Canadian Sarbanes-Oxley (CSOX)
In light of several, recent corporate accounting scandals, the United States enacted a federal law know as the Sarbanes-Oxley Act of 2002 (SOX). SOX enforces corporate governance and disclosure obligations for publicly traded companies in the U.S. This legislation sparked worldwide attention, especially from Canadian corporations with significant access to U.S. markets. Corporate governance regulators were soon under pressure to implement similar rules in Canada.
In order to develop effective regulations, Canadian officials conducted an analysis of the differences between financial markets in the U.S. and Canada.
Three major differences were identified:
1) Unlike the U.S., Canada did not have a national securities commission.
2) Contrary to the U.S., a significant percentage of publicly traded Canadian companies maintains a controlling shareholder.
3) Many publicly traded Canadian companies are significantly smaller than those in the states; therefore, U.S. SOX requirements would impose a considerable financial burden.
Outcome:
The Canadian Securities Administrators (CSA) created multilateral requirements, very similar to Sarbanes-Oxley guidelines, which adhere to Canada’s unique financial market. CSOX rules are as follows:
MI 52-109
Requires company executives, specifically CEOs and CFOs, to approve quarterly and annual financial reports to ensure accuracy and accountability.
MI 52-110
Expands on standards and rules for audit committees.
MI 52-111
Calls for companies to perform detailed internal testing of accounting processes in accordance with external auditor examinations. This particular rule will be phased in over a time period of four years, starting with financial years ending on or after June 30, 2007.
What does this mean to your company?