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AGENDA - Audit Committee - 20180327 Audit Committee Meeting Agenda Tuesday, March 27, 2018 6:15 p.m. Council Chambers Aurora Town Hall Public Release March 20, 2018 Town of Aurora Audit Committee Meeting Agenda Tuesday, March 27, 2018 6:15 p.m., Council Chambers 1.Approval of the Agenda Recommended: That the agenda as circulated by Legislative Services be approved. 2.Declarations of Pecuniary Interest and General Nature Thereof 3.Delegations (a)Andrea Nauss, Manager, BDO Canada LLP Re: Item R1 – FS18-010 – 2017 Year End Audit Plan 4.Consideration of Items Requiring Discussion 1.FS18-010 – 2017 Year End Audit Plan Recommended: 1.That Report No. FS18-010 be received; and 2.That the 2017 Year End Audit Plan as proposed by BDO Canada LLP, be endorsed. 5.Adjournment Town of Aurora Audit Committee Report No. FS18-010 Subject: 2017 Year End Audit Plan Prepared by: Dan Elliott, Director of Financial Services - Treasurer Department: Financial Services Date: March 27, 2018 Recommendation 1. That Report No. FS18-010 be received; and 2. That 2017 year-end Audit Plan as proposed by BDO Canada LLP be endorsed. Executive Summary In accordance with the Audit Committee Terms of Reference, the Audit Committee is responsible to “review the audit plan and audit fee schedule for the ensuing year end”. Staff recommend that the Audit Committee endorse the 2017 year end audit plan as presented. Background Attached (Attachment 1) for the Audit Committees’ review and endorsement is the Town’s 2017 fiscal year end audit plan as prepared by the firm of BDO Canada LLP (BDO). Representatives from BDO Canada LLP will be in attendance in order to review the details of its proposed 2017 year end audit plan. Analysis 2017 Year End Audit Plan Attached is a report prepared by BDO that addresses the audit plan for the 2017 fiscal year end, including the scope and approach to their audit. Staff are not in a position to comment or challenge the approach that the auditors have chosen in order to fulfil their professional obligations required when rendering an audit opinion report. From the perspective of the Financial Services group, we continue to be committed to the provision Audit Committee Meeting Agenda Tuesday, March 27, 2018 Item 1 Page 1 of 33 March 27, 2018 Page 2 of 4 Report No. FS18-010 of any requested documentation to the auditor in a prompt fashion in an effort to facilitate their audit in a timely manner. Audit fees are always quoted on the presumption that staff will have completed all requested schedules and support materials in advance of the audit, and that the financial statements and associated notes have been properly and fully prepared by staff. The fee also anticipates not finding any item of substance requiring extensive additional audit effort to resolve or report. The auditors are required to review all Council minutes, including closed session minutes. They are also required to review the prior year’s internal control letters and consider any concerns raised therein during their current audit, looking for continuing circumstances, weaknesses or concerns as raised in the prior year, and how such may affect the outcome of their current audit, and the opinion to be expressed therefrom. Legal Considerations The annual audit is a statutory requirement, and is guided by professional standards applicable to all Canadian licensed audit practitioners. Financial Implications The cost for this final audit has been provided for within the 2017 budget, as the audit relates to the 2017 fiscal year. The applicable audit fees have been fully accrued as 2017 expenses. An amount of $40,900 has been budgeted for the 2017 audit with anticipated fees of $29,750 for the audit of the consolidated financial statements, excluding administration charges and taxes. Additional audit expenses from this budget may include independent actuarial valuations separately commissioned by staff. Communications Considerations In accordance with the Municipal Act, 2001, S.O.2001, c25, Section 295, the Town’s 2017 audited financial statements will be published on the Town’s website. Also, the auditor will report back to the Audit Committee as to it findings arising from its audit. Audit Committee Meeting Agenda Tuesday, March 27, 2018 Item 1 Page 2 of 33 March 27, 2018 Page 3 of 4 Report No. FS18-010 Link to Strategic Plan Preparation and publication of the annual audited financial statements supports the Strategic Plan principles of integrity, progressive corporate excellence and continuous improvement. Alternative(s) to the Recommendation 1. The Audit Committee may wish to commission the auditors to undertake any special reviews or additional works, however these will incur additional professional fees, for which budget funding will be required. Conclusions The audit committee has been presented with the town’s external auditor’s proposed 2017 year end audit plan for its review and endorsement. Staff recommend that Council endorse the proposed audit plan as presented. Attachments Attachment #1 - 2017 Year-End Auditor’s Reporting Package for Council Previous Reports Nil Pre-submission Review Agenda Management Team review on March 1, 2018 Audit Committee Meeting Agenda Tuesday, March 27, 2018 Item 1 Page 3 of 33 Audit Committee Meeting Agenda Tuesday, March 27, 2018Item 1 Page 4 of 33 The Corporation of the Town of Aurora Planning Report to the Audit Committee March 27, 2018 Audit Committee Meeting Agenda Tuesday, March 27, 2018 Item 1 Page 5 of 33 Audit Committee Meeting Agenda Tuesday, March 27, 2018Item 1 Page 6 of 33 THE CORPORATION OF THE TOWN OF AURORA 3 TABLE OF CONTENTS Terms of Reference 4 Independence 4 Audit Team 5 Responsibilities 6 Audit Strategy 7 Materiality 8 Risks and Planned Audit Response 9 Fraud Discussion 10 Reliance on Experts 12 Audit Timing 13 Fees 14 BDO Resources 15 Appendix A – Engagement Letter Appendix B – Independence Letter Audit Committee Meeting Agenda Tuesday, March 27, 2018 Item 1 Page 7 of 33 THE CORPORATION OF THE TOWN OF AURORA 4 TERMS OF REFERENCE Our overall responsibility is to form and express an opinion on the financial statements. These financial statements are prepared by management, with oversight by those charged with governance. The audit of the financial statements does not relieve management or those charged with governance of their responsibilities. The scope of our work, as confirmed in our engagement