Quality financial records are important for our markets. Many stakeholders ask for financial statements to understand the business and its underlying transactions.
The directors of the company are responsible for ensuring sound annual financial reporting to comply with Singapore Company Act Cap 50 and Singapore Financial Reporting Standards (SFRS).
Below are some guidelines to assist Singapore company directors in carrying out their financial reporting duties.
1. Review of the financial statements
Directors (non-executive or executive) should take all reasonable steps to ensure financial statements are reviewed with diligence and care before presenting to the shareholders and file annually with ACRA. It is the responsibility of the company directors to read and understand the content of the financial statements to make sure the data is complete and accurate to their best understanding.
Even if the directors are not proficient in finance or accounting, they should still question any areas of concern that do not match their understanding of an arrangement. The directors should apply a certain degree of scepticism when it relates to views expressed by the management team in regards to estimates and judgments.
2. Fundamental financial literacy
Directors do not need to be experts in finance and accounting but they should have up-to-date and fundamental knowledge of the Singapore accounting principles to complete an in-depth review of the financial statements.
For directors who do not have the relevant skills, there is the option to attend training or seek help from experts in Singapore. One practical course is the Director Financial Reporting Essentials which is jointly organised via the Institute of Singapore Chartered Accountants (ISCA) and Singapore Institute of Directors (SID).
3. Senior management appointments
In the process of making senior management appointments (Chief Financial Officer (CFO) and Chief Executive Officer (CEO)), the directors must make sure that they have the right integrity, experience, competency and knowledge to undertake their key role.
Directors of a listed company must comply with the Code of Corporate Governance and disclose in the Annual Report whether assurance has been received from the Group CEO and Group CFO about:
1. The financial statement provides a fair and accurate view of the Group's finances and operations, and all financial records are up-to-date and appropriately maintained; and
2. The adequacy of the Group's internal control systems, procedures and risk management.
The assurances provided by the Group CEO and Group CFO should not in any way diminish the responsibilities of the directors and should be seen to show that the management has complete oversight and controls over the process of financial reporting of the underlying transactions.
4. Competent finance function
The directors are responsible for making sure the management has adequately resourced and competent finance team to generate high-quality and accurate financial information. A team of competent and qualified accountants should be employed and receive ongoing professional training to ensure they stay in touch with the latest changes in financial reporting frameworks.
5. Using external accounting services
Directors have the option to outsource the day-to-day accounting and preparation of financial statements to a third-party accounting service firm. However, the directors are still fully responsible and must make sure the accounting service and compliance advice were given by a professional accountant with the appropriate knowledge and expertise. The advice given must be objective and unbiased.
6. Cooperating with independent auditors
Independent auditors have direct access to speak to a senior company representative who is responsible for acting on significant audit findings, which may relate to accounting practices that are not right for the company.
The director must act to resolve the issues brought to their attention by the auditors and request for professional assistance if necessary. They should not rely on the auditors to form an opinion on what action to take. This could impact the objective nature of the independent audit.
7. Internal accounting and control system
Directors must make sure the management puts in place appropriate accounting policies, creates proper internal processes and controls, and ensure accurate and complete accounting records at kept at all times.
The above information should act as a guide to assist directors to comply with significant duties related to all aspects of financial record keeping. If in doubt, the directors should seek legal advice to clarify any duties or responsibilities that are not clear.