Common deficiencies in annual MD&A disclosure identified
in Staff Notice 52-327 include:
1. No disclosure, or unclear or incomplete disclosure, in the
annual MD&A of certifying officers' conclusions
about the effectiveness of internal control over financial
reporting (ICFR) or disclosure controls and procedures
(DC&P). For example, issuers should consider the following
in preparing their annual MD&A:
Certifying officers cannot qualify their assessments of
effectiveness by stating that the issuer's ICFR or
DC&P is effective subject to certain qualifications or
exceptions — unless the qualification pertains to one of
the permitted scope limitations available in Section 3.3 of the
A certifying officer may conclude that the issuer's
ICFR or DC&P is "effective" without referring to
the "design" and "operation" of said ICFR and
DC&P separately. However, if the effectiveness of design of
ICFR or DC&P is noted, a conclusion with respect to the
effectiveness of operation must also be stated.
Issuers are not required to reference the Certification Rule
definitions of ICFR or DC&P in their annual filings. Simply
stating that the ICFR or DC&P is "effective" or
"ineffective" will be sufficient. However, if these
definitions are included, they must be replicated verbatim and in
2. Inadequate disclosure in the annual MD&A of material
weaknesses in ICFR and significant weaknesses in DC&P.
Issuers should note:
The Certification Rule does not require disclosure of a
weakness or deficiency that is not significant enough to constitute
a material weakness in ICFR or a significant weakness in
DC&P. If any such weakness or deficiency is discussed, the
disclosure should clearly indicate that it does not constitute a
material weakness in ICFR or a significant weakness in
If a material weakness is identified, an issuer cannot conclude
that ICFR or DC&P is effective, even if a remediation plan
has been put into action (i.e., the material weakness
existed at year-end).
It is important to note that a material weakness in the
issuer's ICFR will almost always represent a significant
weakness in the issuer's DC&P, given the
substantial overlap in the definitions.
CSA Staff also made note of common deficiencies with respect to
certificates filed by reporting issuers pursuant to the
3. Not using the exact wording prescribed by the required
The most common mistake is deleting the following paragraphs
when they do not apply instead of marking them "not
applicable" or "N/A": (1) paragraph 5.2 on ICFR
material weakness relating to design; (2) paragraph 5.3 on
limitation of scope of design; or (3) subparagraph 6(b)(ii) on ICFR
material weakness relating to operation. These paragraphs must be
left in the certificate in order to maintain the sequence of
4. Issues with dating and timing of filing of the
The date on the certificates is not the same date as the date
the certificate is filed.
The certificates are not filed concurrently with the AIF when
the AIF is filed after the financial statements and
The date in paragraph 7 of Form 52-109F1 is not the date
immediately following the end of the period covered by the
issuer's most recent interim filing.
Restated and Re-Filed Financial Statements
The CSA also notes in Staff Notice 52-327 that issuers that
restated or re-filed financial statements did not always consider
if the misstatement in the financial statements was related to a
material weakness in ICFR. As a result, CSA Staff found
deficiencies in the disclosure of material weaknesses, in the
conclusions of the effectiveness of ICFR and DC&P, and in
the disclosure of material changes to ICFR when a material weakness
CSA Staff will continue to request re-filing of MD&A or
certificates in the future if an issuer has not met the
requirements of the Certification Rule. In addition, CSA Staff have
stated that they may consider other regulatory action as
circumstances warrant. Please don't hesitate to contact us
should you have any questions. We would be pleased to assist you
with the preparation of MD&A and certificates in accordance
with the Certification Rule.
The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.
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