During the third annual audit committee seminar, the Accounting and Corporate Regulatory Authority (ACRA) announced its “restatement first” approach under the Financial Reporting Surveillance Program (FRSP) when reviewing financial statements starting 1 April 2017. Previously, the ACRA’s first course of action under the FRSP was to sanction directors for breaches of accounting standards.
From 1 April 2017, the ACRA will adopt a “restatement first” approach to ensure that financial reporting breaches are re-mediated and communicated promptly for the benefit of investors.
Depending on the severity of the breaches, remediation could range from restating comparatives in the following year’s financial statements to restating, re-auditing and refiling past years’ financial statements.
For the companies that fail to comply, ACRA will soon be empowered by a change in legislation to apply to the courts to compel these companies that have committed serious financial reporting breaches to restate, re-audit and re-file the financial statements where necessary. ACRA will also issue company-specific press releases to ensure that investors are informed on a timely basis.
Only when companies fail to do so will the ACRA will publicly name these companies and hold their directors accountable. Sanctions could also be levied through the issuance of warnings, composition fines, or even prosecution for the egregious cases.
Directors of companies who commit less serious breaches will be asked to restate the comparative figures, or include or improve the disclosures in the following year’s financial statements.
ACRA stressed that it will adopt a “restatement first” approach with company directors being “empowered to voluntarily correct defective accounts”. “Our emphasis will be on ensuring that companies remediate the financial reporting gaps and communicate their effects to the public in a timely manner,” ACRA chief executive Mr Kenneth Yap added. “Investors can thereby be assured that companies will remediate financial reporting gaps promptly.”
“This restatement first” approach as part of FRSP comes in recognition of the fact that business transactions are becoming more complicated and accounting standards, more complex. As such, more areas in financial reporting such as revenue recognition, impairment and ad hoc gains will be subject to estimates and judgment which may lead to misapplication of accounting standards.
The third annual Audit Committee (AC) seminar was held jointly organized by the Accounting and Corporate Regulatory Authority (ACRA), Singapore Exchange and Singapore Institute of Directors on 13 January 2017. The annual seminar also discussed key challenges that audit committees face when overseeing their companies’ financial reporting, audit processes, internal controls and regulatory compliance. In addition, a new ACs Guide was launched at the seminar to help audit committees discharge their oversight duties over financial reporting and governance
Source: ACRA, 13 January 2017