Friday 28 January 2011

CIRCULAR MF4/2011: AUDITORS' REPORTING PURSUANT TO BURSA MALAYSIA SECURITIES BERHAD LISTING REQUIREMENTS ON DISCLOSURE

CIRCULAR MF4/2011: AUDITORS' REPORTING PURSUANT TO BURSA MALAYSIA SECURITIES BERHAD LISTING REQUIREMENTS ON DISCLOSURE OF REALISED AND UNREALISED PROFITS/LOSSES IN THE NOTES TO THE QUARTERLY REPORT AND ANNUAL AUDITED FINANCIAL STATEMENTS

28 Jan 2011 Circular MF4/2011

TO ALL MEMBER FIRMS

AUDITORS' REPORTING PURSUANT TO BURSA MALAYSIA SECURITIES BERHAD LISTING REQUIREMENTS ON DISCLOSURE OF REALISED AND UNREALISED PROFITS/LOSSES IN THE NOTES TO THE QUARTERLY REPORT AND ANNUAL AUDITED FINANCIAL STATEMENTS


Bursa Malaysia Securities Berhad (“Bursa Malaysia”) issued a directive on 20 December 2010, requiring all listed corporations to disclose the breakdown of unappropriated profits or accumulated losses into realised and unrealised on group and company basis, as the case may be, in the notes to the quarterly reports and annual audited financial statements (hereafter referred to as “Bursa Malaysia Disclosure”).

International Standard on Auditing (“ISA”) 700, Forming an Opinion and Reporting on Financial Statements, governs the forming and reporting on financial statements by external auditors. In forming an opinion and reporting on the financial statements, ISA 700 requires auditors to form an opinion on whether the financial statements are prepared, in all material respects, in accordance with the applicable financial reporting framework. ISA 700 is written in the context of a complete set of general purpose financial statements, i.e. financial statements that are prepared in accordance with an applicable financial reporting framework.

In Malaysia, the applicable financial reporting framework refers to the approved accounting standards issued by the Malaysian Accounting Standards Board (“MASB”). The MASB standards do not deal with the distinction of profits and losses into realised and unrealised, nor do they require the disclosure of such distinction. Accordingly, the Bursa Malaysia Disclosure is construed as supplementary information that is not required by the applicable financial reporting framework to be disclosed in the financial statements.

Arising from its communication with the regulators, the Institute takes cognizance that Bursa Malaysia expects auditors to provide assurance on the Bursa Malaysia Disclosure as supplementary information to the annual audited financial statements. The auditor may address this reporting responsibility within the auditor’s report on the financial statements under a separate sub-title of “Other Reporting Responsibilities” to clearly distinguish this from the auditor’s responsibility under ISA 700 to report on the general purpose financial statements.

The directors of the listed corporations are responsible for the preparation of the supplementary information in accordance with Guidance on Special Matter No. 1, Determination of Realised and Unrealised Profits or Losses in the Context of Disclosure Pursuant to Bursa Malaysia Securities Berhad Listing Requirements, as issued by the Malaysian Institute of Accountants (“MIA Guidance”) and the directive of Bursa Malaysia Securities Berhad.

The auditor may report whether the supplementary information is prepared, in all material respects, in accordance with the MIA Guidance and the directive of Bursa Malaysia Securities Berhad. The auditor shall not include a statement, whether explicitly or implicitly, that the Bursa Malaysia Disclosure achieves a true and fair presentation in the context of general purpose financial statements.

As a guide, the auditors may consider using the following wording in the report:

Other Reporting Responsibilities

The supplementary information set out in Note XX is disclosed to meet the requirement of Bursa Malaysia Securities Berhad and is not part of the financial statements. The directors are responsible for the preparation of the supplementary information in accordance with Guidance on Special Matter No. 1, Determination of Realised and Unrealised Profits or Losses in the Context of Disclosure Pursuant to Bursa Malaysia Securities Berhad Listing Requirements, as issued by the Malaysian Institute of Accountants ("MIA Guidance") and the directive of Bursa Malaysia Securities Berhad. In our opinion, the supplementary information is prepared, in all material respects, in accordance with the MIA Guidance and the directive of Bursa Malaysia Securities Berhad.

Please be guided accordingly.

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