Multilateral Instrument 52-109

Management certification on internal control over financial reporting

The Canadian Securities Administrators (CSA) announced in March 2006 revised management certification requirements under Multilateral Instrument 52-109 (MI 52-109). All reporting issuers, other than investment funds, in all Canadian jurisdictions are impacted by these changes. These proposed changes issued under CSA Notice 52-313 take immediate effect and will require action by companies in 2006 and 2007.

Under Notice 52-313 the CSA has proposed to expand the current MI 52-109 rules to include management's certification that they have evaluated the effectiveness of internal control over financial reporting and to disclose in the issuer's annual MD&A management's conclusions. The earliest these new requirements will apply is in respect of financial years ending on or after December 31, 2007.The CSA has, however, decided not to proceed with an earlier proposal that would have additionally required an external audit opinion in respect of management's evaluation of their internal controls.

Current requirements
Current requirements under (MI 52-109) concerning the evaluation of the design and operating effectiveness of disclosure controls and procedures, and evaluation of the design of internal control over financial reporting are not affected by the March 2006 announcement. Effectively, this means that the internal control requirements of the Multilateral Instrument will be implemented by the CSA over a two-year period — management will have to make an assessment of the design of internal control over financial reporting for years ending on or after June 30, 2006, with an annual evaluation of the operating effectiveness of internal control over financial reporting for years ending on or after December 31, 2007 (at the earliest, and subject to the final regulations). As a result, companies will need to carefully consider how to most efficiently and effectively implement the new requirements, to avoid duplication of effort and maximize the use of available resources. Issuers should be focusing now on how they are going to meet these requirements. Additional guidance has now been issued by the CICA under two new documents: Internal Control 2006: The Next Wave of Certification: Guidance for Management, and Internal Control 2006: The Next Wave of Certification: Guidance for Directors.

PwC's approach
PricewaterhouseCoopers has developed the "risk and extent" approach to internal control over financial reporting. This is a pragmatic approach that is cost-effective for all organizations, since it is risk-based, tailored to your company's particular situation and circumstances, and phased in over a two-year period. For more information, contact your local PricewaterhouseCoopers representative or download a copy of the following publications.

Practical Guidance for Management on MI 52-109: Volume four — taxation (1.95 MB) Effective for fiscal years ending on or after June 30, 2006, the Chief Executive Officer and Chief Financial Officer of companies listed on all Canadian stock exchanges are required to personally certify that they have designed, or caused to be designed under their supervision, internal controls over financial reporting regarding the reliability of their financial statements. This publication provides guidance as to how to approach this process in relation to the various corporate and other taxes that the company faces in Canada and in its foreign operations.

	Practical Guidance for Management on MI 52-109: Key elements of an anti-fraud regime (903 KB) This volume specifically addresses the definition of fraud, the need for an antifraud regime to ensure prevention and timely detection, and the key elements of an antifraud regime.

Practical Guidance for Management on MI 52-109: Extent of work — documentation and the evaluation of design (2 MB) The Navigating the New World series has been developed by PricewaterhouseCoopers (PwC) to assist companies in understanding and implementing the requirements of Multilateral Instrument 52-109 Certification of Disclosure in Issuers’ Annual and Interim Filings. The latest volume in this series specifically addresses the process for management to prepare documentation to support a company’s internal controls over financial reporting (ICFR) and the overall evaluation of design effectiveness.

Practical Guidance for Management on MI 52-109: Risk and Scoping (941 KB) The Navigating the New World series has been developed by PricewaterhouseCoopers (PwC) to assist companies in understanding and implementing the requirements of Multilateral Instrument 52-109 Certification of Disclosure in Issuers’ Annual and Interim Filings. The latest volume in this series addresses Risk Assessment and Scoping, and outlines PwC's recommended approach for management in determining the accounts, disclosures and locations to be included in the scope of management's project for internal control over financial reporting (ICFR).

Navigating the New World: Multilateral Instrument 52-109 and Notice 52-313 (744 KB) This publication, which provides an overview of the PricewaterhouseCoopers "risk and extent" approach to internal control over financial reporting, was developed to clear up the confusion regarding what is, and is not, necessary for companies under these requirements.