letter (as set out in Appendix A), and a summary of our proposed fees are set out below. ENGAGEMENT OBJECTIVES • Forming and expressing an audit opinion on the consolidated financial statements. • Present significant findings to the Audit Committee including key audit and accounting issues, any significant deficiencies in internal control and any other significant matters arising from our work. • Provide timely and constructive management letters. This will include deficiencies in internal control identified during our audit. • Consult regarding accounting, income taxes and reporting matters as requested throughout the year. • Work with management towards the timely issuance of consolidated financial statements. INDEPENDENCE At the core of the provision of external audit services is the concept of independence. Canadian generally accepted auditing standards require us to communicate to the Audit Committee at least annually, all relationships between BDO Canada LLP and its related entities and Client and its related entities, that, in our professional judgment, may reasonably be thought to bear on our independence for the forthcoming audit of the Municipality. Refer to Appendix B. Audit Committee Meeting Agenda Tuesday, March 27, 2018 Item 1 Page 8 of 33 THE CORPORATION OF THE TOWN OF AURORA 5 AUDIT TEAM In order to ensure effective communication between the Audit Committee and BDO Canada LLP, the contact details of the engagement team are outlined below. Name Role Years on engagement Phone number Email address Giselle Bodkin, CPA, CA Engagement Partner 5 Years 705-726-6331 x 8510 gbodkin@bdo.ca Andrea Nauss, CPA, CA Assurance Senior Manager 4 years 705-726-6331 X 8555 anauss@bdo.ca Audit Committee Meeting Agenda Tuesday, March 27, 2018 Item 1 Page 9 of 33 THE CORPORATION OF THE TOWN OF AURORA 6 RESPONSIBILITIES It is important for the Audit Committee to understand the responsibilities that rest with the Municipality and its management, those that rest with the external auditor and the responsibilities of those charged with governance. BDO’s responsibilities are outlined within the annual engagement letter attached as Appendix A to this letter. The oversight and financial reporting responsibilities of management and the Audit Committee are summarized below. MANAGEMENT’S RESPONSIBILITIES • Maintain adequate accounting records and maintain an appropriate system of internal control for the Municipality. • Select and consistently apply appropriate accounting policies. • Prepare the annual consolidated financial statements. • Safeguard the Municipality’s assets and take reasonable steps for the prevention and detection of fraud and other irregularities. • Make available to us, as and when required, all of the Municipality’s accounting records and related financial information. AUDIT COMMITTEE’S RESPONSIBILITIES • Oversee the work of the external auditor engaged for the purpose of issuing an independent auditor’s report. • Facilitate the resolution of disagreements between management and the external auditor regarding financial reporting matters. • Pre-approve all non-audit services to be provided to the Municipality or its subsidiaries by the external auditor. • Review the consolidated financial statements before the Municipality publicly discloses this information. Audit Committee Meeting Agenda Tuesday, March 27, 2018 Item 1 Page 10 of 33 THE CORPORATION OF THE TOWN OF AURORA 7 AUDIT STRATEGY Our overall audit strategy involves extensive partner and manager involvement in all aspects of the planning and execution of the audit and is based on our overall understanding of the Municipality. We will perform a risk based audit which allows us to focus our audit effort on higher risk areas and other areas of concern for management and the Audit Committee. To assess risk accurately, we need to gain a detailed understanding of the Municipality’s business and the environment it operates in. This allows us to identify, assess and respond to the risks of material misstatement. To identify, assess and respond to risk, we obtain an understanding of the system of internal control in place in order to consider the adequacy of these controls as a basis for the preparation of the consolidated financial statements, to determine whether adequate accounting records have been maintained and to assess the adequacy of these controls and records as a basis upon which to design and undertake our audit testing. Based on our risk assessment, we design an appropriate audit strategy to obtain sufficient assurance to enable us to report on the consolidated financial statements. We choose audit procedures that we believe are the most effective and efficient to reduce audit risk to an acceptable low level. The procedures are a combination of testing the operating effectiveness of internal controls, substantive analytical procedures and other tests of detailed transactions. Having planned our audit, we will perform audit procedures, maintaining an appropriate degree of professional skepticism, in order to collect evidence to support our audit opinion. Audit Committee Meeting Agenda Tuesday, March 27, 2018 Item 1 Page 11 of 33 THE CORPORATION OF THE TOWN OF AURORA 8 MATERIALITY Misstatements, including omitted financial statement disclosures, are considered to be material if they, individually or in aggregate, could reasonably be expected to influence the economic decisions of users taken on the basis of the financial statements. Judgments about materiality are made in light of surrounding circumstances and include an assessment of both quantitative and qualitative factors and can be affected by the size or nature of a misstatement, or a combination of both. For purposes of our audit, we have set preliminary materiality at $2,250,000 for the Municipality. Our materiality calculation is based on the Municipality’s preliminary results. In the event that actual results vary significantly from those used to calculate preliminary materiality, we will communicate these changes to the Audit Committee as part of our year end communication. We will communicate all corrected and uncorrected misstatements identified during our audit to the Audit Committee, other than those which we determine to be “clearly trivial”. Misstatements are considered to be clearly trivial for purposes of the audit when they are inconsequential both individually and in aggregate. We encourage management to correct any misstatements identified throughout the audit process. Audit Committee Meeting Agenda Tuesday, March 27, 2018 Item 1 Page 12 of 33 THE CORPORATION OF THE TOWN OF AURORA 9 RISKS AND PLANNED AUDIT RESPONSES Based on our knowledge of the Municipality’s business, our past experience, and knowledge gained from management and the Audit Committee, we have identified the following significant risks; those risks of material misstatement that, in our judgment, require special audit consideration. Significant risks arise mainly because of the complexity of the accounting rules, the extent of estimation and judgment involved in the valuation of these financial statement areas, and the existence of new accounting pronouncements that affect them. We request your input on the following significant risks and whether there are any other areas of concern that the Audit Committee has identified. Management Override of Controls Significant Risk Approach • Management is in a unique position to perpetrate fraud because of management’s ability to directly or indirectly manipulate accounting records prepare fraudulent financial statements by overriding controls that otherwise appear to be operating effectively. • Our planned audit procedures test the appropriateness of journal entries recorded in the general ledger and other adjustments made in the preparation of financial statements. • We will also obtain an understanding of the business rationale for significant transactions that we become aware of that are outside the normal course of operations for the Municipality, or that otherwise appear to be unusual given our understanding of the Municipality and its environment. We will review accounting estimates for biases and evaluate whether the circumstances producing the bias, if any, represented a risk of material misstatement due to fraud. Audit Committee Meeting Agenda Tuesday, March 27, 2018 Item 1 Page 13 of 33 THE CORPORATION OF THE TOWN OF AURORA 10 FRAUD DISCUSSION Canadian generally accepted auditing standards require us to discuss fraud risk with the Audit Committee on an annual basis. We have prepared the following comments to facilitate this discussion. Required Discussion BDO Response Question to Audit Committee Details of existing oversight processes with regards to fraud. Through our planning process, and based on prior years’ audits, we have developed an understanding of your oversight processes including: • Audit Committee charters; • Discussions at audit committee meetings and our attendance at those meetings; • Review of related party transactions; and • Consideration of tone at the top Are there any new processes or changes in existing processes relating to fraud that we should be aware of? Knowledge of actual, suspected or alleged fraud. Currently, we are not aware of any fraud. Are you aware of any instances of actual, suspected or alleged fraud affecting the Municipality? AUDITORS’ RESPONSIBILITIES FOR DETECTING FRAUD We are responsible for planning and performing the audit to obtain reasonable assurance that the consolidated financial statements are free of material misstatements, whether caused by error or fraud, by: • Identifying and assessing the risks of material misstatement due to fraud; • Obtaining sufficient and appropriate audit evidence regarding the assessed risks of material misstatement due to fraud, through designing and implementing appropriate responses; and • Responding appropriately to fraud or suspected fraud identified during the audit. The likelihood of not detecting a material misstatement resulting from fraud is higher than the likelihood of not detecting a material misstatement resulting from error because fraud may involve collusion as well as sophisticated and carefully organized schemes designed to conceal it. Audit Committee Meeting Agenda Tuesday, March 27, 2018 Item 1 Page 14 of 33 THE CORPORATION OF THE TOWN OF AURORA 11 During the audit, we will perform risk assessment procedures and related activities to obtain an understanding of the entity and its environment, including the entity’s internal control, to obtain information for use in identifying the risks of material misstatement due to fraud and will make inquires of management regarding: • Management’s assessment of the risk that the consolidated financial statements may be materially misstated due to fraud, including the nature, extent and frequency of such assessments; • Management’s process for identifying and responding to the risks of fraud in the entity, including any specific risks of fraud that management has identified or that have been brought to its attention, or classes of transactions, account balances, or disclosures for which a risk of fraud is likely to exist; • Management’s communication, if any, to those charged with governance regarding its processes for identifying and responding to the risks of fraud in the entity; and • Management’s communication, if any, to employees regarding its view on business practices and ethical behaviour. In response to our risk assessment and our inquiries of management, we will perform procedures to address the assessed risks, which may include: • Inquire of management, the Audit Committee, and others related to any knowledge of fraud, suspected fraud or alleged fraud; • Perform disaggregated analytical procedures and consider unusual or unexpected relationships identified in the planning of our audit; • Incorporate an element of unpredictability in the selection of the nature, timing and extent of our audit procedures; and • Perform additional required procedures to address the risk of management’s override of controls including; o Testing internal controls designed to prevent and detect fraud; o Testing the appropriateness of a sample of adjusting journal entries and other adjustments for evidence of the possibility of material misstatement due to fraud; o Reviewing accounting estimates for biases that could result in material misstatements due to fraud, including a retrospective review of significant prior years’ estimates; and o Evaluating the business rationale for significant unusual transactions. Audit Committee Meeting Agenda Tuesday, March 27, 2018 Item 1 Page 15 of 33 THE CORPORATION OF THE TOWN OF AURORA 12 RELIANCE ON EXPERTS In order for us to perform adequate audit procedures on certain financial statement areas, we will be relying on the work of, and the report prepared by Dixon Actuarial Services Inc. Canadian