June 08, 2006
Are Canadian Directors more exposed to liability because of the proposed revisions to MI 52-109 under CSA Staff Notice 52-313?
Maybe.
Think about it. With the increase in civil liabilities introduced on January 1, 2006 (Bill 198), coupled with the proposed removal of external auditor attestation on a company's internal controls over financial reporting (withdrawal of MI 52-111 as outlined in CSA Staff Notice 52-313), some directors may start to feel a little exposed.
For issuers based on U.S. exchanges, the SOX 404 (Management and Auditor Report on Internal Controls over Financial Reporting) process to a certain extent transfers some of the risk for review over ICFR to the outside auditors and a board member can "rely" more heavily on the auditors' independent assessment of ICFR effectiveness. Not so, with the Canadian approach. Such a trusting country. Indeed it is more than a trust issue. The Canadian market is comprised of many more micro and small cap companies and regulators are worried about companies getting buried in auditor fees. How do Canadian investors feel about this approach? Probably a little exposed just like the directors.
The reality is that the Canadian approach is going to force boards, particularly audit committees, to question CEOs and CFOs more aggressively with respect to disclosure and ICFR activities. Can't you just hear the late night conversations emanating from Bay Street and Howe Street, "Where were you on the night of Year End close? This is the last time I'm going to ask."
In addition, I suspect that board members are not going to be happy about their potential increase in liability so they will make greater use of internal audit functions, and compliance tools (excellent!) to invigorate their organizations.
For TSX and TSX-V based companies looking to get a better fix on what the proposed changes proposed by CSA Notice 52-313 please click here to find out more about sessions being presented by Thomson-Carswell and Torys LLP on June 21st and June 22nd.
Go Oilers!
Think about it. With the increase in civil liabilities introduced on January 1, 2006 (Bill 198), coupled with the proposed removal of external auditor attestation on a company's internal controls over financial reporting (withdrawal of MI 52-111 as outlined in CSA Staff Notice 52-313), some directors may start to feel a little exposed.
For issuers based on U.S. exchanges, the SOX 404 (Management and Auditor Report on Internal Controls over Financial Reporting) process to a certain extent transfers some of the risk for review over ICFR to the outside auditors and a board member can "rely" more heavily on the auditors' independent assessment of ICFR effectiveness. Not so, with the Canadian approach. Such a trusting country. Indeed it is more than a trust issue. The Canadian market is comprised of many more micro and small cap companies and regulators are worried about companies getting buried in auditor fees. How do Canadian investors feel about this approach? Probably a little exposed just like the directors.
The reality is that the Canadian approach is going to force boards, particularly audit committees, to question CEOs and CFOs more aggressively with respect to disclosure and ICFR activities. Can't you just hear the late night conversations emanating from Bay Street and Howe Street, "Where were you on the night of Year End close? This is the last time I'm going to ask."
In addition, I suspect that board members are not going to be happy about their potential increase in liability so they will make greater use of internal audit functions, and compliance tools (excellent!) to invigorate their organizations.
For TSX and TSX-V based companies looking to get a better fix on what the proposed changes proposed by CSA Notice 52-313 please click here to find out more about sessions being presented by Thomson-Carswell and Torys LLP on June 21st and June 22nd.
Go Oilers!
