CANADA Law and Practice Contributed by: Sarah Gingrich, Sean Stevens, Marie-Josée Neveu and Tracy Hooey, Fasken
7. Audit, Risk and Internal Controls 7.1 Appointment of External Auditors Canadian private companies generally have the option regarding whether or not to appoint an external auditor, and often waive this require - ment. Public companies in Canada must appoint an external auditor and the auditor must meet independence requirements. It is not uncommon for large Canadian public companies to have an auditor independence policy which, among oth - er things, establishes a process for determining whether the audit and other services provided by the external auditor to the company affect its independence vis-à-vis the company.
7.2 Requirements for Directors Concerning Management Risk and Internal Controls Unlike Delaware corporate law, Canadian corpo - rate law does not expressly provide for “Care- mark” claim – ie, where a plaintiff can file suit where a company’s board either failed to prop - erly implement an internal system of reporting and controls for key risks facing the company or, having established such an internal system, failed to properly monitor it. Nonetheless, insti - tuting an effective enterprise risk management system is best practice in Canada, as a failure to do so could potentially give rise to a breach of duty of care claim against the company’s direc - tors (see 4.6 Legal Duties of Directors/Officers ). It is therefore common for large Canadian pub - lic companies to have one of their committees address enterprise risk considerations and regu - larly report to the full board.
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