Directors from four companies received warnings after Acra review of FY13 finances

DIRECTORS from four listed companies received warnings after the Accounting and Corporate Regulatory Authority (Acra) reviewed 49 financial statements for fiscal 2013, the regulator announced on Thursday.

Insufficient scrutiny and over-reliance on management lay at the root of non-compliance with Singapore accounting rules, Acra said in the inaugural report on its Financial Reporting Surveillance Programme.

As part of the surveillance programme, which was expanded in 2014 to include financial statements that had received clean audit reports, Acra reviewed 49 financial statements from Singapore-incorporated and Singapore-listed companies for financial years that ended in 2013.

The reviews, which were carried out with industry experts from the Institute of Singapore Chartered Accountants' (Isca) Financial Statements Review Committee, found four instances of severe non-compliance. But those four instances led only to warning letters and not the more severe regulatory sanctions of fines or prosecution.

The reviews also found 54 instances of minor non-compliance and 74 areas of improvement that only required advisory or closure letters.

The resolution of two cases of non-compliance are ongoing.

Only two companies - both large market capitalisation stocks - went through the review with no enquiries.

The review looked at 17 companies with market cap above S$1 billion, five with market cap between S$500 million and S$1 billion, 17 with market cap between S$100 million and S$500 million, and 10 with market cap below S$100 million.

Acra described the state of financial reporting as "generally healthy", but with "room for improvement".

The regulator said it was encouraging that directors in companies that faced enquiries were generally quick to take corrective action.

Acra identified three main causes of non-compliance. First, directors did not scrutinise the financial statements enough. Directors were also over-reliant on management, and too deferential to management's judgment.

"Directors as company stewards have a statutory responsibility to apply the right accounting standards in financial reporting," Acra chief executive Kenneth Yap said in a statement. "It is crucial that they review the financial statements carefully and, when necessary, question management's judgements and estimates. They have a duty to provide their stakeholders with an accurate picture of the financial health of the company."