A committee of 15 leading financial experts today released a discussion paper that proposes ideas for enhancing financial information in Canada’s capital markets.

“Research confirms strongly that, internationally, high quality financial disclosure lowers the cost of capital,” said Efrim Boritz, the author of Maintaining Quality Capital Markets Through Quality Information. “Canada has a capital-intensive economy but represents only 2 to 3% of the world’s capital markets. To compete, we need to ensure that we minimize unnecessary information risks.”

The Capital Markets Leadership Task Force comprises a common interest group of stakeholders, chaired by Laurie Woodruff, of PricewaterhouseCoopers LLP and administered by the Canadian Institute of Chartered Accountants.

“The Task Force came together to promote discussion about ways to enhance reporting in Canada’s capital markets,” Woodruff noted. “It commissioned the Discussion Paper to portray the current environment and delve into issues involved in protecting the quality of those markets. The paper reflects Dr. Boritz’s views and conclusions, developed after consulting widely with stakeholders.”

The Discussion Paper has 44 propositions for enhancing the quality of publicly issued financial information. They fall into four main categories: underlying principles, Boards and audit committees, interim financial statements and other interim disclosures, and internal control over financial reporting and other regulatory disclosures.

The propositions focus on the costs and benefits of:

  • A model for the evolution of assurance services to enhance the quality of a company’s interim financial reporting. This includes a discussion of the merits of an interim reporting process that would see material transactions – such as business combinations, major contracts and lawsuits-audited in the quarter in which they occurred.
  • The mitigation of litigation and regulatory “chill” to encourage non- mandatory disclosures and auditors’ assurance services. This would be achieved through liability reform and a more rational, principles- based regulatory environment. As well, the paper proposes a collaborative shared responsibility model for developing new regulations, involving all stakeholders.
  • More powers for regulators to pursue enforcement activities (especially for violations of insider trading rules and breaches of generally accepted accounting principles) and thus reduce the cost of capital for Canadian companies.
  • More guidance material for Boards and audit committees and standards for auditors’ audit committee services.
  • More guidance for managements on how to assess the effectiveness of control systems for financial reporting and other regulatory disclosures. As well, different ways should be explored for the auditor to add value to those assessments for audit committees and Boards.



For the long term, the Discussion Paper anticipates that discussion, modification and adoption of some or all of the propositions would lead to a continuous flow of relevant, reliable and usable information to the capital markets, supported by an integrated continuous audit.

The Discussion Paper Maintaining Quality Capital Markets Through Quality Information, is available at www.cmltf.ca.