The Sarbanes Oxley Act of 2002 in the US (also known as “SOX”), has a comparable program in Canada, in Multi Lateral Instrument MI 52-109 (also known as Bill 198 and “C-SOX”). Quite often there are questions pertaining to the differences between the 2 regulations. Well, let’s cover some top shelf comparisons:

1. In the US, SOX 302 and SOX 404 have comparables in Canada to MI 52-109 and the rescinded MI 52-111 respectively.
2. SOX 302, the precursor to SOX 404, was similar to MI 52-109 in it was the first portion of SOX to be implemented, and the primary focus was on “disclosure controls” and CEO / CFO certifications of the accuracy of financial statement disclosures as presented in interim filings, public releases etc. Its intent was to “kick start” the drive for accountability and accuracy.
3.  SOX 404 followed SOX 302 and ramped up the level of accountability and assurance to include management’s assessment of internal controls, and external auditors opinion on the companies internal controls and management’s assessment process. (This latter required has been removed by the SEC as of 2007 as it was extremely costly). In Canada, MI 52-111 was very similar to SOX 404, but was not implemented. Essentially Canada noted the experience in the US, and after public consultation, determined that it would not follow through with MI 52-111. Instead, the CSA has decided that a revamped MI 52-109 will be sufficient. In April 2008, the CSA published its draft report for public comment, which is scheduled to become effective on December 15, 2008. MI 52-109 will essentially follow SOX 302 and will not have the requirement of external auditors opinion on internal controls nor external auditors opinion on management’s assessment. However, that being said, the CSA is keenly interested in restoring public confidence in capital markets, and will expect companies to follow the spirit of the law, and ensure that extensive documentation, reviews, and certifications support the financial statements in Canada. In other words, no free lunch for Canadian publically traded companies, and that’s good news for investors.

Please feel free to contact GFS Consulting for more information.

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