FRMP Procedures

1.0 Status of Procedures

These procedures are constrained by the requirements of the Financial Reporting Act 2004, the Charter of the FRMP and the Policies adopted by the FRC in respect of monitoring of financial statements and report. They are not intended to be all encompassing and highlight particular issues only. In case of any inconsistency, the abovementioned documents prevail. These procedures may be amended by the FRC and the FRC CEO.

2.0 Membership of the Panel

The Financial Reporting Monitoring Panel (FRMP) shall consist of seven members. The Manager of the Financial Reporting Monitoring Unit (FRMU) of the Financial Reporting Council (FRC) will attend and contribute to all meetings. The 7 Panel members shall be suitably qualified and experienced in the field of business, finance, accountancy, audit or law preferably with knowledge of financial reporting in the private or public sector.

3.0 Meetings

The FRMP will meet as a whole Panel at least once every two months. Subsets of the FRMP, Teams / working parties will most likely meet more regularly than this on specific areas of work. A quorum for meetings of the whole will be four persons.

4.0 Voting

Voting procedures reflect the importance in the Financial Reporting Monitoring process within the FRC. All questions arising at meetings of any sub-team or working party shall be decided by a simple majority vote by a show of hands.

All other questions will require a simple majority of all members of the Panel, whether present at the meeting or not.

5.0 Teams / Working Parties

The FRMP may need to co-opt individuals with particular expertise to assist in the work of the Panel. Such co-option shall be discussed with the CEO of the FRC prior to the co-option. Each sub-team that is established under the FRMP shall have its brief terms of reference and will be responsible for a specific area and range of work.

6.0 Procedures

6.1 General Basis for procedures

The FRMP is expected to monitor the financial; and non-financial reports of Public Interest Entities (PIEs) for compliance with accounting and financial reporting standards and the Code of Corporate Governance for Mauritius and the rules of the Council by conducting investigations and where appropriate, imposing sanctions on PIEs.

6.2 Public Interest Entities (PIEs) Subject to Jurisdiction of FRMP:

a. PIEs are required to file financial and non-financial reports as specified by the FRMP in order for that Panel to fulfill its legislative obligations.
The Financial Reporting Act of 2004 (the “Act”) defines PIEs as entities having a total annual revenue exceeding Rs200M

b. It is the obligation of the PIE to advise the FRMP that they met the definition set forth in (a) above and therefore may be required to report under the Act.
The form of notice and information required to be submitted therein (the “PIE Status Notice”) as set-forth in [xxx], will include the following:

i.    Name and full contact information for the PIE;
ii.   Listing of directors and officers;
iii   Listing of shareholders owning directly and or beneficially 5% or more of the voting stock;
iv   Basis for qualifying as a PIE;
v    Financial year;
vi   External Auditor;
vii  General description of business activity; and
viii Any other such information as may be required by the FRMP
c. The FRMP, upon receipt of the notice from the PIE, shall, at the outset of its operations, prepare a register of those entities submitting a PIE Status Notice pursuant to
6.2 (b) above and advise such entities that they are subject to the jurisdiction of the FRMP and such other requirements that may be applicable under the Act.

d. It shall be the obligation of the PIE to submit an amended PIE Status Notice to advise the FRMU of the following changes:

i. If it no longer meets the definition of a PIE and the basis for the change in status. In many, if not all cases, the change to “non-reporting” status will be apparent from the financial statements submitted for review.
ii. Notice shall be provided by the PIE within 30 days of a change in the external auditor, which notice shall stipulate the reason for the change;
iii. Any other change in information contained in the latest PIE Status Notice previously submitted within 30 days of such change.
iv. Upon receipt of the PIE Status Notice or notice of changes thereto, the FMRU will advise the licensing department of the FRC of the identity of the licensed auditors for the PIEs using licensed auditors so that information can be included in the registry of licensed auditors (auditor registry).

6.3 Financial and Non-financial Reports Required:

a. All PIEs are required to submit annual financial and non-financial reports to the FRMU as follows:
i. Annual report of the company which includes the financial statements and the auditors’ report thereon, such auditor’s report being rendered by a qualified auditor pursuant to Section 83 (1) of the Act;
ii. Report of compliance and/or non-compliance with the National Code of Corporate Governance; and
iii. Corporate Governance Report, if published.
b. Financial reports will be submitted by the PIEs annually and will comply with the requirements of “Sub-Part C – Financial statements” of the Companies Act of 2001 (the “Companies Act”), and such other requirements as the FRMP may require. It is anticipated that in many cases, the financial statements contained in a reporting entity’s annual report to shareholders and submitted to the Registrar of Companies will be sufficient. Financial statements submitted to the following other regulatory agencies may be filed with the FRMP to comply with these procedures:
i.Bank of Mauritius
ii.Financial Services Commission
c.Notwithstanding to provisions of (b) above, specific requirements regarding the financial statements to be submitted are:
i.Financial statements should be comparative covering, at a minimum, the last two years.
ii.If the reporting entity has one or more majority-owned subsidiaries, the financial statements shall consist of the parent company statements and group consolidated financial statements.

