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Taiwan Stock Exchange Corporation Procedures for Review of Financial Reports of Listed Companies(2024.01.12) |
| Date： |
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Article 3
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The scope of review for the financial reports referred to in the preceding paragraph shall be the financial reports audited or reviewed by a certified public accountant (CPA) and financial statements, and the scope of review for financial forecast shall be CPA review reports with assurance provided, pro forma financial reports, financial forecast declaration, summary of significant accounting policies, and summary of major basic accounting assumptions.
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Article 5
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During the review of financial reports of a listed company, the items listed on the formal examination checklist and substantive examination checklist shall be checked item-by-item to find out if the accounting treatment thereof violates any relevant laws or the generally accepted accounting principles; the following matters shall also be checked:
- Whether the investment in derivatives products is duly disclosed.
- Whether there is any irregularity in the trading with related parties.
- Whether there is any loan granted to others due to a financing need not arising out of company business transactions.
- Whether there is any irregularity in the purchase and sale of block assets.
- Whether there is any endorsement and guarantee for others due to a need not arising out of company business transactions.
- Whether the board of directors is duly operated.
- The improvement progresses of the deficiencies, or the follow-up review of irregularities listed in the previous review.
Financial forecasts shall be reviewed and checked item-by-item for the items listed in the formal examination checklist and the substantive examination checklist; in addition, the following matters shall also be checked:
- Whether there is any irregularity in the CPA conclusion with assurance provided.
- Whether the basic accounting assumptions in the financial forecasts are reasonable.
- Whether there is any irregularity in the timing for updating (or correcting) or restating the financial forecasts.
- Whether the summary of major basic accounting assumptions in the financial forecasts include all the necessary items.
- The improvement progresses of the deficiencies, or the follow-up review of irregularities as listed in the previous review.
The following rules shall be observed in evaluating whether a listed company delays the updating (or correction) of financial forecasts:
- Monitoring on a monthly basis the discrepancy between the estimated figures before the update and its own un-audited figures, and, if such discrepancy has reached the timing for a new update, finding out the cause and basis for such discrepancy with the actual timing for an update.
- Monitoring the time when the cause for a financial forecast correction occurs in order to find out the cause and basis for its discrepancy with the actual timing for a correction.
- Analyzing the supporting materials and the rationality of the company's explanation on the cause of an update (or correction).
The following matters shall be observed during the assessment of the rationality of the basic accounting assumptions in the financial forecasts:
- Comparing the major differences between the financial forecasts before and after the update (or correction), finding out the main cause for such differences, and analyzing item-by-item the rationality of the evaluation materials in 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 major differences, and finding out their causes and rationality.
- Obtaining an analysis report related to the industry that the company belongs to, and comparing the financial reports prepared by companies in the same industry in order to find out the business cycle of the industry.
- Finding out whether the revenue is overestimated or the expenditure is underestimated in the pro forma statement of non-operating revenues and expenditures. If the company being reviewed plans to dispose non-current financial assets or major assets, it shall obtain an objective and accurate price reference or appraisal report to serve as the basis for the determination of the reasonableness of the figures that it prepares. When an evaluation adopts the estimated figures of share of the profit or loss of associates and joint ventures accounted for using the equity method, 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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Article 7
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During the formal examination of financial reports, where financial reports are not submitted pursuant to the regulations, the documents filed are incomplete, or the CPA produces a review report other than one with an unqualified or a review report other than one with an unqualified conclusion, affecting the fair presentation of the financial reports to the extent that a restatement is required, or the internal control system has material deficiencies; or during the formal examination of financial forecast, the documents submitted are incomplete, the documents publicly released are incomplete, the day of public announcement/report and/or the day of preparation are overdue, and the CPA produces an assurance report with a modified conclusion, the concrete handling method or handling suggestions shall be summarized and reported to the competent authority.
After reviewing the financial reports, [the TWSE] shall explicitly express opinions on the review conclusion and the concrete handling method. If deficiencies or omissions are found, the TWSE shall request the listed company to rectify and, in the event of any irregular basis with material deficiencies or omissions which requires the TWSE to handle the matter pursuant to the Securities and Exchange Act or to request the assistance of relevant organizations, the TWSE shall affix review reports case-by-case, and draft a handling opinion to be reported to the competent authority, or suggest that the competent authority transfer the case to the competent authority for the industry concerned for further investigation.
The TWSE may issue a letter requiring the company found to have material deficiencies under the preceding paragraph to send personnel to attend education classes organized by an organization designated by the competent authority, and forward a copy of such letter to the aforementioned organization. If a company does not send personnel to attend the classes, the TWSE may, depending on the nature of the deficiencies, list such company as the first priority for auditing in the subsequent substantive examination of financial reports, routine regulation or regulation by exception, or internal control system audit.
If common deficiencies are found during the review of financial reports, a circular letter shall be regularly sent to the listed companies for their reference and improvement, and a copy thereof shall be forwarded to the competent authority.
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