About the Financial Reporting Duties
It is important to have quality financial information to create strong and successful markets. The different sectors want reliable and timely financial reports to picture the business accurately. The reports they ask for could be for generating value or understanding what the risks are.
Over the years, businesses have begun to become more challenging and they are increasing the complexity of their models. In order to adjust to them, standards of financial reporting now have higher expectations. Hence, the structure needs a more professional judgment when it comes to financial statements. Examples are the ones for business acquisitions, and measuring assets and revenue fairly.
The company directors must ensure the accuracy of their annual financial reporting. They must comply with the Companies Act Chapter 50 and the Singapore Financial Reporting Standards (SFRS).
You will find below the financial reporting duties of company directors.
Keep Accounting Records
It is in Section 14 of the Singapore Companies Act that each company must keep accounting records that explains its financial position. These records must be in a place that all directors agree to. The financial statements must be easily accessible at all times so that all directors can inspect it. Failure to comply renders the company and directors guilty.
Fulfil this requirement by having an efficient accounting and filing system. It should record all business transactions that help to avoid discrepancies later on.
Review Financial Statements
The directors must take all necessary steps to make sure that financial statements are diligently and carefully read before it is shown to the shareholders. They must also do an annual filing at the ACRA.
It is the company directors’ responsibility to understand and read the content of financial statements. This ensures that the data is complete and accurate so they can understand it better.
Even if the company directors are not proficient in accounting or finance, they must still ask about any area they cannot understand according to the arrangement.
The directors must apply a certain level of scepticism when it comes to views that the management expresses when it comes to judgments and estimates.
Work With Independent Auditors
The independent auditors must communicate with people who have governance charges on important audit findings. This includes why they consider accounting practice as unimportant to certain company circumstances before the issuance of audit reports. Directors must amicably resolve these issues and look for help if necessary. Directors must not rely on the independent auditor when they form their opinion on financial statements. If they do this, it will undermine an independent audit’s objective.
Maintain Yearly Accounts
Directors must submit the company financial statements at the Annual General Meeting (AGM). These statements must be shown to the shareholders every calendar year at the AGM. The submission of the first financial statements must be within 18 months since the company was incorporated. Then, a maximum of 15 months can pass between two meetings. The financial statements must be current:
- Not over 4 months before the meeting date of the public company.
- Not more than 6 months prior to the meeting date in the case of another company.
Understand Basic Financial Literacy
Directors do not have to be accounting and finance experts, but they must have a fresh knowledge of Singapore’s accounting principles. This is necessary to complete a deeper review of the financial statements.
For directors with no relevant skills, they have no option to attend training or look for help from Singapore experts.
A practical course is the Director of Financial Reporting Essentials that is organized through the Singapore Institute of Directors (SID) and the Institute of Singapore Chartered Accounts (ISCA).
Internal Controlling System, and Other Records and Accounting
Directors have to make sure that management adopts the right accounting policies, implements, and designs the right internal controls and processes. They must also maintain accurate accounting records. This obligation happens whether the records and books are kept in-house or they outsource it to a third party.
Put Up a Competent Finance Function in-house
The directors have to make sure that the management has enough resources and a competent finance team so they will have accurate and high-quality financial information.
They should hire competent and eligible accountants and have continuous professional training to make sure they are always in touch with any new changes in the frameworks of financial reporting.
The Companies Act has three important meetings that are held by companies, and these are:
- Statutory Meeting – It is written in the Companies Act Section 174 that all public limited companies with a share capital must hold a meeting known as “statutory meeting.” It should be within one month of commencing the business. This meeting is not recurring and it is held only once.
- Annual General Meeting (AGM) – Section 91 in the Companies Act 2014 says that an AGM must take place. According to the provision, the meeting must take place once a year and not more than 15 months gap between them. The first AGM of a company must happen within 18 months from the date of incorporation.
- Extra General Meeting (EGM) – In Section 92 of the Companies Act, the directors, as the request of the members who have at least ten per cent of paid-up shares and carry the right votes in general meetings, must hold an EGM. The EGM should be within 2 months since the request. For the company with no share capital, the request must be made by members who show at least ten per cent of the company’s voting rights. If the directors do not with a meeting within 21 days from the date of request, members can hold the meeting.
Senior Management Appointments
When it comes to making senior management appointments, directors have to make sure that they have integrity, competency, experience, and knowledge to undertake their main role.
The directors of a company must follow the Code of Corporate Governance and include in the annual report whether assurance came from the CEO or CFO:
- The financial statement gives an accurate and fair view of the operations and finances, and financial records are always new and properly kept.
- The adequacy of the Group’s internal control systems, procedures and risk management.
The CEO and CFO provide assurances that should not lessen the responsibilities of the directors. They have to prove that the management can precisely oversee and control the process of financial reporting about the underlying transactions.
Establish an Internal Control System and Accounting
Directors must make sure that the management has appropriate accounting policies. It’s also important for them to make sure there are accurate and complete records of accounting that they keep all the time.
The responsibility of overseeing an accurate keeping of records is applicable either the company has accounting services or maintains it in-house.
Appoint a Company Secretary
The Companies Act Section 88 says that the company secretary should be chosen by its directors. They have to make sure that the chosen secretary has the qualification, prior experience, and industry membership. The secretary’s office must not be left vacant for more than 6 months.
Act as a Fiduciary
A director chosen for that role has the responsibility to prioritize the company’s interests and shareholders above all. These include their personal interests. Imagine the director making decisions in a board meeting that only benefits them personally, and not thinking about the company. This is against common law practices. A statute is unable to specifically outline all acts that a director should or should not do. Therefore, the fiduciary concept encompasses all these situations. That is why a director should make sure to act honestly and responsibly since the position demands this behaviour from them whether the law mentions it or not.
The Accounting and Corporate Regulatory Authority of Singapore outline fiduciary duties that a company director needs to fulfil.
Each director should fulfil the following fiduciary duties:
- Act honestly in keeping the company’s interests in mind.
- Avoid conflict of interest.
- Be careful and diligent in performing duties.
- Do not take advantage of powers that invest in them or the information they know.
Seek Assistance if Necessary
Directors must look for professional advice about accounting and/or outsource the professional service providers that keep records and financial statement reports. However, they are still responsible and must make sure that any advice or service suitably come from eligible persons. These persons must have the right level of expertise and knowledge of accounting standards, and such advice is objective and neutral.
These are the financial reporting duties of directors in Singapore companies. If you need to plan a Singapore Nominee Director Package, you can contact 3E Accounting to give their expert advice on that.