6.4 Review of financial and non-financial reports

a. Upon receipt by the FRMP, the report will be subjected to a “spot” review for completeness to include:
i.    An accompanying auditor’s report, prepared by a qualified auditor,
ii.   Comparative balance sheets, income statements, statements of changes in owners equity and cash flow, and notes to financial          statements;
iii.  Separate parent company financial statements in cases where group consolidated financial statements are submitted;
iv.  Statement of compliance with the disclosure requirements of the National Code of Corporate Governance;
v.   Corporate Governance Report
vi.  Signatures of the 2 Directors, on behalf of the Board of Directors.

In the event that the initial review of the information filed reveals an omission or otherwise non-compliance with the content of the filing requirements, the reports would be returned to the reporting entity together with a listing of the deficiency(s). The reporting entity would then be required to correct the deficiencies and re-file the reports.

a. The “comprehensive” review and analysis of the financial report will focus on matters of substance and will, therefore, extend beyond a “checklist” review of the report for compliance with financial reporting and accounting standards (IAS/IFRS) with special attention given to the areas listed in (e) below.
b. In conducting the comprehensive review, the reviewer must always retain the perspective that:
i. Accounting and financial reporting standards apply to reportable transactions and events. The latter may not be reflected in the entity’s financial records but, nonetheless, may have an impact on the financial report and/or the disclosures therein;
ii. Accounting standards apply to material information. Information is material if, either individually or in the aggregate, its omission or misstatement could influence the users’ decisions of a financial statement and
iii. The purpose of the financial statement review is not evaluate the economic viability of the reporting entity, its financial performance, and/or is market value except to the extent that apparent insolvency and/or poor financial performance may affect the recoverable value of assets and that uncertainty is not adequately disclosed in the financial report and accompanying auditors report.
c. The following are among those areas that typically reveal matters of substance for follow-up and/or comment:

i.     Comments in the auditors’ report;
ii.    Large, unexplained changes in the account balances between the comparative periods presented;
iii.   Accounting policies used in the preparation of the financial report, particularly those policies related to asset valuation, revenue recognition, and the establishment/adjustment of valuation reserves;
iv.   Changes in accounting policies;
v.    Extra-ordinary items, discontinued operations, and/or other items identified as non-reoccurring;
vi.   Disclosure of non-consolidated subsidiaries;
vii.  Inadequate disclosures of information on affiliates/subsidiaries, related parties, and policies on corporate governance;
viii. Recognition and/or disclosure of contingencies; and
ix.   From sources independent of the reporting entity:-
1. Notice of a material irregularity under Section 40 of the Act
2. Complaints from auditors and stakeholders
3. Other regulatory agencies
4. News releases

6.5 Reporting results of the review of financial and non-financial information:

a. The Manager of the FRM Unit should prepare a report on the results of the review. This report would indicate whether a “spot” review (contents compliance only per section 6.4(b) above) or a “comprehensive” review was conducted.
b. If the reports are acceptable, the review report together with a copy of the financial and non-financial reports submitted would be forwarded to the FRMP for final review.
c. If the reports submitted were deficient and/or the reviewer had questions regarding the information in the reports, a preliminary review report should be prepared with the deficiencies and questions listed for discussion with the FRMP
d. Based on the results of the discussions in (c ) above, the Director would prepare a “comment” letter to the reporting entity. All reasonable attempts should be made to resolve the deficiencies and/or reviewer questions with the reporting entity through explanation and/or changes to the financial report.
e. Upon satisfactory resolution of the matters in the comment letter, the final review report will be issued and, together with a copy of the appropriate supporting information, sent to the FRC, for approval and filing.

6.6 Non-compliance and unresolved deficiencies.

a. Non-compliance can result from:
b. An entity meeting the definition of a PIE failing to register.
c. A PIE subject to the filing requirements under the Act does not file the required financial and non-financial information
d. The information filed does not comply with the requirements of FRMP and the reporting entity is unwilling to correct the deficiencies;
e. As set-forth in 6.5(d), all reasonable attempts should be made to resolve instances of non-compliance with the reporting entity;
f. Failure to register or file the required information would initially result in a reminder letter being sent to the PIE. and the PIE record updated accordingly.
g. Continued failure to register or file the required information without an adequate reason, would be referred to the FRC.
h. If the reporting entity is unwilling to correct the deficiencies in a manner satisfactory to the FRMP, with the approval of the Director FRMU, the matter will be referred to FRC

6.7 Miscellaneous Procedures:

a. The FRMP will be responsible for submitting a report to the CEO and to the Council in such form and at timing as requested, summarising the results of the FRMP’s monitoring process for the year together with an evaluation of the extent to which financial and non-financial information submitted by PIEs complies with accounting and reporting standards and the Code of Corporate Governance;
b. The FRMP will insure that all matters noted in the Panel’s monitoring procedures that may pertain to other activities of the FRC are promptly reported to the Directors of such activities;
c. It is anticipated that the functions of the FRMP may overlap and/or interact with the functions of other regulatory agencies and that the respective levels of responsibility between agencies will be defined in memorandums of understanding (MOUs). Accordingly, appropriate procedures will be developed and monitored to ensure that the terms of the MOUs are adhered to in the FRMP’s operations.
d. The FRMP may, in the course of performing its monitoring responsibilities, identify common deficiencies and misunderstandings in the accounting and financial reporting practices of PIEs. Accordingly, it may be appropriate for the FRMP, acting alone or in coordination with other Panel(s), to organize workshops and/or other training programs for stakeholders to facilitate the accomplishment of its objectives.