Governance, Risk, and Compliance Handbook: Technology, Finance, Environmental, and International Guidance and Best Practices

CHAPTER 52

CANADIAN SOX (BILL 198)

Madeleine Ferris Shaw

Sanjay Anand

52.1 BACKGROUND

52.2 WHAT IS REQUIRED?

52.3 CoCo CONTROL MODEL

52.4 COMPARISON OF CoCo TO COSO

(a) Definition and Scope

(b) Underlying Concepts

(c) Judgment of Effectiveness

(d) CoCo Differs in Three Important Respects

52.5 CONCLUSION

NOTES

52.1 BACKGROUND

In 2002, the Ontario Securities Commission (OSC) introduced Bill 198 in response to the reforms taking place in the United States under the Sarbanes-Oxley Act (SOX) and to regain the confidence of investors in Canada's capital markets. Just as the United States saw a number of fiascoes and accounting scandals like Enron and WorldCom, so did Canada with companies like Parmalat and Nortel. Not surprisingly, therefore, Bill 198 is often referred to as Canadian SOX (CSOX).

The purpose of Multilateral Instrument 52-109 (MI 52-109) Certification of Disclosure in Issuers' Annual and Interim Filings is to improve the quality and reliability of reporting issuers' annual and interim disclosures. The initial phase of the ruling required CEOs and CFOs certify that:1

• They have designed, or supervised the design of, internal controls and implemented those controls to provide reasonable assurance that the issuer's financial statements are fairly presented in accordance with generally accepted accounting principles.
• They have designed, or supervised the design of, disclosure controls and procedures and implemented those controls to provide reasonable assurances that material ...