Certification Requirements for Certifying Officers of TSX Listed Companies – Where We Are Today

December 2007 written by Geoff Rodrigues of Horwath Orenstein – “On November 23, 2007 through CSA Notice 52-319, the Canadian Securities Administrators (CSA) announced an update to the regulatory regime to require companies to certify the design and effectiveness of internal controls over financial reporting. Under the current proposed requirements, companies must have a process in place to design and evaluate their internal controls over financial reporting as well as disclosure controls and procedures. This would include testing the critical controls to ensure they are operating effectively. These controls must also be relied upon by the Certifying Officers of the organization (i.e. CEO and CFO) when certifying the reliability and accuracy of all financial information reported to external users. Through the testing required, the Certifying Officers must ensure any “reportable deficiencies” identified have been disclosed as well as the status of remediation efforts. Reportable deficiencies are deficiencies identified in internal controls either individually or in aggregate that would cause a reasonable person to doubt the reliability of the financial information reported.

One of the most significant differences from the regulatory requirements under section 404 of the Sarbanes Oxley Act of 2002, is the requirement for external auditor attestation in the United States. In Canada, the certification is a self-assessment and the issuer is not required to obtain from its auditor an internal control audit opinion regarding management’s assessment of the internal controls over financial reporting. The perception in the market is that this makes the process less onerous for management and keeps the compliance costs lower than in the United States.

However, there is still a requirement for management to self –assess their internal controls over financial reporting, and without the requirement to have these assessments evaluated by the external auditor, this puts more focus on management’s efforts to ensure the company has adequate internal controls. The Certifying Officers have a responsibility to the organization in which they oversee as well as the external shareholders to ensure that information reported is reasonably reliable, accurate, and timely. It is important to understand your regulatory requirements and ensure compliance with the appropriate laws and regulations.

Some of the highlights of CSA Notice 52-319 are:

• The Certifying Officers of Venture issuers will no longer be required to certify that they have designed and evaluated the effectiveness of their internal controls over financial reporting
• All other reporting issuers, except investment funds, are still expected to certify over the effectiveness of the internal controls over financial reporting, but the effective date is no longer June 30, 2008. At this point a new effective date has not been released by the CSA.

For further details on the recently released CSA Notice 52-319 or an interpretation of what this means for your organization, click here.