October 31, 2007
Canadian Public Companies Need to Focus on Internal Controls
While many Canadian companies are working hard on their NI 52-109 projects, there are many who have not put the consistent effort into providing investors that they have reasonable assurance over their Internal Control over Financial Reporting. This is especially disconcerting since the legislation has been proposed and/or in place for many years now.
Of special concern is the Venture Exchange where the resources to comply with this complex legislation are just not available. Many of these companies are in natural resources: mining and natural gas. This represents approximately 1600 companies or (of the approximately 3800 public companies) 42% of companies listed on Canadian exchanges.
Next year is an extremely crucial year in the progress of the requirements of this legislation. It is the year where public companies must certify the effectiveness of their internal control over financial reporting. In other words, they must certify that their controls "work as advertised".
Many companies have struggled with the first phase of this legislation: "Design and Implement Internal Controls over Financial Reporting". It will be interesting to see what happens when the really tough stage begins.
A recent article discusses some of these challenges:
Excerpts from the complete article from the National Post:
"Canadian corporate disclosure about internal controls is also inconsistent and regulation here "severely lags" behind the United States, despite a slew of new rules designed to improve reporting, say the authors of the study...
Only 46% of TSX-listed companies surveyed said their internal controls were effective. Among Venture Exchange companies, the figure plummets to 13%. Internal controls are the checks and measures companies have in place to prevent fraud and to make sure the financial information they generate is accurate."
There is much work to be done. Investors will be closely watching the results.
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.
Of special concern is the Venture Exchange where the resources to comply with this complex legislation are just not available. Many of these companies are in natural resources: mining and natural gas. This represents approximately 1600 companies or (of the approximately 3800 public companies) 42% of companies listed on Canadian exchanges.
Next year is an extremely crucial year in the progress of the requirements of this legislation. It is the year where public companies must certify the effectiveness of their internal control over financial reporting. In other words, they must certify that their controls "work as advertised".
Many companies have struggled with the first phase of this legislation: "Design and Implement Internal Controls over Financial Reporting". It will be interesting to see what happens when the really tough stage begins.
A recent article discusses some of these challenges:
Excerpts from the complete article from the National Post:
"Canadian corporate disclosure about internal controls is also inconsistent and regulation here "severely lags" behind the United States, despite a slew of new rules designed to improve reporting, say the authors of the study...
Only 46% of TSX-listed companies surveyed said their internal controls were effective. Among Venture Exchange companies, the figure plummets to 13%. Internal controls are the checks and measures companies have in place to prevent fraud and to make sure the financial information they generate is accurate."
There is much work to be done. Investors will be closely watching the results.
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.
