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CEO must certify disclosure controls:
As a result of the Enron scandals, the United States government adopted the Sarbanes-Oxley Act, requiring the accuracy of Financial Statements to be certified by both the Chief Executive Officer and the Chief Financial Officer of a Corporation. the Canadian Security Administrators followed America's lead by adopting the Multilateral Instrument 52-109 earlier this year. The main requirement of MI 52-109 is the certification of Financial Statements by the CEO and the CFO of reporting issuers, with respect to both Interim and Annual Financial Statements. This certification applies for all fiscal years beginning on January 1, 2005 or later.
For Interim Financial Statements during the first year, the certification need only be a bare certification that the Financial Statements do not contain any untrue statements and fairly represent the financial condition of the Corporation in all material respects.
However, for fiscal years ending December 31, 2004 and after, both the CEO and the CFO must additionally certify that they have designed, or caused to be designed under their supervision, disclosure controls and procedures, as well as internal control over financial reporting, and that they have evaluated the effectiveness of those disclosure controls and internal controls. Further, their conclusions about the effectiveness of such controls must be set out in the Annual Management Discussion and Analysis for the Corporation.
As 2004 draws to a close, many CEO's and CFO's will be scrambling to design adequate disclosure and internal controls, upon which they MUST report when they issue their Annual Financial Statements and Management Discussion and Analysis.