAAP.

(3) Exemption from Change of Auditor Requirements – This section does not apply if

(a) the following three conditions are met:

(i) a termination, or resignation, and appointment occur in connection with an amalgamation, arrangement, takeover or similar transaction involving the reporting issuer or a reorganization of the reporting issuer;

(ii) the termination, or resignation, and appointment have been disclosed in a news release that has been filed or in a disclosure document that has been delivered to holders of qualified securities and filed; and

(iii) no reportable event has occurred;

(b) the change of auditor is required by the legislation under which the reporting issuer exists or carries on its activities; or

(4) Exemption From Change of Auditor Requirements – SEC Issuers – An SEC issuer satisfies this section if it

(a) complies with the requirements of U.S. laws relating to a change of auditor;

(b) files a copy of all materials required by U.S. laws relating to a change of auditor at the same time as, or as soon as practicable after, they are filed with or furnished to the SEC;

(c) issues and files a news release describing the information disclosed in the materials referred to in paragraph (b), if there are any reportable events; and

(d) includes the materials referred to in paragraph (b) with each relevant information circular.

(5) Requirements Upon Auditor Termination or Resignation – Upon a termination or resignation of its auditor, a reporting issuer must

(a) within 3 days after the date of termination or resignation

(i) prepare a change of auditor notice in accordance with subsection (7) and deliver a copy of it to the predecessor auditor; and

(ii) request the predecessor auditor to

(A) review the reporting issuer’s change of auditor notice;

(B) prepare a letter, addressed to the regulator or securities regulatory authority, stating, for each statement in the change of auditor notice, whether the auditor (I) agrees, (II) disagrees, and the reasons why, or (III) has no basis to agree or disagree; and

(b) within 14 days after the date of termination or resignation

(i) have the audit committee of its board of directors or its board of directors review the letter referred to in clause (5)(a)(ii)(B) if received by the reporting issuer, and approve the change of auditor notice;

(ii) file a copy of the reporting package with the regulator or securities regulatory authority;

(iii) deliver a copy of the reporting package to the predecessor auditor;

(iv) if there are any reportable events, issue and file a news release describing the information in the reporting package; and

(i) a copy of the reporting package as an appendix; and

(ii) a summary of the contents of the reporting package with a crossreference to the appendix.

(6) Requirements upon Auditor Appointment – Upon an appointment of a successor auditor, a reporting issuer must

(a) within 3 days after the date of appointment

(i) prepare a change of auditor notice in accordance with subsection (7) and deliver it to the successor auditor and to the predecessor auditor;

(ii) request the successor auditor to

(A) review the reporting issuer’s change of auditor notice;

(B) prepare a letter addressed to the regulator or securities regulatory authority, stating, for each statement in the change of auditor notice, whether the auditor

(I) agrees,

(II) disagrees, and the reasons why, or

(III) has no basis to agree or disagree; and

(iii) request the predecessor auditor to, within 7 days after the date of appointment,

(A) confirm that the letter referred to in clause (5)(a)(ii)(B) does not have to be updated; or

(B) prepare and deliver to the reporting issuer an updated letter to replace the letter referred to in clause (5)(a)(ii)(B);

(b) within 14 days after the date of appointment,

(i) have the audit committee of its board of directors or its board of directors review the letters referred to in clauses (6)(a)(ii)(B) and (6)(a)(iii)(B) if received by the reporting issuer, and approve the change of auditor notice;

(ii) file a copy of the reporting package with the regulator or securities regulatory authority;

(iii) deliver a copy of the reporting package to the successor auditor and to the predecessor auditor; and

(iv) if there are any reportable events, issue and file a news release disclosing the appointment of the successor auditor and describing the information in the reporting package or referring to the news release required under subparagraph (5)(b)(iv).

(7) Change of Auditor Notice Content – A change of auditor notice must state

(a) the date of termination or resignation;

(b) whether the predecessor auditor

(i) resigned on the predecessor auditor’s own initiative or at the reporting issuer’s request;

(ii) was removed or is proposed to holders of qualified securities to be removed during the predecessor auditor’s term of appointment; or

(iii) was not reappointed or has not been proposed for reappointment;

(c) whether the termination or resignation of the predecessor auditor and any appointment of the successor auditor were considered or approved by the audit committee of the reporting issuer’s board of directors or the reporting issuer’s board of directors;

(d) whether the predecessor auditor’s report on any of the reporting issuer’s financial statements relating to the relevant period expressed a modified opinion and, if so, a description of each modification;

(e) if there is a reportable event, the following information:

(i) for a disagreement,

(A) a description of the disagreement;

(B) whether the audit committee of the reporting issuer’s board of directors or the reporting issuer’s board of directors discussed the disagreement with the predecessor auditor; and

(C) whether the reporting issuer authorized the predecessor auditor to respond fully to inquiries by any successor auditor concerning the disagreement and, if not, a description of and reasons for any limitation;

(ii) for a consultation,

(A) a description of the issue that was the subject of the consultation;

(B) a summary of the successor auditor’s oral advice, if any, provided to the reporting issuer concerning the issue;

(D) whether the reporting issuer consulted with the predecessor auditor concerning the issue and, if so, a summary of the predecessor auditor’s advice concerning the issue; and

(iii) for an unresolved issue,

(A) a description of the issue;

(B) whether the audit committee of the reporting issuer’s board of directors or the reporting issuer’s board of directors discussed the issue with the predecessor auditor; and

(C) whether the reporting issuer authorized the predecessor auditor to respond fully to inquiries by any successor auditor concerning the issue and, if not, a description of and reasons for any limitation; and

(f) if there are no reportable events, a statement to that effect.

(8) Predecessor Auditor’s Obligations to Report Non-Compliance – If a reporting issuer does not file the reporting package required to be filed under subparagraph (5)(b)(ii) or the news release required to be filed under subparagraph (5)(b)(iv), the predecessor auditor must, within 3 days of the required filing date, advise the reporting issuer in writing of the failure and deliver a copy of the letter to the regulator or, in Quebec, the securities regulatory authority.

(9) Successor Auditor’s Obligations to Report Non-Compliance – If a reporting issuer does not file the reporting package required to be filed under subparagraph (6)(b)(ii) or the news release required to be filed under subparagraph (6)(b)(iv), the successor auditor must, within 3 days of the required filing date, advise the reporting issuer in writing of the failure and deliver a copy of the letter to the regulator or, in Quebec, the securities regulatory authority.

National Instrument 51-102 Continuous Disclosure Obligations

Part 4 Financial Statements

Section 4.11

Change of Auditor