generally accepted auditing standards require us to communicate with the expert. We propose to discuss the following with Dixon Actuarial Services Inc.: • The objective and nature of our audit engagement and how we intend to use the expert's findings and report. • Our assessment of the significance and risk aspects of the engagement that will affect the expert's work. • The requirement to advise us if they have any relationship with the organization which could impair their judgment or objectivity in the conduct of their engagement. • The nature, timing and extent of the expert's work and our planned review of it, possibly including review of their working papers. • Confirmation that the assumptions used in their calculations are consistent with those used in the prior periods and with industry standards. • Their obligation to advise BDO Canada LLP of any matters up to the estimated audit report date that may affect their calculations and their report. We ask that the appropriate level of management review the data provided to Dixon Actuarial Services Inc. and that they also review the assumptions used and results reported by the expert for reasonableness. Audit Committee Meeting Agenda Tuesday, March 27, 2018 Item 1 Page 16 of 33 THE CORPORATION OF THE TOWN OF AURORA 13 AUDIT TIMING The following schedule outlines the anticipated timing of the audit of the consolidated financial statements of the Municipality. Audit tasks and deliverables Dates Planning visit and interim fieldwork commences January 2018 Final audit fieldwork commences April 2018 Present draft consolidated financial statements and final report to the Audit Committee June 2018 As part of the year-end audit committee meeting, we will provide the Audit Committee with a copy of our draft audit opinion, discuss our findings, including significant estimates utilized by management, accounting policies, financial statement disclosures, and significant transactions completed during the year. We will also report any significant internal control deficiencies identified during our audit and reconfirm our independence. Audit Committee Meeting Agenda Tuesday, March 27, 2018 Item 1 Page 17 of 33 THE CORPORATION OF THE TOWN OF AURORA 14 FEES We estimate our fees for 2017 will be $29,750 for the audit of the consolidated financial statements. Our estimated fees are based on the time expected to complete the audit and excludes taxes, out of pocket expenses, and internal administration fees and are based upon the following assumptions: • We will be provided with the requested audit schedules, working papers and descriptions of accounting systems and processes as detailed in our annual requirements letter upon the commencement of fieldwork; • The (consolidation and) draft financial statements, including notes, are prepared to a standard suitable for audit with all balances reconciled to the underlying accounting records; • There will be minimal adjusting journal entries; and • The nature of the Municipality’s operations remain consistent with the prior year and there have been no changes in accounting personnel. In the event that we incur additional charges or we experience delays in completing the audit, we will advise management. Audit Committee Meeting Agenda Tuesday, March 27, 2018 Item 1 Page 18 of 33 THE CORPORATION OF THE TOWN OF AURORA 15 BDO RESOURCES BDO is one of Canada’s largest accounting services firms providing assurance and accounting, taxation, financial advisory, risk advisory, financial recovery and consulting services to a variety of publicly traded and privately held companies. BDO serves its clients through 105 offices across Canada. As a member firm of BDO International Limited, BDO serves its multinational clients through a global network of over 1,000 offices in more than 100 countries. Commitment to knowledge and best practice sharing ensures that expertise is easily shared across our global network and common methodologies and information technology ensures efficient and effective service delivery to our clients. Outlined below is a summary of certain BDO resources which may be of interest to the Audit Committee. PUBLICATIONS BDO’s national and international accounting and assurance department issues publications on the transition and application of Public Sector Accounting Standards (PSAB). In addition, we offer a wide array of publications on Accounting Standards for Private Enterprises (ASPE), International Financial Reporting Standards (IFRS), and Accounting Standards for Not-for-Profit Organizations (ASPNO). For additional information on PSAB, including links to archived publications and model financial statements, refer to the link below: http://www.bdo.ca/en/library/services/assurance-and-accounting/pages/default.aspx. TAX BULLETINS, ALERTS AND NEWSLETTERS BDO’s national tax department issues a number of bulletins, alerts and newsletters relating to corporate federal, personal, commodity, transfer pricing and international tax matters. For additional information on tax matters and links to archived tax publications, please refer to the following link: Tax Library | BDO Canada Audit Committee Meeting Agenda Tuesday, March 27, 2018 Item 1 Page 19 of 33 APPENDIX A Engagement Letter Audit Committee Meeting Agenda Tuesday, March 27, 2018 Item 1 Page 20 of 33 Tel: 705-726-6331 BDO Canada LLP Fax: 705-722-6588 300 Lakeshore Drive www.bdo.ca Suite 300 Barrie, Ontario L4N 0B4 Page 1 of 11 BDO Canada LLP, a Canadian limited liability partnership, is a member of BDO International Limited, a UK company limited by guarantee, and forms part of the international BDO network of independent member firms. March 27, 2018 The Corporation of the Town of Aurora 100 John West Way, Box 1000 Auroral, Ontario L4G 6J1 Dear Sir/Madam, We understand that you wish for us to continue as the auditors of The Corporation of the Town of Aurora for its fiscal year ended December 31, 2017 and subsequent years. We are pleased to continue as your auditors subject to the terms and conditions of this Agreement, to which the attached Standard Terms and Conditions form an integral part. The definitions set out in the Standard Terms and Conditions are applicable throughout this Agreement. This Agreement will remain in place and fully effective for future years until varied or replaced by another relevant written agreement. Giselle Bodkin will be the Engagement Partner for all assurance work we perform for you. The Engagement Partner will call upon other individuals with specialized knowledge to assist in the performance of Services. Our Role as Auditors We will conduct our audit(s) in accordance with Canadian generally accepted auditing standards. