Canada’s securities regulators are proposing to make the new requirements for internal control over financial reporting for public companies effective for financial years ending on or after June 30, 2008. This deadline is meant to give issuers the necessary lead time to plan and implement their internal control compliance activities. The new requirements—affecting CEO/CFO certification and annual MD&A disclosure—are likely to be published for public comment by the end of March 2007. We expect that under the new requirements
- CEOs and CFOs will have to certify that they have evaluated the effectiveness of the issuer’s internal control over financial reporting as of the end of the financial year, and
- the annual MD&A will have to describe the evaluation process and disclose the CEO’s and CFO’s conclusions about the effectiveness of the controls.
These requirements will be added to the current requirements for CEOs and CFOs to certify the design of internal controls and disclose material changes in such controls. Issuers will not be required to obtain an audit opinion on the effectiveness of internal controls, as is required of U.S. and cross-border companies under section 404 of the Sarbanes-Oxley Act of 2002. Although this represents a significant difference between the U.S. and Canadian regimes, some convergence is occurring because the SEC and the U.S. Public Company Accounting Oversight Board are in the process of softening the auditor attestation requirements and taking other steps to help companies comply with the U.S. rules more cost-effectively.
A copy of CSA Notice 52-317, Timing of Proposed National Instrument 52-109 Certification of Disclosure in Issuers’ Annual and Interim Filings, can be obtained on the Ontario Securities Commission’s website at
www.osc.gov.on.ca/Regulation/Rulemaking/Current/Part5/csa_20070209_52-317_cert-of-disc.pdf
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.
