ISLAMABAD: Securities and Exchange Commission of Pakistan (SECP) has started show cause proceedings against 62 violators of different legal requirements. These violations pertain to Auditors’ reports, directors’ powers, delayed/non-filling of cost audit reports, investment in associated companies, misstatement of facts, takeover regulations, disclosure of directors’ interests, circulation of financial statements, employees’ provident funds and security deposits.
As per details, the SECP Enforcement Department concluded 30 proceedings against companies and chief executives, directors and auditors of the companies during September and October. In one such instance, the detailed examination of financial statements of a listed company led the SECP to track and unveil material concessions extended by another listed company to its associates, in total ignorance of its shareholders.
The lender company had already extended a loan of Rs 50 million to its associate, which was further rescheduled for another three years, without obtaining the required approval from the shareholders.
The lending company also did not record this material information in its financial statements, to avoid surveillance of the SECP and general shareholders, which surfaced from the record of the borrowing company. The company admitted the default and deposited the fine imposed.
In another case, change in cost formula of inventory valuation was accounted for as ‘change in accounting estimate’ instead of as a ‘change in accounting policy’ in accordance with the requirements of International Financial Reporting Standards (IFRS) and International Accounting Standards (IAS).
Since the change of cost formula represents a change in measurement basis therefore it should have been accounted for retrospectively as nothing to the contrary is mentioned in IAS.
Institute of Chartered Accountants of Pakistan duly endorsed SECP’s point of view on the issue.
