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Article 10
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During review of the financial reports of a TWSE primary listed company or a TIB primary listed company, items on the formal examination checklist and substantive examination checklist shall be checked item-by-item to ascertain whether their accounting treatment violates any relevant laws or generally accepted accounting principles. The following matters shall also be checked:
- Whether investment in derivatives products is duly disclosed.
- Whether there are any irregularity in trading with related parties.
- Whether there are any loans granted to others due to financing needs not arising out of company business transactions.
- Whether there are any irregularities in the purchase and sale of block assets.
- Whether there are any endorsements and guarantees for others due to needs not arising out of company business transactions.
- Whether the board of directors is operating in accordance with regulations.
- The status of improvement in deficiencies noted in previous reviews or follow-up review of previously noted irregularities.
During review of financial forecasts, items in the formal examination checklist and the substantive examination checklist shall be reviewed and checked item-by-item. In addition, the following matters shall also be checked:
- Whether there is any irregularity in the CPA review opinion.
- Whether the basic accounting assumptions in the financial forecasts are reasonable.
- Whether there is any irregularity in the point in time at which the financial forecasts were updated (or corrected).
- Whether all necessary items are included in the summaries of major accounting assumptions in the financial forecasts.
- The status of improvement in deficiencies noted in previous reviews or follow-up review of previously noted irregularities.
The following rules shall be observed in evaluating whether a listed company delays the updating (or correction) of financial forecasts:
- The discrepancy between the estimated figures before the update and the company's own un-audited figures shall be monitored on a monthly basis, and if the discrepancy has reached the standard for the time for an update, the cause and the basis leading to the discrepancy with the actual time of the update shall be ascertained.
- The time of occurrence of the cause for a financial forecast correction shall be monitored in order to ascertain the cause and basis for the discrepancy with the actual time of the correction.
- The supporting materials and the rationality of the company's explanation for the cause of an update (or correction) shall be analyzed.
Attention shall be given to the following matters when assessing the rationality of basic accounting assumptions in financial forecasts:
- Comparing any material differences between the financial forecasts before and after the update (or correction), ascertaining the main cause for the differences, and analyzing item-by-item the rationality of the evaluation materials relating to the basic accounting assumptions.
- Analyzing the historical financial information of the company reviewed for the most recent 2 years and the financial forecasts of the current year to see if there are any material differences, and ascertaining their causes and rationality.
- Obtaining relevant analysis reports for the company's industry belongs to, and comparing financial reports prepared by companies in the same industry in order to understand changes related to the industry's business cycles.
- Ascertaining whether revenues are overestimated or expenditures underestimated in the pro forma statement of non-operating income and expenses. If the company being reviewed plans to dispose non-current financial assets or major assets, it shall obtain a definite and objective price reference or appraisal report in order to determine whether there is a reasonable basis for the figures it prepares. When figures for the company's share of profits or losses of associates and joint ventures recognized under the equity method were adopted for the estimate, materials related to relevant industries, the same industry, or securities market fluctuations shall also be obtained to facilitate analysis and judgment.
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