September 29, 2006
TSX-Venture Issuers and MI 52-109 Omissions
In our everyday work with Canadian and US filers, we encounter a variety of reactions when companies finally realize the amount of work that is required to accomplish a good quality and accurate Internal Controls over Financial Reporting (ICFR) project. It ranges from acceptance to total denial/anger.
What has become especially disturbing of late is the lack of knowledge and awareness of TSX-V filers surrounding the ICFR requirements for fiscal years ending, in many cases, December 31, 2006. The reactions of many TSX-V filers to the requirements of MI 52-109: "causing internal controls over financial reporting to be designed and implemented" seems to be disbelief and or denial. As if ignoring the requirements and the consequences will make them go away.
As was mentioned earlier this week on our blog, CSA (Canadian Securities Administrators) 52-315 Certification Compliance Review, TSX-V filers are falling way short, on average, of the current disclosure control requirements.
Per the Review:
62% of TSX-V filers did not discuss the effectiveness of their Disclosure Controls and Procedures in their MD&A. The CSA's conclusion is that many "issuers are not paying adequate attention to their disclosure obligations".
This is a "shot off the bow" to issuers to get this right. There may not be too many other warnings.
One can only speculate how many omissions there will be on 52-109 certifications when the majority of issuers with December 31 fiscal year ends begin submitting their 52-109 certifications ,concerning Internal Controls over Financial Reporting.
It is disturbing to see this lack of awareness from companies who have raised funds on the public markets. Public trust is important.
If your small to emerging company is in need of assistance to meet its MI 52-109 or SOX 404 obligations, see www.issuescentral.com to learn more about Compliance Playbook(tm) or if your company is based in Canada, see www.compliancepartner.ca to learn more about Compliance Partner. Now featuring special editions for mining and manufacturing as well as standard editions.
What has become especially disturbing of late is the lack of knowledge and awareness of TSX-V filers surrounding the ICFR requirements for fiscal years ending, in many cases, December 31, 2006. The reactions of many TSX-V filers to the requirements of MI 52-109: "causing internal controls over financial reporting to be designed and implemented" seems to be disbelief and or denial. As if ignoring the requirements and the consequences will make them go away.
As was mentioned earlier this week on our blog, CSA (Canadian Securities Administrators) 52-315 Certification Compliance Review, TSX-V filers are falling way short, on average, of the current disclosure control requirements.
Per the Review:
62% of TSX-V filers did not discuss the effectiveness of their Disclosure Controls and Procedures in their MD&A. The CSA's conclusion is that many "issuers are not paying adequate attention to their disclosure obligations".
This is a "shot off the bow" to issuers to get this right. There may not be too many other warnings.
One can only speculate how many omissions there will be on 52-109 certifications when the majority of issuers with December 31 fiscal year ends begin submitting their 52-109 certifications ,concerning Internal Controls over Financial Reporting.
It is disturbing to see this lack of awareness from companies who have raised funds on the public markets. Public trust is important.
If your small to emerging company is in need of assistance to meet its MI 52-109 or SOX 404 obligations, see www.issuescentral.com to learn more about Compliance Playbook(tm) or if your company is based in Canada, see www.compliancepartner.ca to learn more about Compliance Partner. Now featuring special editions for mining and manufacturing as well as standard editions.
September 28, 2006
Take a moment to remember: Kenneth Thomson (1923-2006)
My mother was born in Belfast, Northern Ireland in a very difficult time for the world. She taught me that we all make a difference.
So in keeping with that thought and a call she just made to me. This blog entry is about a man named Kenneth Thomson (1923-2006). You probably don't know it, but tomorrow (September 29th at 11am at Roy Thomson Hall) in Toronto, the family that is the controlling shareholder in the world's largest information resource company (Thomson Corporation), is holding a memorial service for Kenneth Thomson. His company is one of your windows onto the world for information, and in my space, financial compliance. A small thing that we had in common, is that we both went to the same high school. Isn't the world a small and beautiful place?
If you don't know who he was, don't worry about it. He was always a private person with big responsibilities. He ran a great business. He is from a great family and was a great family man. We wish the best to his family. His memory remains with us.
Kenneth Thomson - click here to begin to understand more about his legacy.
So in keeping with that thought and a call she just made to me. This blog entry is about a man named Kenneth Thomson (1923-2006). You probably don't know it, but tomorrow (September 29th at 11am at Roy Thomson Hall) in Toronto, the family that is the controlling shareholder in the world's largest information resource company (Thomson Corporation), is holding a memorial service for Kenneth Thomson. His company is one of your windows onto the world for information, and in my space, financial compliance. A small thing that we had in common, is that we both went to the same high school. Isn't the world a small and beautiful place?
