What Does ACRA Say About the Directors’ Duties Concerning Financial Reporting?
Quality financial information is the ultimate goal of ACRA.
Since the pandemic, investors, suppliers, company directors, and many more are striving for reliable and timely financial statements in order to obtain a better, more accurate picture of the business.
More specifically, over the past decade, businesses have been facing several challenges when it comes to understanding the guidelines for directors laid down by ACRA. In its efforts to increase the level of transparency and quality of financial reporting, ACRA has introduced a Financial Reporting Surveillance Program. Under this program, ACRA intends to eradicate poor financial reporting that leads to unreliable information or non-compliance.
Keeping this in mind, here are the duties and responsibilities of company directors and ACRA’s guidelines concerning such duties.
Duties of Directors
As per section 201(2) and 201(5) of the Companies Act, directors are responsible for presenting the following at the annual general meeting:-
- Financial statements that comply with the accounting standards issued by the Accounting Standard Council; and
- Financial reports that provide a true and fair view of the financial position and performance of the company.
Furthermore, directors are responsible for maintaining:-
- A streamlined system of internal accounting controls.
- Proper accounting and other records that enable the preparation of high-authority financial statements.
Guidelines Laid Down By ACRA Concerning Directors’ Duties: The Do’s and Don’ts
- Review of Financial Statements
Whether an executive or non-executive, every director must exercise care, competence, and diligence while reviewing the financial statements. They must read, understand, and enquire every facet of the financial statements to ensure that the information furnished is clear, complete, and consistent.
- Sufficient Financial Literacy
Directors should have sufficient and up-to-date knowledge of accounting principles and practices. If they lack requisite financial literacy, directors are advised to seek help or attend training.
- Competence of the Management
Directors must ensure that the company’s senior management, such as the CEO, CFO, and other critical staff, have adequate knowledge, expertise, and experience to carry out their roles.
- Seeking External Help
Directors can seek professional guidance or outsource accounting processes to reputable service providers. However, the directors will be responsible for ensuring that the advice comes from suitably qualified persons who possess appropriate knowledge of the accounting standards and taxonomy.
- Internal Control System and Accounting and Other Records
Directors must ensure that proper accounting policies, designs, and elements are adopted along with appropriate internal controls and processes. This ensures that a complete and accurate record of accounting and other processes is maintained.
For further information on such guidelines and regulations, stay tuned and wade through the DataTracks blog.