Sections 202A and 202B of the Companies Act (the Act) were introduced to allow the revision of defective financial statements under two circumstances. Section 202A allows directors of a company to voluntarily revise their defective financial statements without the need to obtain a court order, when it appears to the directors that the financial statements do not comply with the requirements of the Act (including compliance with the Accounting Standards). Section 202B provides for the Registrar to apply to the Court for a declaration that the financial statements do not comply with the requirements of the Act, and for an order requiring the directors to revise the financial statements.
The subsidiary legislation on the above sections was recently issued and is set out in the Companies (Revision of Defective Financial Statements, or Consolidated Financial Statements or Balance-Sheet) Regulations 2018 (the Regulations). The requirements of sections 202A and 202B and the Regulations take effect on 20 April 2018.
The Regulations require all revised financial statements to be audited and reported (unless exempted).
To guide the profession in the reporting of the audit on the revised financial statements, ISCA has developed a sample auditor’s report. The changes from a standard auditor’s report are shown as shaded text. The key points to note on the report are as follows:
As required by the Regulations, revised financial statements are taken as having been prepared on the date of the original financial statements, instead of on the date of revision, and accordingly, do not deal with events after the date of the original financial statements. The auditor’s opinion on the revised financial statements is hence also based on the audit evidence obtained, seen as at the date of the original financial statements.
Going concern assessment is based on audit evidence obtained up to the date of the original auditor’s report.
“Key Audit Matters” (KAM) section would need to be updated as at date of auditor’s report on revised financial statements. The revisions made to the financial statements may give rise to an additional KAM or relate to a matter previously communicated and revisions to the description of the KAM may therefore be necessary. The need to update is due to the intent of the KAM section to provide relevant and useful information to users of the audited financial statements.
“Other Information” would comprise the new Directors’ Statement or revised annual report (if applicable).
An “Other Matter” section is included to draw attention to the disclosures in the financial statements on the aspects in which the original financial statements did not comply with the Act and the material revisions made.