KEY POINTS:
The financial reporting standards of some finance companies are likely to come under the spotlight of the Securities Commission in its next round of surveillance.
The commission has been undertaking six-monthly checks of both listed and unlisted companies which sell securities to the public since 2005.
Commission chief accountant Alastair Boult said in light of the recent finance company collapses the commission was "likely to ringfence a few finance companies" in its next surveillance cycle.
"They always have been on the radar but recent events have bought them to greater attention."
The commission's latest surveillance results released yesterday found 16 out of the 40 reports reviewed over the past six months had matters that needed addressing.
Of those, three significant matters remained outstanding and one is being considered separately as an enforcement matter.
Of the 40 reviewed, 12 had converted to the new internationally recognised New Zealand Financial Reporting Standards, and seven of those were considered to have issues.
Boult said the figure was similar to previous surveillance periods but may have been slightly higher because of the companies selected in the latest round.
The majority of the companies selected are from those listed on the New Zealand stock exchange or alternative exchange, but some included in the surveillance are selected by staff because of a tip-off or through a decision to take a closer look at particular sector.
Boult said many of the issues picked up by companies that had converted to the new reporting standards related to adjustments made as part of the transition.
"In the review we found that some issuers did not correctly separate NZ IFRS transition-related adjustments from corrections of prior period errors."
The commission writes to all companies where an issue is found asking for an explanation, and if that is not satisfactory contacts the firm directly.
Boult said some issues were also taken up with the accountancy professional body the New Zealand Institute of Chartered Accountants, where accountants could be put through a process to determine their competency.
The body has the power to strike an accountant off their register. But Boult said this had yet to happen over any issues taken to the professional body.
Boult said the commission was generally pleased with the co-operation of companies and their willingness to improve the quality of their reporting.
He said the aim of the surveillance and its resulting report was to encourage companies to improve the quality of their financial reports and contribute to the integrity of the New Zealand securities market.
