Having examined an issuer’s financial report, IAASA corresponds with the directors seeking further information and/or clarification. IAASA may meet with issuer representatives.
When all information, clarifications and/or explanations necessary has been obtained, IAASA will make an assessment as to whether the periodic financial report is in compliance with the relevant reporting framework have been obtained.
The range of outcomes to an examination are:
- no apparent instances of non-compliance has been detected and the examination is closed;
- less significant instances of instances of non-compliance are detected and undertakings are sought that such maters will be rectified in future periodic financial statements;
- significant instances of instances of non-compliance are detected and revised financial statements are prepared and published.
In addition, the financial reporting decision may warrant publication in accordance with IAASA’s Policy Paper on Publication of IAASA’s Financial Reporting Enforcement Findings.
Having examined an issuer’s periodic financial report, it may appear that there are issues arising in respect of which further information and/or clarification is required. In such cases, IAASA corresponds with those charged with the issuer’s governance, i.e. the directors. In such correspondence, the matters arising are set out in detail and the issuer’s directors are requested to respond in writing, providing any information, clarification and/or explanations considered necessary.
Where directors’ responses do not fully address the issue(s) raised or, as is frequently the case, directors’ responses require further elaboration and/or clarification, IAASA typically enters into further correspondence with the directors. In instances where it is deemed more effective to do so, IAASA holds face-to-face meetings with issuer representatives, until such time as all information, clarifications and/or explanations necessary to enable an assessment to be made as to whether the periodic financial report is in compliance with the relevant reporting framework have been obtained.
When all information deemed necessary has been received, IAASA determines whether the particular financial reporting treatment adopted and/or disclosures provided are in compliance with the relevant reporting framework.
It is important to note that not all matters raised with issuers’ directors suggest potential non-compliance with the relevant reporting framework.
Rather, as considered necessary, IAASA seeks further information and/or clarification from issuers’ directors for the purpose of enabling it to better understand the basis for certain of their financial reporting judgments in preparing periodic financial reports, including their judgments relating to recognition, measurement, classification, presentation and disclosure.
On receipt of such further information and/or clarification from issuers’ directors, matters raised by IAASA in initial correspondence may be closed without the need for re-statement, additional disclosure or other actions on the part of the issuer.
Based on experiences to date, IAASA has found that those issuers that are most forthcoming with the requisite information, clarifications and explanations are those that bring their contacts with IAASA to a successful conclusion in the most efficient and expeditious manner.