If you don't know who he was, don't worry about it. He was always a private person with big responsibilities. He ran a great business. He is from a great family and was a great family man. We wish the best to his family. His memory remains with us.
Kenneth Thomson - click here to begin to understand more about his legacy.
September 27, 2006
Latest Update on Canadian Compliance and Disclosure Activities: CSA Notice 52-315 and CSA Notice 52-316
Our last update on Canadian compliance initiatives was on August 28, 2006 with an overview of MI 52-109 (sort of a SOX 302 jab with a modest 404 hook). The previous blog entry was entitled "Canadian Internal Control over Financial Reporting Rules are Kicking In" - Click here to review it.
Well, it appears, based on a very recent study that just as the CEO/CFO certifications, and related MD&A discussions, associated with the Design stage of ICFR of MI 52-109 are kicking in, that all is not well in the land of Disclosure Controls & Procedures (DC&P). Click here to read more about CSA Staff Notice 52-315: Certification Compliance Review. If you are one of the company's in the blue portion of the charts you are not going to endear yourself to the provincial regulators. In particular, some of you on the TSX Venture Exchange are in danger of putting the "Ad" back into Venture. Just imagine what the lawyers at the various securities regulators are thinking, "So if it is like this with DC&P, what will it be like with ICFR? Do you think anyone is reading our Notices? Maybe we should bring back MI 52-111 and have the "externals" take them to the rink for a bit of an ICFR attestation workout!" Perhaps I'm overreacting, or just want the regular hockey season to get started, but what would happen if the regulators went in and did a random, detailed review of DC&P effectiveness evaluations of 5% of the TSX and TSX Venture listings (5% is about 180 companies)? Any bets on how many would be going to the penalty box?
Quick, for $10.00 who can give me a succinct analysis of the difference between DC&P and ICFR? Time's up! Don't worry there are lots of consulting groups that will charge you several zeros north of $10.00 to help you through the overlap between these two pillars of the financial compliance community. Venn diagram heaven.
So that brings up the next development. CSA Staff Notice 52-316: Certification of Design of Internal Control over Financial Reporting. Click here to read more. The Notice relates to certification of the Design of ICFR if one is aware of weaknesses in ICFR and expectations with respect to discussing the ICFR weakness and remediation in the annual MD&A. There will be additional updates on this topic as it broadly affects your MI 52-109 activities in the very near future.
Stay tuned!
If you are a Canadian-based filer needing to affordably comply with either SOX or MI 52-109 please visit the website of our exclusive Canadian distributor, Thomson Carswell, at http://www.compliancepartner.ca/ to learn about Compliance Partner(TM), plus their new product for the Mining Sector, Compliance Partner(TM) - Mining Edition.
Thomson Carswell is also providing some web-based seminars for TSX and TSX Venture companies on the topic of MI 52-109 and recent changes during the months of October and November 2006. Please click here for more information.
If your company is based in the U.S., or outside of North America, and needs to comply with SOX efficiently and without the drama please visit http://www.issuescentral.com/ to learn more about the Compliance Playbook(TM).
Well, it appears, based on a very recent study that just as the CEO/CFO certifications, and related MD&A discussions, associated with the Design stage of ICFR of MI 52-109 are kicking in, that all is not well in the land of Disclosure Controls & Procedures (DC&P). Click here to read more about CSA Staff Notice 52-315: Certification Compliance Review. If you are one of the company's in the blue portion of the charts you are not going to endear yourself to the provincial regulators. In particular, some of you on the TSX Venture Exchange are in danger of putting the "Ad" back into Venture. Just imagine what the lawyers at the various securities regulators are thinking, "So if it is like this with DC&P, what will it be like with ICFR? Do you think anyone is reading our Notices? Maybe we should bring back MI 52-111 and have the "externals" take them to the rink for a bit of an ICFR attestation workout!" Perhaps I'm overreacting, or just want the regular hockey season to get started, but what would happen if the regulators went in and did a random, detailed review of DC&P effectiveness evaluations of 5% of the TSX and TSX Venture listings (5% is about 180 companies)? Any bets on how many would be going to the penalty box?
Quick, for $10.00 who can give me a succinct analysis of the difference between DC&P and ICFR? Time's up! Don't worry there are lots of consulting groups that will charge you several zeros north of $10.00 to help you through the overlap between these two pillars of the financial compliance community. Venn diagram heaven.
