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Amendments

Title:

Taiwan Stock Exchange Corporation Procedures for Routine Regulation and Regulation by Exception Over Financial and Business Affairs of Listed Companies  CH

Amended Date: 2021.03.31 
Categories: Primary Market > Management > Auditing and Review

Title: Taiwan Stock Exchange Corporation Procedures for Routine Regulation and Regulation by Exception Over Financial and Business Affairs of Listed Companies(2011.08.18)
Date:
Article 5 The TWSE shall select companies subject to audit based on the following criteria:
1. Selection is based on the following criteria:
(1) Financial items:
1. There is a significant year-on-year decline in operating revenue, operating income, or income before tax.
2. The amount of investment loss generated by an equity-method investee company reaches a certain monetary amount or reaches a certain percentage of the company's current operating income, or a subsidiary's total holdings of the parent company's equity reaches a certain percentage of the parent company's equity.
3. The total amount of purchases from (or sales to) related parties in the current period reaches 20 percent or more of the total amount of the purchases (or sales) of a listed company, or shows a year-on-year increase of 50 percent or more and reaches 3 percent or more of shareholders' equity.
4. The ending balance of receivables from related parties and advance payments to related parties reaches 10 percent or more of shareholders' equity, or increases by 50 percent or more from the beginning of the period and reaches 3 percent of shareholders' equity.
5. The cumulative amount of assets traded (excluding purchase and sale transactions) with related parties in the current period accounts for 3 percent or more of the total assets at period-end.
6. The increase in the amount of loans to others in the current quarter reaches 3 percent or more of shareholders' equity; or the cumulative amount of loans to others at the end of the period reaches 10 percent or more of shareholders' equity.
7. The increase in the amount of endorsements and guarantees in the current quarter reaches 10 percent or more of shareholders' equity; or the cumulative amount of endorsements and guarantees at the end of the period reaches 30 percent or more of shareholders' equity.
8. Financial ratios are poor.
9. The amount of non-current equity investment accounts for 60 percent or more of shareholders' equity.
10. Net worth per share is too low.
(2) Non-financial items:
1. Resignation of a financial officer.
2. Resignation of an accounting officer.
3. Resignation of an internal audit officer.
4. Resignation of a research and development officer.
5. Change of certified public accountant (other than an internal adjustment at the accounting firm).
6. Change in shareholding of directors/supervisors.
7. Change of directors/supervisor (including independent directors), or resignation of the chairperson or general manager.
8. The board of directors is authorized to pay compensation for directors/supervisors in accordance with standards in the same industry, and the compensation paid is found to be unreasonable according to the screening criteria.
9. The filed report of the most recent month shows that pledges created by directors/supervisors exceed 50 percent or more of the actual shareholding of all directors/supervisors.
10. The financial operations of the company are materially affected by any litigation in the most recent year.
11. The financial officer or accounting officer is related within the second degree of kinship with any of the directors/supervisors.
If a company that is selected as subject to audit pursuant to the aforementioned criteria was selected for audit in the previous quarter the company may be excluded from the selection list.
2. A company that meets any of the following criteria is required to be listed as a company subject to audit, provided that it need not be listed if, after analysis, implementation of the audit is deemed unnecessary:
(1) A company for which any irregularities are discovered by a formality review of its financial report.
(2) There is a material change in managerial control (such as one third or more of its directors are changed).
(3) There is any material change to its principal lines of business.
(4) There have been consecutive deficits in the most recent 3 years, or the accumulated deficit reaches 50 percent or more of the amount of capital stock stated in the financial report.
(5) The incremental amount of loss before tax as compared to the loss or income before tax in the same period of the preceding fiscal year reaches 30 percent or more of the capital stock stated in the financial report.
(6) Any of the criteria specified in subparagraphs 3, 4, and 8 of the preceding paragraph is met, and the sum in question is large, the financial ratio is poor, and the company has not undergone a special audit in the previous quarter.
(7) There is uncertainty about the company's ability to make repayment at maturity for corporate bonds issued by it.
(8) Cash and cash equivalents account for too high a percentage of capital, and there is no capital expenditure plan.
(9) The amount of prepayments, or the volatility thereof, is large or irregular.
(10) The amount of unrealized loss in the trading of derivatives reaches NT$100 million and amounts to 3 percent or more of shareholders' equity, or the amount of open interest held for trading purposes in the period amounts to 40 percent or more of the capital stock stated in the financial report.
(11) The opinion produced by the CPA on the annual financial report is produced in a form whereby the responsibility for the opinion is divided [with other CPAs], and the audit works adopted from other CPAs account for too high a percentage.
(12) A company newly added to the current-quarter Public Bulletin Board of Companies Whose Financial Operations Require Special Attention.
(13) A company with relatively high risk indicators for the consolidated financial statement.
(14) The receivables and amount of inventory in the consolidated financial statement account for too high a percentage of the shareholder's equity.
(15) A company for which audit is required by the TWSE for other reasons.
3. During each selection, the TWSE also randomly chooses companies for review based on the following criteria:
(1) Companies that have not undergone routine regulation, regulation by exception, or substantive review of financial report for the most recent 3 years.
(2) Other criteria for random selection.