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Taiwan Stock Exchange Corporation Rules for Regulating TWSE Primary Listed Companies and Taiwan Innovation Board Primary Listed Companies After Listing(2022.05.04) |
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Article 17
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For audits of the implementation of audit plans by the internal auditors of a TWSE primary listed company or a TIB primary listed company, the random case selection rate is at least 25 percent per quarter in principle.
Instead of conducting the audit referred to in the preceding paragraph, the TWSE may use the CPA special audit report of the previous year presented by the company under Article 4 of these Rules. If the fiscal year for the selection of TWSE primary listed companies and TIB primary listed companies whose internal control systems are to be audited by the TWSE is the fiscal year of initial listing, the period covered by the special audit report for the internal control systems may be determined by the Procedures for Reviewing Internal Control System Audit Reports Issued by Certified Public Accountants.
Where a material unexpected incident occurs to a TWSE primary listed company or a TIB primary listed company, or where the competent authority or the TWSE deems it necessary for other reasons, the TWSE may examine the effectiveness of the design and implementation of said company’s internal control systems .
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Article 19
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When the TWSE audits the internal control system of a TWSE primary listed company or a TIB primary listed company, in addition to auditing one or more audit items selected from the annual audit plan formulated by the audited company, the following matters will also be listed as required audit items:
- The acquisition or disposal of assets.
- Derivatives trading.
- Loans of funds to others.
- Provision of endorsements or guarantees for others.
- The state of operation of the board of directors.
- Management of the operations of the remuneration committee.
- Management of application of the International Financial Reporting Standards.
- Procedures for professional accounting judgments and procedures for making changes in accounting policies and estimates.
- Such other audit items as the competent authority or the TWSE may deem necessary.
An audited company shall submit the following documents within the time limit designated by the TWSE:
- Internal Control System Statements for the most recent three fiscal years.
- The internal audit plan and the self-evaluation report, audit report, follow-up report, and related working papers for audit items as prepared for the given year.
- The internal control recommendations issued by a certified public accountant for the most recent period.
- Such other materials as the TWSE may deem necessary.
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Article 21
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When conducting an audit of a TWSE primary listed company's or a TIB primary listed company’s internal control system, the TWSE shall note the following matters:
- Reviewing whether the spot-checked operations shown in the audited company’s self-evaluation reports, audit reports, follow-up reports, and relevant working papers have undergone proper approval, authorization, validation, adjustment, cross-checking, record checking, and division of functions.
- Ascertaining whether the audited company’s auditors conducted their audits in compliance with the annual audit plan that was formulated, and whether working papers, audit reports, or follow-up reports were prepared in accordance with it.
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Article 26
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If any significant deficiency is found during a TWSE audit of a TWSE primary listed company's or a TIB primary listed company’s financial reports and internal control system, the TWSE may issue a letter requesting the audited company to dispatch personnel to participate in guidance courses held by an agency designated by the competent authority, with a copy of the letter to the designated agency. If the said company fails to dispatch personnel for that purpose, the TWSE, based upon the nature of the deficiency, may list it as a first target for substantive reviews of subsequent financial reports or internal control system audits. If a circumstance calling for prompt measures as in Article 23 is found in a TWSE audit of the internal control system of a TWSE primary listed company or a TIB primary listed company, the TWSE may impose a default penalty of NT$30,000 to NT$200,000 for the irregularity or deficiency, provided in the event when the circumstance has a material impact on shareholder equity, the TWSE may impose a default penalty between NT$200,000 and NT$5 million; timely rectification shall be made if the TWSE requests rectification within a prescribed time limit, or the TWSE may impose a default penalty from NT$50,000 to NT$5 million successively for each failure to rectify on schedule until the date of rectification.
If the TWSE discovers, in reviewing the annual report of a TWSE primary listed company or a TIB primary listed company, that the report was not prepared in accordance with the Regulations Governing Information to be Published in Annual Reports of Public Companies, it may issue a letter requiring the company to supplement or correct the report within five days after receipt of the letter, and to upload information relating to the supplementation or correction in the form of an electronic file to the TWSE-designated information reporting website. It shall also treat the discrepancy as an "other event having a material impact on shareholders' equity" under the TWSE Procedures for Verification and Disclosure of Material Information of Companies with Listed Securities, and bring the matter to the attention of investors.
If any of the following circumstances are found with respect to a TWSE primary listed company or a TIB primary listed company after TWSE review of the company's financial forecasts, the TWSE may issue a letter imposing a demerit on the company. When the circumstances are of a material nature, it may also impose a default penalty of NT$30,000, list the company as a potential candidate for substantive review of financial reports, and submit the matter for recordation by the competent authority:
- The company has not made timely updates (or corrections) of its financial forecasts pursuant to the Regulations Governing the Publication of Financial Forecasts of Public Companies.
- The basic accounting assumptions in the financial forecasts have not been reasonably evaluated.
- The company has failed to have financial forecasts approved by the board of directors and can give no legitimate reason.
- The company has failed to report relevant documents pursuant to the Regulations Governing the Publication of Financial Forecasts of Public Companies.
- There is a material mistake or omission in a public disclosure or filing made pursuant to the Regulations Governing the Publication of Financial Forecasts of Public Companies.
- The company has failed to make improvement or correction within the time limit after receiving notification to do so.
Financial reports, financial forecasts, annual reports, and internal control system audit reports of TWSE primary listed companies and TIB primary listed companies shall be retained by the TWSE for three years, and may be provided for review at the request of the competent authority during the period of retention.
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Article 27
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If a TWSE primary listed company or a TIB primary listed company violates any provision of these Rules, the TWSE may, in addition to handling the violation pursuant to the provisions of the preceding Article, issue a letter requesting the company to take improvement action, and may further require the company or its CPA or lead underwriter to propose an improvement action plan in a response letter addressed to the TWSE. The TWSE may additionally impose a monetary penalty of NT$30,000 on the T company commensurate with the circumstances of the particular case, and, if the violation is serious in nature, alter the trading method or suspend trading of the company's listed securities pursuant to Article 49-1, paragraph 1; Article 50-3, paragraph 1;, or Article 49-4, paragraph 1; Article 50-9, paragraph 1 of the TWSE Operating Rules.
With respect to the imposition of a monetary penalty under the preceding paragraph, if the cumulative number of penalties imposed on the TWSE primary listed company or the TIB primary listed company within the most recent one year reaches two or more (inclusive of the current penalty), or if the circumstances in an individual case are due to intent or material negligence, or have a material impact on shareholder equity or securities prices, the TWSE may impose a penalty of NT$50,000 to NT$5 million.
A TWSE primary listed company or a TIB primary listed company on which a default penalty is imposed in accordance with these Rules shall pay the penalty to the TWSE Finance Department within five days after receiving notice from the TWSE.
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