Listed companies that have committed serious reporting breaches may have to restate their financial statements under new rules that may lead to warnings, fines or even criminal charges being laid against errant directors.
The new enforcement approach announced yesterday by the Accounting and Corporate Regulatory Authority (Acra) aims to raise reporting standards and better protect investors.
Acra chief executive Kenneth Yap said that previously, the first step was to sanction directors for breaches of accounting standards but this changes on April 1 when a "restatement first" approach will kick in.
This will involve two possible courses of action.
Firms that have committed lesser breaches will be asked to restate some comparative figures in the following year's financial statement.
But those with serious breaches will be required to not only restate, but also re-audit and refile the past financial statements.
If companies do not comply, Acra will apply to the courts to compel them to do so.
Acra has previously ordered company directors to issue restatements but the new approach will shift this first-level accountability to companies.
'RESTATEMENT FIRST' APPROACH
Previously, our first course of action was to sanction directors for breaches of accounting standards. With effect from April 1, Acra will instead adopt a 'restatement first' approach... And only if companies fail to do so, will we hold the directors accountable. Sanction could be levied through the issuance of warnings, composition fines or even prosecution for the egregious case.
ACRA CHIEF EXECUTIVE KENNETH YAP, on the new enforcement approach by Acra, which aims to raise reporting standards.
"And only if companies fail to do so, will we hold the directors accountable. Sanction could be levied through the issuance of warnings, composition fines or even prosecution for the egregious cases," Mr Yap said, adding that Acra will also issue press releases highlighting the breaches and action taken.
The new approach is a key feature of revisions to the Financial Reporting Surveillance Programme, an initiative where Acra selectively reviews financial reports of listed companies to ensure compliance and reporting standards.
Acra's new rules, which were unveiled at the annual Audit Committee Seminar, were met with some degree of reservation among those present.
Keppel Corporation audit committee chairman Danny Teoh said: "To me, restatement is a super serious thing.
"If you were in the United States and restated your quarterlies, you would probably have an avalanche of lawsuits directed at the company. It's something to be taken very seriously when decisions are made about restatements."
Mr Yap responded that the decision-making process will be as rigorous as before, backed by the views of experts and an independent review panel.
A new Audit Committee Guide was launched at the seminar by the Singapore Institute of Directors to help auditors and companies cope with tougher reporting standards.
The guide outlines the principles and approaches of an audit committee's responsibilities. It incorporates the Guidebook for Audit Committees in Singapore, which was last updated in 2012 and co-issued by Acra, the Monetary Authority of Singapore and the Singapore Exchange.
Directors can refer to it for the latest reporting requirements, such as those around the preparation of an enhanced auditor's reports (EAR), which became compulsory for all listed companies at the start of this year.
An EAR has an expanded reporting scope. It requires external auditors to disclose "key audit matters" in their dealing with a company, such as major transactions or areas with significant risks of financial misstatement.
More than 500 audit committee members and senior management figures from listed companies attended the seminar held at the Marina Mandarin hotel.