weakness exists, and testing and evaluating the design and operating effectiveness
of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We
believe that our audit provides a reasonable basis for our opinion.
A company’s internal control over financial reporting is a process designed to
provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal
control over financial reporting includes those policies and procedures that
(1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as
necessary to permit preparation of financial statements in accordance with
generally accepted accounting principles, and that receipts and expenditures
of the company are being made only in accordance with authorizations of
management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition,
use, or disposition of the company’s assets that could have a material effect
on the financial statements.
Because of its inherent limitations, internal control over financial reporting
may not prevent or detect misstatements. Also, 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.
In our opinion, MDC Partners Inc. maintained, in all material respects, effective internal control over financial reporting as of December 31, 2016, based
on the COSO criteria.
 BDO has not withdrawn their unqualified audit opinions
nor required a restatement of MDC’s financial statements for any
of the years 2012 to 2016. BDO has not withdrawn its ICFR
reports for any of the years 2012 to 2016.
 On May 9, 2014, MDC received a letter from the SEC
requesting that it use the qualifier “adjusted” with respect to
“EBITDA” (earnings before interest, taxes, depreciation and
amortization) in future filings. MDC responded by letter dated
May 19, 2014 confirming that it would comply with the SEC’s
request. This correspondence was publicly filed on EDGAR at the
time it was made.
 On October 5, 2014, the SEC served a subpoena on MDC
requiring it to produce documents and testimony with respect to
an investigation relating to (a) reimbursement of expenses
incurred by Mr. Nadal; (b) accounting for goodwill; (c) certain
other accounting practices; and (d) the trading in its securities by
 In response to the service of the subpoena, MDC co-operated
in the investigation, and it began its own internal investigation.
 MDC did not immediately publicly announce the service of
the subpoena, and on October 29, 2014, it released a news release