CICA Publishes Internal Control Guidance for Small Companies

The Canadian Institute of Chartered Accountants (CICA) has recently published Helping Smaller Public Companies with Certification and Disclosure about Internal Control over Financial Reporting. This paper, written by James Goodfellow, FCA, and Alan Willis, CA, is a follow-up to Guidance for Management and Guidance for Directors (discussed in an earlier issue of the PolicyPro Bulletin) and is the latest installment in the CICA series “Internal Control: The Next Wave of Certification”.

As its title makes clear, this current CICA paper focuses on the needs of smaller public companies, who are not exempt from the Canadian CEO/CFO certification requirements, but are faced with unique compliance challenges not typically faced by larger organizations. Indeed, many of these challenges can lead to design weaknesses in internal control over financial reporting (ICOFR), which, under the new rules, must be disclosed by the CEO and CFO. In one example, the entrepreneurial “hands-on” approach taken by senior management in smaller firms can lead to overrides of internal controls. In another, separation of duties, a cornerstone of internal control, is much more difficult to implement with a small staff.

The paper focuses on the design weaknesses that smaller companies are likely to encounter, and the corresponding MD&A disclosures that should be made when these weaknesses are identified.

For the CICA press release, which contains a link to a PDF version of this extremely valuable paper, click here.

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Deloitte Guidance on Certifying the Operating Effectiveness of ICOFR

In the last issue of the PolicyPro Bulletin, we talked about the final piece of the CSA’s “investor confidence” rules: the requirement for CEOs and CFOs of Canadian public companies to certify on the operating effectiveness of their internal control over financial reporting (ICOFR).

But what must issuers do to comply with this latest certification requirement?

In Preparing to certify operating effectiveness of internal control over financial reporting, in the April 2007 edition of CEO/CFO Certification News, Deloitte proposes a 3-step process, as follows:

1. Updating the company’s financial reporting risk assessment to ensure completeness and accuracy
2. Ensuring that the controls considered by management include only those that provide for an effective design necessary to prevent or detect errors material to the presentation of the financial statements, in accordance with GAAP, and
3. Developing a strategy for assessing/testing the operational effectiveness of ICFR

As Deloitte makes clear, companies need to start this process immediately, even though the certification of operating effectiveness will not be required before 2008.

For a link to this edition of CEO/CFO News, click here.

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According to “Adapting to the New Trade Paradigm,” a commentary written by Stephen S. Poloz, Senior Vice-President, Corporate Affairs and Chief Economist, Export Development Canada, vertical integration, in which successful companies integrate suppliers into their operations to reduce costs, has become a liability, not an asset.

What’s responsible for the change? New technology has slashed the costs of finding and managing supply networks, making it advantageous to integrate new, low-cost countries into global supply chains. Now companies that that are not saddled with vertically integrated suppliers outperform those that are.

For the full text of this commentary discussing this new integrative trade paradigm, click here.

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A lot has changed in five years, especially in respect of network technologies, more sophisticated market research tools, and the proliferation of identity theft. Generally, this half-decade has been a time of increased threats to personal information, and a greater emphasis on security.

These factors were all taken into account by the House of Commons Standing Committee on Access to Information, Privacy and Ethics in the course of a mandatory review of PIPEDA, the Personal Information Protection and Electronic Documents Act.

Ariane Siegel, a partner with Gowling Lafleur Henderson LLP, has recently written a brief that describes the work of the Committee, the issues they considered, and the report submitted to Parliament. For a link to the Gowlings brief, click here.

For a model Confidentiality and Privacy policy see chapter GV 1.11 in Volume II – Corporate Governance of Finance and Accounting PolicyPro.

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With scientific evidence for global warming mounting every month, and the increased emphasis on risk assessments as part of an organization’s overall internal control framework, the timing is perfect for a recent guide co-published by the Canadian Chamber of Commerce and Pollution Probe.

The 56-page publication does much more than outline the causes and impacts of climate change. It highlights the ways that businesses can reduce operating costs (through energy efficiencies) and take advantage of the business opportunities that climate change may bring. It also provides a straightforward risk assessment process to help determine the impact that climate change may have on your organization. Best of all, the guide includes a generous selection of examples of the way that Canadian small- to medium-sized enterprises are coping with, and taking advantage of, global climate change.

The guide is available free in PDF format from Pollution Probe. Just click here and follow the link to A Guide to Climate Change for Small- to Medium-sized Enterprises.

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Volunteerism is growing across Canada. If your organization involves volunteers, you should strongly consider creating a Volunteers policy.

Here’s a couple of reasons why:

• In some circumstances a volunteer might be considered an employee at law, and thereby be entitled to employee rights under provincial employment standards legislation or at common law
• Volunteers can create potential liabilities through their actions, omissions or accidents

To help organizations avoid problems such as these, a Volunteers policy is included in the latest update releases for the Alberta, British Columbia and Ontario editions of Human Resources PolicyPro.

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