So that brings up the next development. CSA Staff Notice 52-316: Certification of Design of Internal Control over Financial Reporting. Click here to read more. The Notice relates to certification of the Design of ICFR if one is aware of weaknesses in ICFR and expectations with respect to discussing the ICFR weakness and remediation in the annual MD&A. There will be additional updates on this topic as it broadly affects your MI 52-109 activities in the very near future.
Stay tuned!
If you are a Canadian-based filer needing to affordably comply with either SOX or MI 52-109 please visit the website of our exclusive Canadian distributor, Thomson Carswell, at http://www.compliancepartner.ca/ to learn about Compliance Partner(TM), plus their new product for the Mining Sector, Compliance Partner(TM) - Mining Edition.
Thomson Carswell is also providing some web-based seminars for TSX and TSX Venture companies on the topic of MI 52-109 and recent changes during the months of October and November 2006. Please click here for more information.
If your company is based in the U.S., or outside of North America, and needs to comply with SOX efficiently and without the drama please visit http://www.issuescentral.com/ to learn more about the Compliance Playbook(TM).
September 25, 2006
Investor Confidence and Differences in Regulatory Standards
The debate rages across the Atlantic (and the Internet) over the competitiveness of U.S. Capital markets and markets such as the AIM on the LSE. One of the culprits being blamed for the increase of IPOs in non-U.S. markets is the whole concept and application of governance and compliance standards and their impact on investors and new public offerings.
The AIM prides itself on "flexible regulatory regimes". That phrase reminds me of Groucho Marx and his quote, "Those are my principles. If you don't like them I have others." Discussion is underway in the U.K. to consider higher required compliance standards for AIM filers. Click here to get a fascinating look into the debate going on in London.
Clearly investors need to treat listings on the AIM with more caution and a greater risk premium. I suspect that if the compliance standards were higher the quality of the listings on the AIM would be higher, there would be fewer listings, and the market premium greater. Click here for a previous blog post (August 24, 2006 - Ready, AIM, but don't head Higher!) with additional background.
The other trend that is clear is that markets such as AIM are under pressure to raise the bar to meet U.S. standards, just as U.S. markets are under pressure to deal with all factors contributing to IPO costs.
If your company is U.S., or based outside of North America, and needs to comply with SOX efficiently and without the drama please visit http://www.issuescentral.com/ to learn more about the Compliance Playbook(TM).
If you are a Canadian-based filer needing to comply with either SOX or MI 52-109 please visit the website of our exclusive Canadian distributor, Thomson Carswell, at http://www.compliancepartner.ca/ to learn about Compliance Partner(TM), plus their new product for the Mining Sector, Compliance Partner(TM) - Mining Edition.
The AIM prides itself on "flexible regulatory regimes". That phrase reminds me of Groucho Marx and his quote, "Those are my principles. If you don't like them I have others." Discussion is underway in the U.K. to consider higher required compliance standards for AIM filers. Click here to get a fascinating look into the debate going on in London.
Clearly investors need to treat listings on the AIM with more caution and a greater risk premium. I suspect that if the compliance standards were higher the quality of the listings on the AIM would be higher, there would be fewer listings, and the market premium greater. Click here for a previous blog post (August 24, 2006 - Ready, AIM, but don't head Higher!) with additional background.
The other trend that is clear is that markets such as AIM are under pressure to raise the bar to meet U.S. standards, just as U.S. markets are under pressure to deal with all factors contributing to IPO costs.
If your company is U.S., or based outside of North America, and needs to comply with SOX efficiently and without the drama please visit http://www.issuescentral.com/ to learn more about the Compliance Playbook(TM).
If you are a Canadian-based filer needing to comply with either SOX or MI 52-109 please visit the website of our exclusive Canadian distributor, Thomson Carswell, at http://www.compliancepartner.ca/ to learn about Compliance Partner(TM), plus their new product for the Mining Sector, Compliance Partner(TM) - Mining Edition.
September 20, 2006
Chairman Cox Testifies Before House Financial Services Committee
On September 19th, S.E.C. Chairman Cox and PCAOB Chairman Olson testified before the Financial Services Committee.
Congressman Michael Oxley, one of the co-sponsors of the Sarbanes-Oxley Act of 2002, kicked off the meeting with an excellent overview of the progress and challenges associated with SOX.