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements ("financial statements") prepared in accordance with Canadian public sector accounting standards are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. Our audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by you, as well as evaluating the overall financial statement presentation. Because of the inherent limitations of an audit, together with the inherent limitations of internal control, there is an unavoidable risk that some material misstatements, whether by fraud or error, may not be detected, even though the audit is properly planned and performed in accordance with Canadian generally accepted auditing standards. In making our risk assessments, we consider internal control relevant to your preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of your internal controls. However, we will communicate to you concerning any significant deficiencies in internal controls relevant to the audit of the financial statements that we have identified during the audit. We will also communicate matters required by professional standards, to the extent that such matters come to our attention, to you, those charged with governance and/or the board of directors. Audit Committee Meeting Agenda Tuesday, March 27, 2018 Item 1 Page 21 of 33 Page 2 of 11 Reporting Our audit will be conducted on the basis that the financial statements have been prepared in accordance with Canadian public sector accounting standards. Our independent auditor’s report will be substantially in the form set out in Canadian Auditing Standard (CAS) 700. The form and content of our report may need to be amended in the light of our audit findings. If we are unable to issue or decline to issue an audit report, we will discuss the reasons with you and seek to resolve any differences of view that may exist. Role of Management and Those Charged with Governance You acknowledge and understand that you have responsibility for: (a) the preparation and fair presentation of the financial statements in accordance with Canadian public sector accounting standards. The audit of the financial statements does not relieve you of your responsibilities; (b) such internal controls as you determine are necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error; and (c) providing us with: • access, in a timely manner, to all information of which you are aware that is relevant to the preparation of the financial statements such as records, documentation and other matters; • additional information that we may request for the purpose of the audit; • unrestricted access to persons within the entity from whom we determine it is necessary to obtain audit evidence; • financial and non-financial information (other information) that will be included in document(s) containing financial statements and our audit report thereon prior to the date of our auditor’s report. If it is not possible to provide all the other information prior to the date of our auditor's report, you are responsible for provision of such other information as soon as practicable; and • written confirmation concerning representations made to us in connection with the audit. If appropriate and adequate written representations are not provided to us, professional standards require that we disclaim an audit opinion. Financial Statement Services We will obtain your approval, if during the course of our engagement we: (a) prepare or change a journal entry; or (b) prepare or change an account code or a classification for a transaction. As agreed, we will provide assistance in the preparation of the financial statements. Audit Committee Meeting Agenda Tuesday, March 27, 2018 Item 1 Page 22 of 33 Page 3 of 11 These services create a threat to our independence. We, therefore, require that the following safeguards be put into place: (a) that you create the source data for all accounting entries; (b) that you develop any underlying assumptions for the accounting treatment and measurement of entries; and (c) that you review and approve the draft financial statements, including the notes to the financial statements. Tax Services Our audit is conducted primarily to enable us to express an opinion on the financial statements. The audit process is not designed to provide us with a full understanding of your tax situation and in particular, to allow us to determine whether the entity has specific tax compliance issues. We understand that you are not looking to BDO to provide you with any guidance or advice in regard to tax planning or compliance. Additional Services We are available to provide a wide range of services beyond those outlined in this Agreement. To the extent that any additional services that we provide to you that are not provided under a separate written engagement agreement, the provisions of this Agreement will apply to the services. Standard Terms and Conditions A copy of our Standard Terms and Conditions is attached as Appendix 1. You should ensure that you read and understand them. The Standard Terms and Conditions include clauses that limit our professional liability. Please sign and return the attached copy of this Agreement to indicate your agreement with it. If you have any questions concerning this Agreement, please contact us before signing it. It is a pleasure for us to be of service and we look forward to many future years of association with you. Audit Committee Meeting Agenda Tuesday, March 27, 2018 Item 1 Page 23 of 33 Audit Committee Meeting Agenda Tuesday, March 27, 2018Item 1 Page 24 of 33 Page 5 of 11 Appendix 1 - Standard Terms and Conditions 1. Overview and Interpretation 1.1 This Agreement sets forth the entire agreement between the parties in relation to Services and it supersedes all prior agreements, negotiations or understandings, whether oral or written, with respect to Services. To the extent that any of the provisions of the accompanying letter conflict with these Standard Terms and Conditions, these Standard Terms and Conditions shall prevail. This Agreement may not be changed, modified or waived in whole or part except by an instrument in writing signed by both parties. 