April 11, 2007
All Public Company Boards Should ask to "Ecce Signum"....
I was speaking to a public company board member the other day and the board member expressed concern over whether the company in fact was really in compliance with disclosure control and internal control over financial reporting requirements.
As a Board Member, your CFO and Finance Team should allow you to "Ecce Signum" or Behold the Proof.
You should not have to "Trust" people that these projects are OK!
As the SEC daily issues complaints against companies for various infractions and as Canada's team at the Ontario Securities Commission is now headed up by a litigator, David Wilson, Boards have to be more and more "hands-on" and be concerned about key areas such as internal control over financial reporting (ICFR) in which they have liability.
Here are Five Questions to ask the Finance Team in your Company about your ICFR project and how to "Behold the Proof"
1.) Ask what financial compliance framework they are using to evaluate internal control over financial reporting.
2. )Ask to see sample documentation of a key process such as financial reporting and entity level controls.
3. )Ask if the company is doing sub-certifications and if so, ask to see some samples.
4. )Ask what approach/methods the company is using to test the effectiveness of internal controls.
5. )Ask about the certification documents that have been signed (US s.302 or s. 404; Canada MI 52-109F1) to see what detail there is to back-up these certifications could be provided to the Board if required.
The answers to these questions should be readily available if ICFR projects are on track.
What is of concern to many board members is that they asking and receiving a short report on the topic. Ask more questions. Many CFOs know that Boards are not really interested in these topics. The Audit Committee is responsible for ICFR, but liability for incorrect public disclosures falls on the entire board as well as CFO and CEO.
If your company has to comply with SOX 404 or NI 52-109, and wants to do it in a sensible and cost effective way, contact http://www.issuescentral.com/ for more information on Compliance Playbook® for companies based outside of Canada. For Canadian based companies, see http://www.compliancepartner.ca/ for more information on Compliance Partner™ from Thomson Carswell.
As a Board Member, your CFO and Finance Team should allow you to "Ecce Signum" or Behold the Proof.
You should not have to "Trust" people that these projects are OK!
As the SEC daily issues complaints against companies for various infractions and as Canada's team at the Ontario Securities Commission is now headed up by a litigator, David Wilson, Boards have to be more and more "hands-on" and be concerned about key areas such as internal control over financial reporting (ICFR) in which they have liability.
Here are Five Questions to ask the Finance Team in your Company about your ICFR project and how to "Behold the Proof"
1.) Ask what financial compliance framework they are using to evaluate internal control over financial reporting.
2. )Ask to see sample documentation of a key process such as financial reporting and entity level controls.
3. )Ask if the company is doing sub-certifications and if so, ask to see some samples.
4. )Ask what approach/methods the company is using to test the effectiveness of internal controls.
5. )Ask about the certification documents that have been signed (US s.302 or s. 404; Canada MI 52-109F1) to see what detail there is to back-up these certifications could be provided to the Board if required.
The answers to these questions should be readily available if ICFR projects are on track.
What is of concern to many board members is that they asking and receiving a short report on the topic. Ask more questions. Many CFOs know that Boards are not really interested in these topics. The Audit Committee is responsible for ICFR, but liability for incorrect public disclosures falls on the entire board as well as CFO and CEO.
If your company has to comply with SOX 404 or NI 52-109, and wants to do it in a sensible and cost effective way, contact http://www.issuescentral.com/ for more information on Compliance Playbook® for companies based outside of Canada. For Canadian based companies, see http://www.compliancepartner.ca/ for more information on Compliance Partner™ from Thomson Carswell.
