Bank of Montreal 2012 Annual Report Download - page 77

MD&A
MANAGEMENT’S DISCUSSION AND ANALYSIS
Management’s Annual Report on Disclosure Controls and Procedures and
Internal Control over Financial Reporting
Disclosure Controls and Procedures
Disclosure controls and procedures are designed to provide reasonable
assurance that all relevant information is gathered and reported to
senior management, including the President and Chief Executive Officer
(CEO) and the Executive Vice-President and Chief Financial Officer (CFO),
on a timely basis so that appropriate decisions can be made regarding
public disclosure.
An evaluation of the effectiveness of the design and operation of
our disclosure controls and procedures was conducted as at October 31,
2012, by BMO Financial Group’s management under the supervision of
the CEO and the CFO. Based on this evaluation, the CEO and the CFO have
concluded that, as at October 31, 2012, our disclosure controls and
procedures, as defined in Canada by National Instrument 52-109, Certifi-
cation of Disclosure in Issuers’ Annual and Interim Filings, and in the
United States by Rule 13a-15(e) under the Securities Exchange Act of
1934 (the Exchange Act), are effective.
Internal Control over Financial Reporting
Internal control over financial reporting is designed to provide reason-
able assurance regarding the reliability of financial reporting and the
preparation of financial statements in accordance with International
Financial Reporting Standards (IFRS) and the requirements of the Secu-
rities and Exchange Commission (SEC) in the United States, as applicable.
Management is responsible for establishing and maintaining adequate
internal control over financial reporting for BMO Financial Group.
BMO’s internal control over financial reporting includes policies and
procedures designed to provide reasonable assurance that: records are
maintained in reasonable detail to accurately and fairly reflect the
transactions and dispositions of the assets of BMO; transactions are
recorded as necessary to permit preparation of the financial statements
in accordance with IFRS and the requirements of the SEC in the United
States, as applicable; receipts and expenditures of BMO are being made
only in accordance with authorizations by management and directors of
BMO; and unauthorized acquisition, use or disposition of BMO’s assets
that could have a material effect on the financial statements are pre-
vented or detected in a timely manner.
Because of its inherent limitations, internal control over financial
reporting can provide only reasonable assurance and may not prevent
or detect misstatements. Furthermore, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may
become inadequate because of changes in conditions, or that the
degree of compliance with the policies or procedures may deteriorate.
BMO Financial Group’s management, under the supervision of the
CEO and the CFO, has evaluated the effectiveness of internal control
over financial reporting using the framework and criteria established in
Internal Control – Integrated Framework, issued by the Committee of
Sponsoring Organizations of the Treadway Commission. Based on this
evaluation, management has concluded that internal control over finan-
cial reporting was effective as at October 31, 2012.
BMO Financial Group’s auditors, KPMG LLP (Shareholders’ Auditors),
an independent registered public accounting firm, has issued an audit
report on our internal control over financial reporting. This audit report
appears on page 117.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting in
fiscal 2012 that have materially affected, or are reasonably likely to
materially affect, the adequacy and effectiveness of our internal control
over financial reporting. The transition to IFRS did not materially change
BMO’s internal control over financial reporting.
Shareholders’ Auditors’ Services and Fees
Pre-Approval Policies and Procedures
As part of BMO Financial Group’s corporate governance practices, the
Board of Directors oversees the strict application of BMO’s corporate
policy limiting the services provided by the Shareholders’ Auditors that
are not related to their role as auditors. All services provided by the
Shareholders’ Auditors are pre-approved by the Audit and Conduct
Review Committee as they arise, or through an annual pre-approval of
amounts for specific types of services. All services comply with our
Auditor Independence Policy, as well as professional standards and
securities regulations governing auditor independence.
Shareholders’ Auditors’ Fees
Aggregate fees paid to the Shareholders’ Auditors during the fiscal years
ended October 31, 2012 and 2011 were as follows:
Fees ($ millions) (1) 2012 2011
Audit fees 15.8 13.8
Audit-related fees (2) 1.7 0.8
Tax fees ––
All other fees (3) 1.2 0.2
Total 18.7 14.8
(1) The classification of fees is based on applicable Canadian securities laws and United States
Securities and Exchange Commission definitions.
(2) Audit-related fees for 2012 and 2011 relate to fees paid for accounting advice, specified
procedures on our Proxy Circular and other specified procedures.
(3) All other fees for 2012 and 2011 relate primarily to fees paid for reviews of compliance with
regulatory requirements for financial information and reports on internal controls over
services provided by various BMO Financial Group businesses. They also include costs of
translation services.
74 BMO Financial Group 195th Annual Report 2012