1.2 In this agreement, the following words and expressions have the meanings set out below: This Agreement – these Standard Terms and Conditions, the letter to which they are attached, and any supporting schedules or other appendices to the letter Services – the services provided or to be provided under this Agreement We, us, our, BDO – refer to BDO Canada LLP, a Canadian limited liability partnership organized under the laws of the Province of Ontario You, your – the party or parties contracting with BDO under this agreement, including the party’s or parties’ management and those charged with corporate governance. You and your does not include BDO, its affiliates or BDO Member Firms BDO Member Firm or Firms – any firm or firms that form part of the international network of independent firms that are members of BDO International Limited Confidential Information - information that contains identifying features that can be attributed to you or individual personnel 2. BDO Network and Sole Recourse 2.1 BDO is a member of BDO International Limited, a UK company limited by guarantee, and forms part of the international network of independent member firms (i.e. BDO Member Firms), each of which is a separate legal entity. 2.2 We may use other BDO Member Firms or subcontractors to provide Services; however, we remain solely responsible for Services. You agree not to bring any claim or action against another BDO Member Firm (or their partners, members, directors, employees or subcontractors) or our subcontractors in respect of any liability relating to the provision of Services. 2.3 You agree that any of our affiliates, subcontractors, and other BDO Member Firms and any subcontractors thereof whom we directly or indirectly involve in providing Services have the right to rely on and enforce Section 2.2 above as if they were a party to this agreement. 3. Respective Responsibilities 3.1 We will use reasonable efforts to complete, within any agreed-upon time frame, the performance of Services. Audit Committee Meeting Agenda Tuesday, March 27, 2018 Item 1 Page 25 of 33 Page 6 of 11 3.2 You shall be responsible for your personnel’s compliance with your obligations under this Agreement. We will not be responsible for any delays or other consequences arising from you not fulfilling your obligations. 4. Working Papers and Deliverables 4.1 Ownership – Any documents prepared by us or for us in connection with Services belong solely to us. 4.2 Oral advice and draft deliverables – You should not rely upon any draft deliverables or oral advice provided by us. Should you wish to rely upon something we have said to you, please let us know and, if possible, we will provide the information that you require in writing. 4.3 Translated documents - If you engage us to translate any documents, advice, opinions, reports or other work product of BDO from one language to another, you are responsible for the accuracy of the translation work. 4.4 Reliance by Third Parties – Our Services will not be planned or conducted in contemplation of or for the purpose of reliance by any third party other than you and any party to whom the assurance report is addressed. Items of possible interest to a third party will not be addressed and matters may exist that would be assessed differently by a third party, possibly in connection with a specific transaction. 4.5 Consent to use the Report - If we are requested to consent to the use of our report in connection with a continuous disclosure document, a public or private offering document, an annual report or any other document, we will consider, at the relevant time, providing consent and any conditions applicable to our consent. Our consent must be in writing. In order to provide consent, professional standards require that we read the other information in the related document and consider whether such information is materially inconsistent with the related financial statements. We will require adequate notice of the request for consent to allow us to consider your identification and resolution of events occurring in the period since the date of our report, and to obtain updated written representation letters. Such procedures will be performed at your cost. 5. Confidentiality 5.1 We agree to use Confidential Information provided by you only in relation to the services in connection with which the information is provided and we will not disclose the information, except where required by law, regulation or professional obligation. We may however, give Confidential Information to other BDO Member Firms or other subcontractors assisting us in providing Services. Any party to whom we subcontract work will be required to keep Confidential Information confidential either by professional obligation or contract with us. 5.2 BDO shall be entitled to include a description of services we render to or for you in marketing and research materials and disclose such information to third parties, provided that all such information will be made anonymous and not associated with you. Additionally, we may analyze information on an industry or sector basis for internal purposes or to provide industry/sector wide information to our clients or potential clients. You consent to our using information obtained from you in this way provided that the outputs therefrom will not contain any identifying features that can be attributed to you. Audit Committee Meeting Agenda Tuesday, March 27, 2018 Item 1 Page 26 of 33 Page 7 of 11 6. Independence 6.1 Professional and certain regulatory standards require us to be independent, in both fact and appearance, with respect to our clients in the performance of our services. We will communicate to you any relationships between BDO (including its related entities) and you that, in our professional judgment, may reasonably be thought to bear on our independence. Further, we will confirm our independence in writing. 7. Offers of Employment 7.1 Any discussions that you, or any party acting on your behalf, have with professional personnel of our Firm regarding employment could pose a threat to our independence. Your recruitment of an engagement team member from the current or prior year's engagement may compromise our independence and our ability to render agreed services to you. Engagement team members may include current and former partners and staff of BDO, other BDO Member Firms and other firms who work under our direction. Therefore, you agree to inform us prior to any such discussions so that you and we can implement appropriate safeguards to maintain our independence. 