Report on the Observance of Standards & Codes (ROSC) Accounting & Auditing (A&A) MODULE B: INSTITUTIONAL FRAMEWORK FOR CORPORATE FINANCIAL REPORTING B.2 LISTED COMPANIES TABLE OF CONTENTS INTRODUCTION TO THE QUESTIONNAIRE 3 A. OVERVIEW OF THE SECURITIES EXCHANGE(S) AND MARKET 4 B. SECURITIES MARKET REGULATION 5 C. FINANCIAL REPORTING REQUIREMENTS FOR LISTED COMPANIES 6 D. STATUTORY AUDIT AND OTHER FORMS OF INDEPENDENT ASSURANCE 7 E. AUDIT COMMITTEES 9 F. FILING/PUBLICATION OF FINANCIAL STATEMENTS 10 G. MONITORING AND ENFORCEMENT – FINANCIAL REPORTING 11 H. CORPORATE GOVERNANCE 13 Additional information 14 © 2017 International Bank for Reconstruction and Development / The World Bank 1818 H Street NW Washington DC 20433 Telephone: 202-473-1000 Internet: www.worldbank.org This work is a product of the staff of The World Bank with external contributions. 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Any queries on rights and licenses, including subsidiary rights, should be addressed to World Bank Publications, The World Bank Group, 1818 H Street NW, Washington, DC 20433, USA; fax: 202-522-2625; e-mail: pubrights@worldbank.org 2 ROSC Accounting & Auditing Module B: Institutional Framework – B.2 Listed companies INTRODUCTION TO THE QUESTIONNAIRE The purpose of this questionnaire is to gain an understanding of the financial reporting requirements for companies whose equity or debt securities are listed for trading on a regulated market in a jurisdiction in addition to or instead of the requirements for commercial enterprises1 in general. There are also questions in relation to the monitoring and enforcement capacity of the local securities market regulator in respect of financial reporting of listed companies specifically. Questions are based on international good practice for listed companies such as the Objectives and Principles of Securities Regulation (2010) issued by the International Organization of Securities Commissions (IOSCO). The questionnaire is structured as follows: A. Overview of the securities exchange and market B. Securities market regulation C. Financial reporting requirements for listed companies D. Statutory audit and other forms of independent assurance E. Audit committees F. Filing/publication of financial statements G. Monitoring and enforcement - financial reporting H. Corporate governance How should the questionnaire be completed? • The questionnaire should be completed by counterparts from the securities market regulator (or equivalent). • Where the response to a question is the same for listed companies as for commercial enterprises in general, please state this. • If there are additional requirements or expected good practice for listed companies specifically, state the legal instrument or code that establishes a requirement and the date of enactment. 1 Refer to responses provided in Module B Institutional Framework – B.1 Commercial Enterprises including SMEs 3 ROSC Accounting & Auditing Module B: Institutional Framework – B.2 Listed companies Please provide the following information when completing this questionnaire. Country Organization Date of preparation Telephone number Individual(s) responsible for preparation Address Job Title(s) Email A. OVERVIEW OF THE SECURITIES EXCHANGE(S) AND MARKET 1. Please provide the following information regarding the stock exchange(s). Comments a. Is there one or more stock exchanges in the jurisdiction? If so, please provide the name(s) and website addresses. b. Is the stock exchange part of a network with other exchanges? c. Are there different listing segments on the exchange(s)? If yes, please state the listing segments and briefly describe them. d. Number of initial public offerings (IPOs) within the last three years. e. Number of additional public offerings in the last three years. f. Trading volume for the previous three years g. Is there a secondary market for securities? 2. Indicate the number of listed companies and market capitalization of the stock exchange(s). Number of listed companies Market capitalization a. Domestic companies – Listed companies owned/ controlled by the state b. Subsidiaries of companies registered overseas but listed locally 4 ROSC Accounting & Auditing Module B: Institutional Framework – B.2 Listed companies 3. Indicate the number of bonds in issue of the stock exchange(s). Number of bonds in issue Market capitalization Total bonds in issue, of which: a. Corporate bonds b. Government bonds 4. Describe the principal institutional investors in the domestic stock exchange(s) (e.g., pension funds, banks etc.) B. SECURITIES MARKET REGULATION 5. Name the securities market regulator and describe its authority (e.g., comprehensive inspection, compliance and enforcement powers), indicating whether this is established by law or other instrument. 6. Briefly describe the key responsibilities of the securities market regulator in respect of financial reporting for listed companies (e.g., development of or contribution to prudential standards, audit oversight etc.). 7. Please indicate the source(s) of funding of the securities market regulator, noting the percentage contribution from each source. 8. Is the securities market regulator required to report on its activities (e.g., issue an annual report)? If so, please indicate the law or other instrument which establishes the requirement and whether this report is made available to the public. Provide a copy of the report or link to the website if the report is available online. 