ACRA drives accurate, high quality financial reporting
The Accounting and Corporate Regulatory Authority (ACRA) is empowered to direct the attention of the judiciary towards financial reporting breaches. This is an update from ACRA’s Financial Reporting Surveillance Programme (FRSP) that is aimed to motivate the company’s directors to file the correct financial statements which comply with the accounting standards. The regulator hopes to adopt a “restatement first” approach for the next cycle of its FRSP, which starts on April 1st 2017.
ACRA action on Financial Reporting Breaches:
The following actions will be taken against the companies with serious and less serious reporting breaches respectively:
Action against companies with serious breaches:
- Directors of companies found to have one or more instances of severe non-compliance with financial reporting requirements stated in the Companies Act will be given warning letters.
- Directors of companies which commit serious financial reporting breaches will have to restate, as well as re-audit and re-file the affected financial statements.
- The restatement must be announced within a prescribed time.
- Companies which fail to restate, re-audit and re-file their financial statements will be publicly named and shamed and their directors will be held accountable.
- ACRA will be backed by the legislation/courts to act against the companies with serious breaches so they may re-state their financial statements. Punitive actions against companies which refuse to restate their accounts may become harsher in future.
- Directors will also be empowered to voluntarily correct defective accounts.
Action against companies with less serious breaches:
- The companies whose instances of non-compliance are less serious will be given advisory letters.
- Companies will be asked to restate the comparative figures or improve the disclosures in the following year’s financial statements.
The challenges occur in scenarios when the business transactions and accounting standards become more complex. It is important that companies pay more attention to the filing of their financial statements, including quality of XBRL reporting with ACRA. ACRA recognizes that more areas in financial reporting – such as revenue recognition, impairment and ad hoc gains – will be subject to estimates and judgment. ACRA has indicated that if the company refuses to comply, warnings, fines or prosecution leading to fines or imprisonment will be considered against the directors. Professional XBRL tagging service companies like DataTracks can assist companies help prepare quality XBRL reports (Check here for the price list), and thus establish/sustain their integrity and reputation.
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