TheRoleofDirectorsinthePrepara3onsofFinancial
Statements(Presenta3ontoNBAADirectorsTrainingatAPCBunju–March19,2016)
Coverage(plannedflow)• WhoisaDirector?• AFS:SourceofRegula3oninTanzania• Fiduciaryresponsibili3es-revisi3ed• FinancialNumeracyResponsibilityandskillsneeded:CPAornoCPA
• DirectorsDu3es…includingprepara3onofAFS• KeyareasofaVesta3ons
WhoisaDirector?
• Adirector,bywhatever3tleisapersonoccupyingtheposi3onofadirectorandmayincludeGovernors,Councilmembers,Trustee,….etc.
• Execu3veorNonExecu3veDirectors:SitsintheBoardasamemberresponsibleforcontrolanddirec3on.
• InourdiscussionwefocusonDirectorswhoareboardmembers.
AFS:SourceofRegula3ons
In Tanzania, external financial reporting is regulated by: � Legislation – Company Act 2006 - compels � Financial Reporting Standards (NBAA IAS
and IFRS); IPSAS – compels � CMSAandDSEforlistedcompanies,BOTforBanksandFinancialIns3tu3ons,
� Other laws – Like: on Taxation - compels
Directors’FiduciaryResponsibili3es-Revisited
• Toacceptdirectorship…..istoaccept….aresponsibilityofutmosttrust,faithandconfidencetomanageandprotectpropertyormoneywhereinonepersonhasanobliga8ontoactforanother'sbenefit
Specificresponsibili3es…
toactwithinpowers;• topromotethesuccessofthecompanyforthebenefitofitsmembersasawhole;
• toexerciseindependentjudgment;• toexercisereasonablecare,skillanddiligence;
Specificresponsibili3es…
• toavoidconflictsofinterest• nottoacceptbenefitsfromthirdpar3es;and
• todeclareinterestinproposedtransac3onorarrangement
Responsibili3esonfinancialnumeracy
Directorsresponsibili3esisnotlimitedbyapar3cularbackgroundknowledgeandexperience.Onehastobecomefamiliarwiththebusinessofhis/hercompanyandhowitisrun,andensurethatitisbeingproperlyrun(bymanagement).
Youdon’tneedtobeACPAequivalent.But….
• Youmusthaveanappropriateleveloffinancialknowledgetounderstandyourcompany’sbusinessandhowitisreflectedinthefinancialreport,andapplyyourknowledgeoftransac3onsandeventstothefinancialreport.
• FinancialknowledgeincludesknowledgeofmaVerssuchas:
• financialrepor3ng,• financialproductsorinstruments,
Youdon’tneedtobeCPA..butneedtobeconversantwith
• financialassessmentsforcapitalandfundingdecisions,
• financialprocessesandcontrols,and• howdecisionscanimpactonthefuturefinancialhealthofacompany.
• Theextentandareasoffinancialknowledgerequiredmayvarydependinguponthecompaniesofwhichyouareadirectorandfactorssuchastheindustryandtheuseofcomplexfinancialproducts
ResponsibilitytokeepwriVenfinancialrecordsthat:
• correctlyrecord(Reliable)andexplainthecompany’stransac3ons(comparability)anditsfinancialposi3onandperformance(meaning),andenabletrueandfairfinancialstatementstobepreparedandaudited(IFRScompliant).
ResponsibilitytokeepwriVenfinancialrecordsthat:
DirectorsresponsibilityonAFSinclude:• recordsarecompleteandaccurate• throughtheadop3onofappropriateaccoun3ngpoliciesand;
• thedesignandimplementa3onofappropriatecontrolsandprocesses.
