Regulatory Position Behind The Extension Of The Annual Report: Temperature And Attitude

In April 7th, the securities and Futures Commission issued the "announcement on matters related to the audit and disclosure of the current annual reports of listed companies". Following that, Shenzhen and Shanghai two issued the notice on supporting the listed companies to do well the audit and disclosure of the annual report in 2019 (hereinafter referred to as the notice), conveying the fact that some companies that are seriously affected by the epidemic can postpone the disclosure of the year. The detailed arrangement of the main business performance can be disclosed first, the regulatory temperature should be released, and the market will fight the epidemic.

According to our reporter's incomplete statistics, as of the evening of April 27th, a total of 56 listed companies in Shenzhen Stock Exchange issued interim announcements for postponed disclosure of annual reports, of which 24 companies were expected to disclose annual reports before May 31st, and 32 companies expected to disclose annual reports before June 30th. The reasons for delayed disclosure include the serious location of a company or company's important subsidiaries, or the influence of the epidemic prevention and control policy on the audit team. It is impossible to carry out the on-site audit and affect the progress of the audit work.

As a special policy to attract investors to meet the needs of market participants in the special period, the postponed disclosure of the annual report has solved the urgent need of many listed companies and intermediaries. Reporters noted that some ST and *ST companies also recently announced the delay announcement, including the the Great Wall animation, the Great Wall film, *ST Herme and *ST North news, which were likely to be implemented for two consecutive years of losses. The *ST Liyuan, which had been released for two consecutive years, was suspended from listing for three years, and *ST *ST and Qianshan medicine were terminated. The stock price is below the face value of Tianguang Zhong Mao and *ST Pegasus; and the investigation of the Cody dairy industry, there is capital occupation or illegal guarantee of unknown medicine, Hua Xun ark, ST Tianbao and so on.

According to the notice, the listed company should disclose the matters affected by the epidemic and the extent of its impact, the progress of the annual report preparation and audit work, etc., and the annual audit of the accounting firms should also give special opinions to verify whether the related matters in the aforementioned and annual reports of the listed companies are true. However, there are various reasons for the delay in the disclosure of the annual reports of these companies. The disclosure of the annual report preparation and audit progress is also vague, which naturally raises the question of the exchange.

According to incomplete statistics, in view of the fact that some companies and annual accounting postponement are true, the Shenzhen Stock Exchange has sent 14 enquiries, and the journalist has found out that the regulators have launched a key inquiry and supervision on the rationality and normality of the annual report extension, whether the risk prompts are sufficient, and supervise the performance of the intermediary agencies.

No excuse for delay.

Recently, *ST Pegasus announced in its annual report postponed that some of the subsidiaries are located in the key epidemic prevention and control areas, which have a greater impact on the company's business performance and affect the progress of the audit. The annual report is expected to be postponed until June 30th. However, according to the company's semi annual report in 2019, the subsidiary company that affected more than 10% of the company's net profit is only one of Datong Fu Qiao garbage incineration power generation Co., Ltd., located in Datong, Shanxi province. After understanding the situation, the exchange immediately issued a letter of concern, asked him to explain the specific circumstances of the impact of the progress of the audit on the location of the joint venture company, and the prevention and control policy.

The announcement of the extension of ST's annual report is even more "abnormal". It is said that the Peking University trade of the Japanese subsidiary company is affected by the epidemic. The annual report is expected to be postponed to May 30th. But according to the annual report of the accountant postponed the special opinion, the unaudited business income of Peking University trade in 2019 accounted for 40.97% of the consolidated business, and the net assets of 2019 audited was -0.57 billion yuan. Subsequently, the exchange focused on the substantial increase in the proportion of Peking's trading revenue and the reasonableness of its net assets, which required the company to explain the reasons for the delay in detail.

Risk warning should be adequate.

The extension of the annual report is not to be wrapped up, but to be wrapped up. Although some risk stocks can get the opportunity to postpone, but before the disclosure of the annual report, do a good job of risk warning, for investors to play a good "preventive" is an indispensable part of stabilizing the market.

Recently, the exchange's letter of concern also repeatedly asked some listed companies to postpone the disclosure of annual reports to fully indicate risks. If the Singapore News ark, which intends to postpone its annual report to May 30th, announced its 2019 earnings forecast amendment notice, the company's net profit in the 2019 year is -10 billion yuan to -15 billion yuan. After the disclosure of the annual report, it is possible to implement a delisting risk warning for two consecutive years of losses. The exchange then asked the company to alert investors to possible risks of delisting risks. At the same time, it also requested the auditor to fully assess the impact of the company's financial reporting and audit work in 2019 on the situation of bankruptcy reorganization, breach of guarantee, overdue loan and heavy litigation.

Intermediaries should not be less responsible.

In addition to vigorously combating speculation in listed companies, the exchange also has strict requirements for the responsibility of "gatekeeper" in the annual report.

The circular requires that accounting firms should make overall plans for epidemic prevention and control and perform their duties according to law, innovate auditing methods, create conditions to fulfill the necessary auditing procedures, and promptly carry out audit work to ensure the quality of audit. For example, the delayed announcement of the annual report of Cody dairy company said that the company's capital chain problems had caused the new customers and new employees of the company to be more, and the related job transfer was not in place and the business was not familiar with, so that the performance of audit procedures was affected. The exchange also asked the auditor to give full attention to the internal control risks caused by the extension of the reasons for the extension of the annual report and the details of the epidemic.

In the face of the "different opinions" of some listed companies and audit institutions, the exchange has also given high attention. For example, the extension of the annual report of unnamed medicine is due to the restriction of the audit work of Beijing branch and stock company Beijing Kexing due to the epidemic situation. However, the audit report of reservations issued by the accounting firms in its audit institutions shows that in 2017 and 2018, Beijing declined to provide sufficient financial data and information to the company. In addition, the company disclosed earlier that the controlling shareholder of the company occupied 561 million yuan of the company's funds and then offered to compensate it by assets. In the face of this phenomenon, the exchange requires not only the annual auditor to verify the reasons for the delay, but also the company's annual auditor's full attention to the occupation of funds, the company's ability to continue to operate, and whether the company's internal control is sound and effective. It is prudent to assess the impact of capital occupation and debt repayment on the company's audit opinion and issue relevant verification opinions on related issues.

Information disclosure is the core of capital market, and annual report is an important information for investors to make investment decisions. The notice emphasizes that the exchange will strengthen supervision over the listed companies' postponed disclosure of audited annual reports, and find that it is not consistent with the actual situation, and will seriously deal with it in accordance with the law. At present, the listed companies and accounting firms should overcome difficulties and seek truth from facts. We should press ahead with the disclosure and audit of annual reports and not abuse the "aid system". At the same time, investors must polish their eyes to read "information" so as to achieve "clear rules and risks". (Editor: Wu Yan Ling)

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