The Canadian securities regulators have announced that they will extend the proposed implementation schedule of Multilateral Instrument 52-111, Reporting on Internal Control over Financial Reporting,1 to give them more time to observe the effect in the United States of similar requirements. Therefore, if the regulators decide to implement these requirements, the earliest that a management internal control report and auditor attestation could be required would be for financial years ending on or after June 30, 2007. (Compliance with MI52-111 was proposed to be phased-in over a four-year period, depending on the market capitalization of the issuer, with the largest issuers being required to comply in respect of financial years ended on or after June 30, 2006.)
CEO and CFO certification of internal control over financial reporting is not affected by this extension. Beginning with financial years ending on or after June 30, 2006, the CEO and CFO will be required to certify, among other things, that they have designed the issuer’s internal control over financial reporting. OSC staff has indicated that the CEO and CFO must review and document the controls in a manner that provides substantive support for the certification, although comprehensive testing would not necessarily be required. Although the extent of this work would be less than that required for management to prepare its internal control report, a significant amount of work would still have to be done.
This extension was announced in CSA Staff Notice 52-310, Regarding Proposed Timing of Proposed MI52-111 and Companion Policy 52-111CP Reporting on Internal Control over Financial Reporting, which can be found on the Ontario Securities Commission’s website at
www.osc.gov.on.ca/Regulation/Rulemaking/Current/Part5/csa_20050729_52-310_not-pro-timing.jsp
Footnotes
1. For a discussion of proposed MI52-111, see our client memo no. 2005-7, Internal Control Responsibilities: What Every CEO and CFO Should Know, which is available on our website, under Publications.
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