• (Thisobliga8onexistsregardlessofwhopreparesthem:whetherbooksandrecordsaremaintainedin-house,outsourcedtoathirdparty,orwhethertheyareelectronicorhardcopyrecords)
(4)Anyperson,beingaDirectorofacompany,failstotakeallreasonablestepstosecurecomplianceasrespectsanyaccountslaidbeforethecompanyingeneralmee3ngwiththeprovisionsofthissec3onandwithotherrequirementsofthisActatothemaVerstobestatedintheaccounts,heshall,inrespectofeachoffence,beliableonconvic3ontoimprisonmentortoafine
Compliance……
ApprovalApprovalandSigningoftheAccounts
158(1)AcompaniesannualaccountsshallbeapprovedbythecompaniesboardofDirectorsandsignedonbehalfoftheboardofDirectorsofthecompany
Directors’financialrepor3ngobliga3ons-1
• Yourcompanymustlodgefinancialstatements:thereportsmustincludeadirectors’aVesta3on/statementofresponsibili3esthatincludes:– whether,inthedirectors’opinion,therearereasonablegroundstobelievethatthecompanywillbeabletopayitsdebtsasandwhentheybecomedue
Directors’financialrepor3ngobliga3ons-2
• whetherthefinancialstatementsandnotescomplywithaccoun3ngstandards,andgiveatrueandfairviewofthefinancialposi3onandperformanceofthecompanyandanyconsolidateden3ty,and
• whetherthedirectorshavebeengiventhedeclara3onsrequiredbythechiefexecu3veofficer(CEO)andchieffinancialofficer(CFO).
The3MainAVesta3on
1.Directors’responsibilitystatement• TheBoardofDirectorshavepreparedthesestatements.
• TheBoardconfirmstothebestofitsknowledge:– theconsolidatedfinancialstatements,preparedinaccordancewithIFRSandgiveatrueandfairviewoftheassets,liabili3es,financialposi3onandprofitorlossoftheGroup;and
MainAVesta3on
– thedirectors’reportincludesafairreviewofthedevelopmentandperformanceofthebusinessandtheposi3onoftheGrouptogetherwithadescrip3onoftheprincipalrisksanduncertain3esthatitfaces.
MainAVesta3on
2.Disclosureofinforma3ontoauditor• Havingmadetherequisiteenquiries,sofarasthedirectorsareaware,thereisnorelevantauditinforma3onofwhichtheCompany’sauditorisunawareandthedirectorshavetakenallthestepstheyoughttohavetakentomakethemselvesawareofanyrelevantauditinforma3onandtoestablishthattheCompany’sauditorisawareofthatinforma3on.
MainAVesta3on3.Goingconcern• AjerreviewingtheGroup’sandCompany’sbudgetforthe
nextfinancialyear,andotherlongertermplans,thedirectorsaresa3sfiedthat,atthe3meofapprovingthefinancialstatements,itisappropriatetoadoptthegoingconcernbasisinpreparingthefinancialstatements.[Furtherdetailisincludedwithinliquidityandcapitalresourcesonpages48to51andnotes21and22totheconsolidatedfinancialstatementswhichincludedisclosureinrela3ontotheGroup’sobjec3ves,policiesandprocessesformanagingitscapital;itsfinancialriskmanagementobjec3ves;details]
mainroleandresponsibili3esoftheauditcommiVee
Theyinclude:• tomonitortheintegrityofthefinancialstatementsofthecompanyandanyformalannouncementsrela3ngtothecompany’sfinancialperformance,
• reviewingsignificantfinancialrepor3ngjudgmentscontainedinthem;internalfinancialcontrolsand,andriskmanagementsystems;
mainroleandresponsibili3esoftheauditcommiVee
• tomonitorandreviewtheeffec3venessofthecompany’sinternalauditfunc3on;
• tomakerecommenda3onstotheboard,forittobeputtotheshareholdersattheAGMontheappointmentoftheexternalauditor
mainroleandresponsibili3esoftheauditcommiVee
• theremunera3onandtermsofengagementoftheexternalauditor;
• toreviewandmonitortheexternalauditor’sindependenceandobjec3vityandthe
• effec3venessoftheauditprocess,takingintoconsidera3onrelevantprofessionalandregulatoryrequirements;
• todevelopandimplementpolicyontheengagementoftheexternalauditortosupplynonauditservices.
mainroleandresponsibili3esoftheauditcommiVee
• services,takingintoaccountrelevantethicalguidanceregardingtheprovisionofnon-auditservicesbytheexternalauditfirm;
mainroleandresponsibili3esoftheauditcommiVee
• andtoreporttotheboard,iden3fyinganymaVersinrespectofwhichitconsidersthatac3onorimprovementisneeded,andmakingrecommenda3onsastothestepstobetaken;and
• toreporttotheboardonhowithasdischargeditsresponsibili3es.