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Getting It Right: CA Institute, Ontario Chamber of Commerce release business leaders’ submission to CSA

Toronto (June 3, 2005) – The Canadian Securities Administrators (CSA) are on the right track with their proposed changes to financial reporting requirements, but there must be fine-tuning of the regulations and a better explanation of how companies and auditors are to comply with them. That is the key message coming out of a June 2 submission to the CSA from participants at a recent roundtable discussion on the new reporting requirements that was facilitated by the Institute of Chartered Accountants of Ontario and the Ontario Chamber of Commerce (OCC).

In fact, on June 2, just hours after receiving the roundtable submission, the Ontario Securities Commission announced that it was extending the deadline for comment on the proposed Multilateral Instruments 52-109 and 52-111 from June 6 to June 30, 2005, which was the first of five recommendations made by the roundtable.

The submission recommendations are:

• Extending the June 6 deadline for commenting on Multilateral Instruments 52-109 and 52-111, until June 30, 2005

• The CSA and Ontario Securities Commission (OSC) publicly commit to the same standards of compliance and enforcement that the U.S. Securities and Exchange Commission (SEC) and Public Company Accounting Oversight Board (PCAOB) committed to on May 16, 2005

• The CSA and OSC specifically commit to high-level principles that will help define the assessment process proposed under 52-111 for all concerned

• Establishing a Canadian equivalent to the Securities and Exchange Commission Advisory Committee on Smaller Public Companies to look for ways to help small companies comply

• Reassuring audit firms that the use of reasonable judgment will be recognized and respected by regulators

A summary of the roundtable submission to the CSA can be found at: www.icao.on.ca.

"To pull together these recommendations, the Institute and the Chamber worked in unison to recruit a prominent cross-section of Ontario business leaders to evaluate and make recommendations regarding the regulations being proposed by the CSA," said Brian Hunt, FCA and Institute President and CEO. "As Chartered Accountants, our role is to assist businesses in becoming and remaining good and pro.table corporate citizens – and this is one particularly important way to do it. The views and ideas expressed in this submission are the voice of the senior Ontario business leaders who participated in the roundtable."

Background:

On February 4, 2005, the CSA released proposed regulatory changes (known as Multilateral Instruments 52-109 and 52-111) that would bring Canadian requirements in line with those of Section 404 of the Sarbanes-Oxley Act (SOX), which requires CEO and CFO certification of a public companies’ systems of internal control over financial reporting and an auditor’s report on their efforts. The CSA originally asked for feedback on the proposed changes by June 6, 2005.

"The Sarbanes-Oxley Act was passed in the wake of a number of financial reporting scandals in the United States. It has been highly controversial since its passage in 2002, with some lauding its focus on increased accountability and others decrying increased costs for businesses," said Brian Hunt, President and CEO of the Institute. "In May, the Securities and Exchange Commission vowed to revisit Section 404, with a focus on clarifying the role and expectations of external auditors as a means of reducing costs and the overall compliance burden. That process will continue through June of 2005 – meaning that the very Section 404 that the CSA rules are based on, or at least the guidance for interpreting it, will likely change to some degree."

On May 12, the OCC and the Institute facilitated a roundtable discussion on the proposed changes to financial reporting regulations at the Institute in Toronto. Invitees included representatives of a wide range of businesses, including banks, insurance companies, retailers and manufacturers (Note: See list of participating organizations at the end of this release). Participants were asked to consider the impacts of the proposed regulations and make suggestions for how the CSA could improve their implementation.

"Our organizations brought together top experts to develop these recommendations because we believe it is crucial that Canadian regulators learn from the successes and failures of U.S. legislation and that Canadian businesses make their voices heard during the process," said Mr. Hunt. "We’ve done our part as requested by the CSA. Now it is up to this country’s securities regulators to take the suggestions from this submission and the others they’ve received and make sure the regulations coming into effect in June 2006 protect the needs of both investors and businesses.

"We’re pleased that the CSA and OSC have taken the first necessary step of extending the deadline. It shows they’re in tune with the needs of the business community. The deadline for submissions is now June 30, 2005," noted Mr. Hunt, "so it’s not too late for other interested parties to make their voices heard on this important issue. We urge them to do so now, because the window of opportunity to help shape these regulations is closing soon."

About the Institute of Chartered Accountants of Ontario

The Institute of Chartered Accountants of Ontario is the qualifying and regulatory body of Ontario’s 31,000 CAs. Since 1879, the Institute has protected the public interest through the CA profession’s high standards of qualification and the enforcement of its rules of professional conduct.

About the Ontario Chamber of Commerce

The Ontario Chamber of Commerce represents over 57,000 businesses through 160 local Chambers of Commerce and Boards of Trade, and has been Ontario’s business advocate since 1911. Its advocacy and policy initiatives focus on six areas key to the economic well being of the province: health; education; energy; finance & taxation; transportation & infrastructure; and border issues.

For further information, please contact:

Perry Jensen
The Institute of Chartered Accountants of Ontario
Office: (416) 969-4271
Toll free: 1(800) 387-0735 ext. 271
E-mail: pjensen@icao.on.ca

Roundtable participants

• AGF Management Ltd.
• Canada Bread Company, Limited
• Canadian Tire Corporation Limited
• Cygnal Technologies Corporation
• Danier Leather Inc.
• Hampton Equity Management Inc.
• J.J. Barnicke Limited
• Manulife Financial
• Maple Leaf Foods Inc.
• Mercedes-Benz Canada Inc.
• OMERS
• Oshawa Power & Utilities Corporation
• RBC Financial Group
• Research In Motion Limited
• RioCan Real Estate Investment Trust
• Risk Diagnostics, Inc.
• ScotiaBank Group
• St. Joseph Communications
• TD Bank Financial Group
• Virgin Mobile Canada
• Xerox Canada Ltd.

Subject-matter experts were supplied by:

• BDO Dunwoody LLP
• Deloitte & Touche LLP
• Ernst & Young LLP
• KPMG LLP
• PricewaterhouseCoopers LLP

Note: The accounting firm representatives were involved solely to provide technical guidance to the industry participants.