SECP Directs Directors of Listed Companies to Maintain Proper Financial Statements

SECP Directs Directors of Listed Companies to Maintain Proper Financial Statements

SECP Directs Directors of Listed Companies to Maintain Proper Financial Statements. The Securities and Exchange Commission of Pakistan (SECP) has issued a directive to executives of the listed firms to keep correct books of accounts and financial statements that meet the regulations under the Companies Act and financial reporting requirements.In this regard in this regard, the SECP have issued a notice in this regard to Dadabhoy Sack Limited (DSL).

In accordance with the SECP’s guidelines that the listed companies must make financial statements as well as maintain their books of accounts in order to provide an honest and accurate overview of the current situation of the business.

It is the duty of directors of the company to maintain proper books of accounts that are in compliance with the requirements of Companies Act and complied with the financial reporting requirements that were notified to the Commission. The company breached its obligations by not meeting the regulations of section 225, read in conjunction with section 220 of the Act regarding how it prepares its financial statements for the period ending June 30th 2021.

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The order will dispose of the actions initiated against the company as well as the the Board of Directors of the company (respondents) via the notification issued under the rules of the section 474 of the Companies Act, 2017.

The audit report of the company’s auditor revealed this year that the business operations have been shut down since the the financial year 2008, due to which the business is experiencing operational and financial challenges and is not able to pay its obligations within the timeframe of its business. The company is reporting “nil sales since then and is entirely dependent upon the financial backing of its Sponsors and Directors to meet its financial and operational obligations.

These facts reveal the existence of substantial uncertainties that could raise doubts on the ability of the company to survive as a company and, consequently the company might not be able to fully realize its assets and pay off its obligations at the stated amount within the course of normal business. The financial statements don’t provide this information. Additionally, the mitigation factors mentioned from the executive in the note to the financial statements are preliminary steps being planned by the management in order to restart the operations of the company , but are not yet realized until the time of the publication of these financial statements.

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The company hasn’t carried the necessary revaluation of property, plant or equipment. This is necessary to be conducted at least every 3 to 5 years, in accordance with the provisions under IAS 16. The most recent revaluation was carried out for the period ending June 30 2016. We are unable to establish the amount of adjustments that might resulted from the revaluation been executed out.Moreover the negative opinions were also provided in the context of an audit by the auditor for the statutory audit in their report to members of the company on the annual audited financial statements for the year that ended June 30 and 2020. Additionally the auditor appointed by the company’s statutory committee has been giving an unfavourable view on the annual audited financial statements of the company since June 30, 2016.

The financial statements that are required by law of firms must be prepared according to the accounting standards that are approved by the government, which include the IFRS/IAS as they apply in Pakistan along with the obligations under the Act and must reflect the real situation of the business.

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The company, however, has, in the financial reports for its year ending on June 30th, 2021 is a prime example of as follows:) not maintained its books of account in order to provide a fair and accurate picture of the current situation of the company , as stipulated by Section 220(1) of the Act and b) did not make and submit its financial statements in a way that gives an honest and accurate view of the current state of the business in accordance with Section 225(1) of the Act

The SECP has taken careful consideration of the facts of the matter, the available documents and the applicable law.


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