SINGAPORE - The Accounting and Corporate Regulatory Authority (Acra) will soon have the power to apply to the courts to compel companies to restate their financial statements if serious reporting breaches are discovered.
But Acra stressed that it will adopt a "restatement first" approach with company directors being "empowered to voluntarily correct defective accounts".
"Only when companies refuse to do so, will we hold directors accountable," said Acra chief executive Kenneth Yap.
Currently, directors of companies found to have seriously breached financial reporting requirements as stated in the Companies Act are given warning letters, while those for less serious non-compliance get advisory letters.
But from April 1 this year, in cases with serious breaches, companies must restate, re-audit and re-file past years' financial statements, on top of the restatements of comparatives in the current year's financial statements.
For less severe breaches, they will need to restate comparatives or improve disclosures in the current year's financial statements.
Sanctions against directors will be considered only when the company refuses to comply or in egregious cases, said Acra. These sanctions include warnings, fines or prosecution leading to fines and/or imprisonment.
"Our emphasis will be on ensuring that companies remediate the financial reporting gaps and communicate their effects to the public in a timely manner," he added. "Investors can thereby be assured that companies will remediate financial reporting gaps promptly."
Mr Yap was speaking at the annual Audit Committee Seminar on Friday (Jan 13), which brought together over 500 audit committee members and senior management figures of listed companies.
The move was made after two rounds of review on the Financial Reporting Surveillance Programme, an Acra initiative to selectively review listed company financial statements to ensure compliance quality.
A new Audit Committee Guide was also launched at the seminar by the Singapore Institute of Directors in response to rising governance and reporting standards.
The guide covers key concepts, principles and approaches of an audit committee's responsibilities, having incorporated some new regulatory requirements.
These include guidelines around the preparation of the enhanced auditor's report (EAR), which becomes a new requirement for listed companies this financial year. An EAR will be a more comprehensive coverage, with new elements such as key audit matters that outline major transactions or areas with significant risks of misstatements, said Acra.
Singapore Exchange chief regulatory officer Tan Boon Gin, who also spoke at the seminar, said the key audit matters "will go a long way to help investors understand the parts of financial statements that involve the highest degree of judgement and precludes charges of aggressive accounting".