Stiffer fines set for false claims in financial reports

To ensure that financial statements are free of misrepresentation, the Securities and Exchange Commission has drawn up stiffer sanctions for any officer of a company who will be found to have caused the disclosure of untrue or misleading information in financial reports.

This forms part of the SEC’s proposed amendments to its accounting rules to align the financial reporting system of Philippine corporations with global accounting standards and to ensure that financial statements reflect the true financial health of a corporation.

Under the plan, any officer or director of a company who will be found responsible for filing erroneous financial statements, shall after due notice and hearing, be subject to a basic penalty of P100,000 plus a daily fine of P500 until the information is corrected or completed.

Criminal cases may also be fined against the erring officers depending on the gravity of offense.

Also covered by this provision are person acting under the direction of any officer or director or acting on his own, who fraudulently influences, coerces, or misleads the external auditor of such company.

Apart from this, the SEC has required all corporations to submit a statement of management’s responsibility, signed by the chairman, the chief executive officer, and chief financial officer, that the board of directors performed its responsibility to pass upon or review the financial statements before the same were disseminated to the company’s stockholders.

The new rules prescribe the requirements applicable to the form and content of financial statements required to be filed with the SEC by all corporations, except those whose paid-up capital is less than P50,000.

With the SEC bent on adopting international accounting standards (IAS), more companies with large foreign exchange borrowing are expected to be in the red or incur even higher losses starting this year.

This was the assessment of the SEC once companies started writing off their foreign exchange losses this year as required under the corporate watchdog agency’s new rules on financial reporting patterned after the IAS set by the London-based International Accounting Standards Council.