5 ROSC Accounting & Auditing Module B: Institutional Framework – B.2 Listed companies C. FINANCIAL REPORTING REQUIREMENTS FOR LISTED COMPANIES 9. Please describe the specific financial reporting requirements for listed companies in addition to, and/or in lieu of, those applicable to commercial enterprises. If there is more than one listing segment and/or exchange, please provide a response for each segment and/or exchange (use the ‘Additional Information’ page at the end of this questionnaire if necessary). In all instances, please indicate the law or regulation that establishes a requirement. a. Are IFRS required for the general purpose2 consolidated financial statements of listed companies? If not, please indicate: i. Which accounting standards are required ii. If IFRS is permitted b. Are IFRS required for the legal entity financial statements of listed companies? If not, please indicate: i. Which accounting standards are required ii. If IFRS is permitted c. Where IFRS are required, please indicate whether it is the full and current version of the standards as issued by the IASB or indicate the version and year. d. Are the financial statements required to follow a specific presentation (e.g., standardized format, chart of accounts)? If yes, please explain. e. Please indicate the deadline for submitting annual financial statements and indicate to whom they are submitted. f. Are listed companies required to prepare a management report/ management discussion and analysis in the annual report? If so, please describe briefly the requirements. 2 General purpose financial statements are those prepared to meet the needs of a variety of users of financial statements as opposed to those prepared for regulatory or other purposes. 6 ROSC Accounting & Auditing Module B: Institutional Framework – B.2 Listed companies g. Are interim or other periodic financial statements required? If so, please describe: i. the requirements (for both legal entity and consolidated statements where applicable) ii. the filing/publishing deadlines iii. whether an audit or limited review must be conducted. 10. Describe the regulations issued by the securities market regulator pertaining to financial reporting for listed companies. 11. Are there any inconsistencies between securities market regulations covering financial reporting and the provisions of other laws and regulations? If so, please briefly describe the inconsistencies and indicate which regulation(s) or requirement(s) take precedence. D. STATUTORY AUDIT AND OTHER FORMS OF INDEPENDENT ASSURANCE Note that throughout the assessment the term “audit” refers to a statutory audit of financial statements which is defined here as an independent audit of general purpose financial statements mandated by law, or by regulations issued by an institution with the legal authority to establish such requirements. In this regard, “auditors” are individuals or firms which are licensed or certified to perform statutory audits. 12. Are the financial statements of listed companies subject to an annual statutory audit? If so, please indicate the legal instrument or regulation that establishes this requirement. 13. Please indicate which body sets the auditing standards used in the audits of listed companies. 7 ROSC Accounting & Auditing Module B: Institutional Framework – B.2 Listed companies 14. Are full and current International Standards on Auditing (ISA) as issued by the International Auditing and Assurance Standards Board (IAASB) adopted in the jurisdiction and required to be followed for the audits of listed companies? If not, please indicate which auditing standards are used. 15. Please complete the following table, in respect of requirements regarding the tenure of auditors of listed companies. For each requirement, state the applicable/law regulation which establishes the requirement. Requirements a. Is rotation of the audit partner required? If so, state the frequency of rotation. b. Is rotation of the audit firm required? If so, state the frequency of rotation. c. Is a ‘cooling-off ’ period for the auditor (partner or firm) required? If so, state the length of time. d. Describe any other requirements in respect of the tenure of auditors of listed companies. 16. Further to the requirements for auditing commercial enterprises in general, are there additional requirements/ conditions from the securities market regulator or per the stock exchange listing rules to audit a listed company? If so, please describe. 17. Is there a list of approved auditors of listed companies? 18. Do auditors face any restrictions on providing non-audit services to listed companies they audit? 8 ROSC Accounting & Auditing Module B: Institutional Framework – B.2 Listed companies 19. Indicate the powers of the following with regard to auditor appointments and terminations. Requirements Annual general meeting of shareholders Audit committee Board of directors Other (please explain) 20. Does legislation or other instrument require the auditor of listed companies to attend the annual general meeting of shareholders? 21. Does the resignation/termination of the auditor need to be reported to the securities market regulator? If so, please describe the procedure. E. AUDIT COMMITTEES 22. Please describe the requirements for listed companies, indicating the applicable law or regulation which establishes the requirement. a. Is there a requirement to have an audit committee? b. Does the law, other regulation or code prescribe requirements for the composition of the audit committee (e.g., number of independent directors etc.)