Cox and Olson highlighted SOX benefits, but also addressed some of the challenges associated with Section 404 - Management's Report on Internal Control over Financial Reporting (SOX 404). In particular they addressed upcoming revisions to Audit Standard 2 (AS2 is used by the external auditors to evaluate the internal controls) to improve the efficiency of audits (and reduce excessive zealotry by the "externals"), plus developments on the front of providing management with more formal guidance with respect to ICFR implementation as an alternative to AS 2.
Click here to go to the C-Span: On Demand recording.
Investors all over the world, and in particular in the U.S., owe thanks to Senator Sarbanes and Congressman Oxley. As Cox said the Sarbanes-Oxley Act is "iconic" and "we have come a long way from the dark days of 2002" and "it is remarkable how many countries have adopted similar legislation".
By the way, doesn't Cox sound more than a little Presidential? Hmmm.
Congressman Michael Oxley, one of the co-sponsors of the Sarbanes-Oxley Act of 2002, kicked off the meeting with an excellent overview of the progress and challenges associated with SOX.
Cox and Olson highlighted SOX benefits, but also addressed some of the challenges associated with Section 404 - Management's Report on Internal Control over Financial Reporting (SOX 404). In particular they addressed upcoming revisions to Audit Standard 2 (AS2 is used by the external auditors to evaluate the internal controls) to improve the efficiency of audits (and reduce excessive zealotry by the "externals"), plus developments on the front of providing management with more formal guidance with respect to ICFR implementation as an alternative to AS 2.
Click here to go to the C-Span: On Demand recording.
Investors all over the world, and in particular in the U.S., owe thanks to Senator Sarbanes and Congressman Oxley. As Cox said the Sarbanes-Oxley Act is "iconic" and "we have come a long way from the dark days of 2002" and "it is remarkable how many countries have adopted similar legislation".
By the way, doesn't Cox sound more than a little Presidential? Hmmm.
September 13, 2006
Product Eases SOX 404 and MI 52-109 compliance for Mining Companies - Can You Dig It!
Normally I like to wax poetic about the world of internal controls over financial reporting (ICFR). Haikus, sonnets, compliance limericks, that sort of thing. However, I must "refrain" for this blog entry.
The boss told me to toot our own horn on an important announcement to reduce the cost of internal control over financial reporting(ICFR) for mining companies that need to comply with either SOX 404 or the ICFR portion of MI 52-109 (for TSX and TSX-Venture based miners).
The Compliance Playbook(TM) - Mining Edition was announced by Issues Central, Inc. yesterday (www.issuescentral.com).
From the press release:
"The Compliance Playbook™ - Mining Edition is the first software-based financial compliance product dedicated to the mining sector and comes complete with over 100+ industry-specific compliance templates ranging from Reserve Valuation, Mining AFEs, Asset Impairment, Mining AROs, Mineral Claims and Production through to Financial Close as well as Entity Level Controls. The product offers a “start-to-certification” approach that covers all aspects of an ICFR project including planning, top down risk-based scoping, entity-level controls, process-level controls, testing and remediation, and ongoing compliance beyond year one.
Important features include:
The boss told me to toot our own horn on an important announcement to reduce the cost of internal control over financial reporting(ICFR) for mining companies that need to comply with either SOX 404 or the ICFR portion of MI 52-109 (for TSX and TSX-Venture based miners).
The Compliance Playbook(TM) - Mining Edition was announced by Issues Central, Inc. yesterday (www.issuescentral.com).
From the press release:
"The Compliance Playbook™ - Mining Edition is the first software-based financial compliance product dedicated to the mining sector and comes complete with over 100+ industry-specific compliance templates ranging from Reserve Valuation, Mining AFEs, Asset Impairment, Mining AROs, Mineral Claims and Production through to Financial Close as well as Entity Level Controls. The product offers a “start-to-certification” approach that covers all aspects of an ICFR project including planning, top down risk-based scoping, entity-level controls, process-level controls, testing and remediation, and ongoing compliance beyond year one.
Important features include:
- Rapid documentation
- Automatic flowcharting
- Customizable compliance reporting
- Minimal IT investment
The product comes standard with a tight integration with Microsoft® Office including Word, Excel and Visio."
If you are a miner based in the U.S. , or outside North America, and would like more information please call Issues Central at 1.800.410.6681 ext 112 or e-mail: mining@issuescentral.com and provide your name, company and telephone number.
If you are a Canadian-based miner and need to comply with SOX 404, or MI 52-109, please contact Thomson-Carswell, our Canadian distributor, at www.compliancepartner.ca or via e-mail at: carswell.compliancepartner@thomson.com.
