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Article 3
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The TWSE shall, in principle, carry out quarterly audits of the implementation of audit plans by internal auditors of two percent of listed companies, and shall, where necessary, carry out on-site audits and use compliance tests. On-site audits shall be conducted on at least one-fourth of audited companies, and shall be conducted on any company to which any circumstances under paragraphs 1 through 9 of Article 4 hereof apply. Within one month after the end of each quarter, the TWSE shall compile and submit the audit reports and/or follow-up reports for that quarter to the competent authority for recordation. The quarterly selection ratio under paragraph 1 may be adjusted as needed, provided that at least eight percent of companies shall be selected for audit in the whole of each year.
Where a material unexpected incident occurs to a TWSE 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 the said company’s internal control systems.
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Article 5
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When auditing the internal control system of a listed company, the TWSE, in addition to auditing one or more audit items selected from the annual audit plan formulated by such audited company, shall list the following matters as requisite audit items, provided that the TWSE may adjust relevant audit items for specific supervisory purposes:
- acquisition or disposal of assets.
- trading in derivatives.
- lending funds to others.
- providing endorsements or guarantees for others.
- state of operations of the board of directors.
- 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 years.
- any internal audit plan as well as self-evaluation report, audit report, and follow-up report and relevant working papers on audit items that are prepared for the given year.
- 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 7
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When conducting an audit of the internal control system of a listed company, the TWSE shall focus its attention on 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 have conducted audits in compliance with the formulated annual audit plan and prepared working papers, audit reports, or follow-up reports accordingly.
- Reviewing whether the audited company has been subject to any sanction by the competent authority for its industry, and if it has received such a disposition, requesting the audited company to provide an explanation or a plan for improvement.
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Article 9
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Corresponding actions shall be taken promptly upon discovery of the following during an audit:
- Upon discovery of a material irregularity for which an in-depth audit is necessary, the company shall be listed as an audit target for routine supervision or exceptional supervision.
- Upon discovery of a material irregularity or violation of applicable provisions of the TWSE Operating Rules, the prescribed measures shall be taken and a report shall be submitted to the competent authority.
- Upon discovery of a material deficiency or upon occurrence of an event under any subparagraph of Article 43 of the Regulations for the Establishment of Internal Control Systems by Public Companies, where necessary, the TWSE may submit a report to the competent authority requesting the audited company to engage a certified public accountant to conduct a special internal control system audit and issue an audit report. If the CPA is found upon review to have failed to abide by Section III (Special Audits by Certified Public Accountants) of Chapter III of the Regulations for the Establishment of Internal Control Systems by Public Companies, the TWSE may request the CPA in writing to pay attention and take action, with a copy forwarded to the competent authority.
If any of the circumstances in the preceding paragraphs applies to a TWSE 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.
A TWSE listed company on which a default penalty is imposed shall pay the penalty to the TWSE Finance Department within five days after receiving notice from the TWSE.
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