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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 review.
- 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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