8. Professional and Regulatory Oversight 8.1 As required by legal, regulatory, or professional authorities (both in Canada and abroad) and by BDO policy, our client files must periodically be reviewed by practice inspectors to ensure that we are adhering to professional and BDO standards. It is understood that by entering into this agreement, you provide your consent to us providing our files relating to your engagement to the practice inspectors for the sole purpose of their inspection. 8.2 Certain regulatory bodies may also have the right to conduct investigations of you, including the Services provided by us. To the extent practicable and permitted by law, we will advise you of any such investigation request or order prior to providing our working papers. 8.3 You agree to reimburse us for our time and expenses, including reasonable legal fees, incurred in responding to any investigation that is requested or authorized by you or investigations of you undertaken under government regulation or authority, court order or other legal process. 9. Privacy and Consents 9.1 You agree we will have access to all personal information in your custody that we require to complete our engagement. We may collect, use, transfer, store, or process such information disclosed by you of a personal nature (personal information). Our Services are provided on the understanding that: (a) you have obtained any consents for collection, use and disclosure to us of personal information required under all applicable privacy legislation; and (b) we will hold all personal information in compliance with our Privacy Statement. 10. Electronic Communications 10.1 Both parties recognize and accept the security risks associated with email communications, including but not limited to the lack of security, unreliability of delivery and possible loss Audit Committee Meeting Agenda Tuesday, March 27, 2018 Item 1 Page 27 of 33 Page 8 of 11 of confidentiality and privilege. Unless you request in writing that we do not communicate by internet email, you assume all responsibility and liability in respect of risk associated with its use. 10.2 By signing this agreement, you provide BDO with express consent to communicate with you and your employees, as applicable, electronically, including sending BDO newsletters, publications, announcements, invitations and other news and alerts that may be of interest to you. You and your employees may withdraw such consent at any time by contacting BDO at www.bdo.ca/unsubscribe. 11. Limitation of Liability 11.1 In any dispute, action, claim, demand for losses or damages arising out of the Services performed by BDO pursuant to this Agreement, BDO shall only be liable for its proportionate share of the total liability based on degree of fault as determined by a court of competent jurisdiction or by an independent arbitrator as a result of the dispute resolution procedures, notwithstanding the provisions of any statute or rule of common law which create, or purport to create, joint and several liability. 11.2 Our liability shall be restricted to damages of a direct and compensatory nature and shall not include indirect, consequential, aggravated or punitive damages, or damages for loss of profits or expected tax savings, whether or not the likelihood of such loss or damage was contemplated. 11.3 You agree that BDO shall in no event be liable to you for any actions, damages, claims, liabilities, costs, expenses, or losses in any way arising out of or relating to the Services performed hereunder for an aggregate amount of more than the higher of: (a) three times the fees paid by you to BDO in the twelve months preceding the incident giving rise to the claim; and (b) $25,000. 11.4 No exclusion or limitation on the liability of other responsible persons imposed or agreed at any time shall affect any assessment of our proportionate liability hereunder, nor shall settlement of or difficulty enforcing any claim, or the death, dissolution or insolvency of any such other responsible persons or their ceasing to be liable for the loss or damage or any portion thereof, affect any such assessment. 11.5 You agree claims or actions relating to the delivery of Services shall be brought against us alone, and not against any individual. Where our individuals are described as partners, they are acting as one of our members. 12. Indemnity 12.1 To the fullest extent permitted by applicable law and professional regulations, you agree to indemnify and hold harmless BDO from and against all losses, costs (including solicitors' fees), damages, expenses, claims, demands or liabilities arising out of or in consequence of: (a) a misrepresentation by a member of your management or board of directors, regardless of whether such person was acting in your interest; Audit Committee Meeting Agenda Tuesday, March 27, 2018 Item 1 Page 28 of 33 Page 9 of 11 13. Alternative Dispute Resolution 13.1 Both parties agree that they will first attempt to settle any dispute arising out of or relating to this agreement or the Services provided hereunder through good faith negotiations. 13.2 In the event that the parties are unable to settle or resolve their dispute through negotiation, such dispute shall be subject to mediation pursuant to the National Mediation rules of the ADR Institute of Canada Inc. All disputes remaining unsettled for more than 60 days following the parties first meeting with a mediator or such longer period as the parties mutually agree upon shall be subject to arbitration pursuant to the National Arbitration Rules of the ADR Institute of Canada Inc. Such arbitration shall be final, conclusive and binding upon the parties, and the parties shall have no right of appeal or judicial review of the decision. The parties hereby waive any such right of appeal which may otherwise be provided for in any provincial arbitration statute made applicable under the National Arbitration Rules. 14. Limitation Period 14.1 You shall make any claim relating to Services or otherwise under this Agreement no later than one year after you became aware or ought reasonably to have become aware of the facts giving rise to any such claim. 14.2 You shall in no event make any claim relating to the Services or otherwise under this Agreement later than two years after the completion of the Services under this Agreement. 