A study recently released by the Queen’s School of Business says that Canada’s 10 provincial and three territorial regulators seemingly fail to consistently enforce even the few guidelines they agree upon, such as disclosure controls and procedures effectiveness opinions, compared to the United States model, where a single, well-funded and rigorous national securities regulator successfully enforces laws that require transparent control safeguards.
Key findings:
- Among the study’s sample of companies that are solely listed on the TSX, almost one in 10 (nine per cent) do not disclose anything about internal control design responsibility in their Management Discussion and Analysis, including large firms like Loblaw Companies, Power Corp, Power Financial and The Score Media.
- Among the 91 per cent that do, just over half (54 per cent) actually provide an opinion on the effectiveness of their own controls design, and fewer than half of the TSX-listed companies in the sample (46 per cent) evaluated their safeguards as being effective.
- Queen’s School of Business researchers discovered that less than one third (29 per cent) of the sample’s Venture Exchange-listed companies provide an opinion on their own financial controls, and of those, just 45 per cent (or 13 per cent overall) evaluate their controls as being effective.
The study also concluded that baseline compliance (doing just enough) has become an example of good corporate citizenship. We have seen this from some companies over the last couple of years. However, the trend seems to be changing with more and more of the companies that we work viewing internal controls, compliance and disclosure in general as a key mandate of the organization.
The solution, says Prof. Salterio and his colleagues at Queen’s School of Business, is a National Securities Regulator with proper powers to investigate and penalize errant companies, auditors (and audit firms), lawyers and other participants involved in disclosure.
We agree with the concept of a single regulator and the benefits that this has for the market and for investors. This is certainly not a new idea, but hopefully this study will help move us closer to a single agency.
Technorati Tags: Bill 198, Sarbanes Oxley, MI 52-109, CEO and CFO Certification, SOX 302, SOX 404, Risk Management, Compliance, Disclosure controls, Disclosure, SEC, OSC
Related posts:
