Canada strengthens financial reporting requirements

D&O insurers and risk managers take note: Canada’s version of the U.S. Sarbanes-Oxley Act has arrived.
The Canadian Securities Administrators (CSA) recently announced proposals that would require all publicly-traded companies in all Canadian jurisdictions to report on the effectiveness of their internal controls over financial reporting, starting as early as Dec. 31, 2007.
“All members of the CSA have agreed on an effective way to improve the quality, reliability and transparency of financial reporting for investors by requiring disclosure of the effectiveness of the internal controls that support the integrity of financial statements,” according to Jean St-Gelais, chair of the CSA and president and CEO of Qubec’s Autorit des marchs financiers.
“We believe the proposed additional disclosure will increase management’s focus on, and accountability for, the quality of internal controls over financial reporting. This will strengthen investor protection while appropriately balancing the costs and benefits associated with internal control reporting requirements for companies of all sizes.”
The CSA, the council of the securities regulators of Canada’s provinces and territories, coordinates and harmonizes regulation for the Canadian capital markets. The CSA Notice 52- 313 regarding the status of internal control reporting requirements is available on several CSA members’ Web sites.
After extensive consultation, the CSA said it decided not to proceed with an earlier proposal that would have required companies to obtain from their external auditors an audit opinion concerning management’s evaluation of the effectiveness of internal controls over financial reporting.
The proposed harmonized requirements would apply in all Canadian jurisdictions to all companies listed on the TSX and TSX Venture exchanges. The earliest the proposed requirements would be adopted would be for financial years ending on or after Dec. 31, 2007.
This schedule would allow significant time for companies to plan and implement the activities needed to support the new disclosures, the CSA says in a press release.