14.3 To the extent permitted by law, the parties to this Agreement agree that the limitation periods established in this Agreement replace any limitation periods under any limitations act and/or any other applicable legislation and any limitation periods under any limitations act and/or any other applicable legislation shall not alter the limitation periods specified in this Agreement. 15. Québec Personnel 15.1 We may sometimes have individual partners and employees performing Services within the Province of Québec who are members of the Ordre des comptables professionnels agréés du Québec. Any such members performing professional services hereunder assumes full personal civil liability arising from the practice of their profession, regardless of their status within our partnership. They may not invoke the liability of our partnership as grounds for excluding or limiting their own liability. The provisions in Sections 11 (Limitation of Liability) and 14 (Limitation Period) shall therefore not apply to limit the personal civil liability of partners and employees who are members of the Ordre des comptables professionnels agréés du Québec. (b) the services performed by BDO pursuant to this Agreement, unless, and to the extent that, such losses, costs, damages and expenses are found by a court of competent jurisdiction to have been due to the gross negligence of BDO. In the event that the matter is settled out of court, we will mutually agree on the extent of the indemnification to be provided by you, failing which, the matter may be referred to dispute resolution in accordance with the terms of this letter. Audit Committee Meeting Agenda Tuesday, March 27, 2018 Item 1 Page 29 of 33 Page 10 of 11 16. Termination 16.1 This Agreement applies to Services whenever performed (including before the date of this Agreement). 16.2 You or we may terminate this Agreement at any time upon written notice of such termination to the other party. We will not be liable for any loss, cost or expense arising from such termination. You agree to pay us for all Services performed up to the date of termination, including Services performed, work-in-progress and expenses incurred by us up to and including the effective date of the termination of this Agreement. 17. Fees and Billings 17.1 Our estimated fee is based on an assumed level of quality of your accounting records, the agreed upon level of preparation and assistance from your personnel and adherence to the agreed-upon timetable. Our estimated fee also assumes that your financial statements are in accordance with the applicable financial reporting framework and that there are no significant new or changed accounting policies or issues or internal control or other reporting issues. We will inform you on a timely basis if these factors are not in place. 17.2 Should our assumptions with respect to the quality of your accounting records be incorrect or should the conditions of the records, degree of cooperation, results of audit procedures, or other matters beyond our reasonable control require additional commitments by us beyond those upon which our estimated fees are based, we may adjust our fees and planned completion dates. 17.3 Our professional fees will be based on our regular billing rates which depend on the means by which and by whom our Services are provided. We also will bill you for our out-of- pocket expenses, our administrative charge (described below), and applicable Harmonized Sales Tax, Goods and Services Tax and Provincial Sales Tax. 17.4 Our administrative charge is calculated as a percentage of our professional fee and represents an allocation of estimated costs associated with our technology infrastructure, telephone charges, photocopying and some support staff time costs. 17.5 Our accounts are due when rendered. BDO may suspend the performance of Services in the event that you fail to pay an invoice when it is due. Interest may be charged at the rate of 12% per annum on all accounts outstanding for more than 30 days. 18. Governing Laws 18.1 The terms of our engagement shall remain operative until amended, terminated, or superseded in writing. They shall be interpreted according to the laws of the province or territory in which BDO’s principal Canadian office performing the engagement is located, without regard to such province/territory’s rules on conflicts of law. 19. Entire Agreement and Survival 19.1 This Agreement sets forth the entire agreement between the parties with respect to the subject matter herein, superseding all prior agreements, negotiations or understandings, whether oral or written, with respect to such subject matter. It is understood that this Agreement will not be superseded by any contract with us for other specific services that Audit Committee Meeting Agenda Tuesday, March 27, 2018 Item 1 Page 30 of 33 Page 11 of 11 are not of the same scope as the Services contemplated in this Agreement, unless the other contract explicitly references this Agreement and an intent to supersede it. 19.2 The provisions of this Agreement that give either of us rights or obligations beyond its termination shall continue indefinitely following the termination of this Agreement. Any clause that is meant to continue to apply after termination of this Agreement will do so. 20. Force Majeure 20.1 We will not be liable for any delays or failures in performance or breach of contract due to events or circumstances beyond our reasonable control, including acts of God, war, acts by governments and regulators, acts of terrorism, accident, fire, flood or storm or civil disturbance. 21. Assignment 21.1 No party may assign, transfer or delegate any of the rights or obligations hereunder without the written consent of the other party or parties. BDO may engage independent contractors and BDO Member Firms to assist us in performing the Services in this Agreement without your consent. 22. Severability 22.1 If a court or regulator with proper jurisdiction determines that a provision of this Agreement is invalid, then the provision will be interpreted in a way that is valid under applicable law or regulation. If any provision is invalid, the rest of this Agreement will remain effective. Version: 201801 Audit Committee Meeting Agenda Tuesday, March 27, 2018 Item 1 Page 31 of 33 APPENDIX B Independence Letter Audit Committee Meeting Agenda Tuesday, March 27, 2018 Item 1 Page 32 of 33 Audit Committee Meeting Agenda Tuesday, March 27, 2018Item 1 Page 33 of 33