SOX Compliance Costs - Heading Down
Do you subscribe to the various news/keyword alert services? I do. It is no surprise that several of my alerts are based around "Sarbanes-Oxley", "SOX 404" and so on. A trend is becoming clear with respect to the cost of SOX 404 for large accelerated and accelerated filers. I need to firm up my numbers based on recent earnings announcements, but it appears that in the range 6-7 out of 10 filers are saying that SOX 404 costs are dropping. In some cases significantly. As an example, Craftmade International (NASDAQ- CRFT) mentions in their earnings press release today (Click here) that SOX 404 processes are being streamlined, etc etc.
From an overall perspective, this is a natural consequence of the compliance learning curve. Effective internal controls over financial reporting (ICFR) should not be a burden once companies have it integrated into their operations.
To help your firm achieve cost-effective SOX 404 compliance please go to http://www.issuescentral.com/ to learn more about the Compliance Playbook(TM).
If you are a Canadian-based filer, please go to our exclusive Canadian distributor's (Thomson-Carswell) website http://www.compliancepartner.ca/ to learn more about achieving SOX 404 or MI 52-109 compliance with Compliance Partner(TM).
From an overall perspective, this is a natural consequence of the compliance learning curve. Effective internal controls over financial reporting (ICFR) should not be a burden once companies have it integrated into their operations.
To help your firm achieve cost-effective SOX 404 compliance please go to http://www.issuescentral.com/ to learn more about the Compliance Playbook(TM).
If you are a Canadian-based filer, please go to our exclusive Canadian distributor's (Thomson-Carswell) website http://www.compliancepartner.ca/ to learn more about achieving SOX 404 or MI 52-109 compliance with Compliance Partner(TM).
September 12, 2006
AS2 Revisions In The Near Future?
According to the good people at CFO.com, the PCAOB has made draft revisions to Audit Standard 2 (AS2), which is used by the external audit community as their guidance for conducting internal control over financial reporting (ICFR) reviews, and provided these suggested revisions to the SEC. Click here to read more.
While AS2 is for the external auditor, there has been no formal equivalent ICFR guidance for management which has meant that management teams defaulted to using AS2 as part of their own internal reviews of ICFR. In the coming weeks it appears that the SEC will initiate the process of constructing a framework for management to use as part of the SOX 404 ICFR requirements.
Progressive improvement beats postponed perfection.
To help your firm achieve cost-effective SOX 404 compliance please go to http://www.issuescentral.com/ to learn more about the Compliance Playbook(TM).
If you are a Canadian-based filer, please go to our exclusive Canadian distributor's (Thomson-Carswell) website http://www.compliancepartner.ca/ to learn more about achieving SOX 404 or MI 52-109 compliance with Compliance Partner(TM).
While AS2 is for the external auditor, there has been no formal equivalent ICFR guidance for management which has meant that management teams defaulted to using AS2 as part of their own internal reviews of ICFR. In the coming weeks it appears that the SEC will initiate the process of constructing a framework for management to use as part of the SOX 404 ICFR requirements.
Progressive improvement beats postponed perfection.
To help your firm achieve cost-effective SOX 404 compliance please go to http://www.issuescentral.com/ to learn more about the Compliance Playbook(TM).
If you are a Canadian-based filer, please go to our exclusive Canadian distributor's (Thomson-Carswell) website http://www.compliancepartner.ca/ to learn more about achieving SOX 404 or MI 52-109 compliance with Compliance Partner(TM).
September 11, 2006
According to the SEC - The World is Pulling Up Its SOXs
An excellent overview of global compliance initiatives and comparative regulatory measures was provided by Ethiopis Tafara the Director, Office of International Affairs for the SEC in the International Financial Law Review - September 2006. Click here to read more.
To help your firm achieve cost-effective SOX 404 compliance please go to http://www.issuescentral.com/ to learn more about the Compliance Playbook(TM).
If you are a Canadian-based filer, please go to our exclusive Canadian distributor's (Thomson-Carswell) website http://www.compliancepartner.ca/ to learn more about achieving SOX 404 or MI 52-109 compliance with Compliance Partner(TM).
To help your firm achieve cost-effective SOX 404 compliance please go to http://www.issuescentral.com/ to learn more about the Compliance Playbook(TM).
If you are a Canadian-based filer, please go to our exclusive Canadian distributor's (Thomson-Carswell) website http://www.compliancepartner.ca/ to learn more about achieving SOX 404 or MI 52-109 compliance with Compliance Partner(TM).