? Please briefly describe. c. Please briefly describe the key responsibilities of the audit committee in respect of financial reporting. 9 ROSC Accounting & Auditing Module B: Institutional Framework – B.2 Listed companies d. Please describe the competences required in order to serve as an audit committee member (e.g., experience/knowledge of financial reporting) e. Is the audit committee required to report to the shareholders on an annual basis? F. FILING/PUBLICATION OF FINANCIAL STATEMENTS 23. Are listed companies required to make their financial statements and other relevant reports available to the public? If yes, please indicate what is made publicly available from the list below. Select all that apply. Statement of Financial Position (or balance sheet) Statement of changes in equity Statement of cash flows Auditor’s report Notes and disclosures Management discussion and analysis (or management report) Income statement (or profit and loss statement) Other (please explain) Exemptions (please explain) Deadline for publication 24. Are listed companies required to disclose material information relating to financial reporting and A&A (e.g., change in accounting policies, change in auditor, etc.) on an ongoing and non-selective basis? If so, please explain briefly the requirement(s) and deadline for the public announcement. 10 ROSC Accounting & Auditing Module B: Institutional Framework – B.2 Listed companies 25. Please indicate where financial statements can be accessed by the public. Select all that apply. If there is a cost for accessing financial statements, please indicate the cost. Internet (please indicate where, e.g., listed company’s website, securities market regulator website) In person at the companies’ registry (please explain) Newspaper Official gazette Other (please explain) G. MONITORING AND ENFORCEMENT – FINANCIAL REPORTING 26. Does the securities market regulator review financial statements of listed companies? If so, please complete the following table: Comments a. Is there a dedicated unit with responsibility for reviewing the financial statements (e.g., checking if financial reporting and disclosure requirements are met, reviewing auditor’s reports, etc.)? b. Name of the monitoring unit(s) c. The number of staff dedicated to the monitoring activities and the required competences (e.g., financial reporting expertise) d. A brief description of the monitoring mechanisms 27. Besides the securities market regulator, are there any other institutions responsible for monitoring compliance with financial reporting requirements for listed companies (e.g., stock exchange)? If yes, please list below and briefly explain their duties. 11 ROSC Accounting & Auditing Module B: Institutional Framework – B.2 Listed companies 28. Does the securities market regulator play a role in the oversight of auditors of listed companies? If so, please firstly describe its role in this regard, and secondly, indicate whether there are other institutions with oversight responsibilities for the auditors of listed companies. 29. If the securities market regulator performs a review of financial statements of listed companies, describe the supervisory measures and sanctions where violations of financial reporting requirements occur. Please indicate all possible sanctions (administrative, civil and criminal), as they may relate to the listed company itself, its directors, managers, and auditors. 30. Please list major cases where an enforcement action has been taken over the past five years, if any, for breaches of financial reporting requirements. 31. What supervisory measures, if any, are triggered on the part of the securities market regulator if a listed company receives anything other than an unqualified audit opinion (e.g., qualified audit opinion, disclaimer, adverse opinion, matter of emphasis etc.)? 12 ROSC Accounting & Auditing Module B: Institutional Framework – B.2 Listed companies 32. Please complete the following table in relation to the interaction between the securities market regulator and the auditors of listed companies: Comments a. Are there protocols in place for the securities market regulator to engage with auditors of listed companies, either directly or indirectly? b. How often does the regulator meet with the auditors? c. Are auditors required to report on matters which they believe may be of material significance to the functions of the securities market regulator (e.g., breaches of securities or other laws)? d. Does the securities market regulator have the power to approve and/or dismiss auditors of listed companies? e. Does the securities market regulator have the power to require production of any documents from the auditor? H. CORPORATE GOVERNANCE 33. Is there a code of corporate governance or similar for listed companies ? If so, is compliance with the code voluntary or on a “comply or explain” basis? 34. In addition to the financial reporting requirements established by law or regulation described in the previous sections, does the code of corporate governance require or encourage further/different financial reporting practices (including audit requirements) for listed companies? If so, briefly describe. 35. What are the consequences (if any) for non-compliance with the code of corporate governance by listed companies? 13 ROSC Accounting & Auditing Module B: Institutional Framework – B.2 Listed companies Additional information Please indicate the corresponding section and question number if using this page to provide additional information. 14