In 2016, most of New Zealand entities had a varying level of change when it came to financial reporting obligations.
This change continued the impact of significant changes to key legislation governing financial reporting for Companies and other entities that were enacted into Law.
For companies this removed the filing requirement for many subsidiaries of foreign owned companies who were not considered to be ‘large’ (i.e. Revenue of $10m or Assets of $20m) to file its company’s financial statements with the Companies office.
For other entities, such as registered charities new timeframe requirements for filing your annual return were introduced for the first time.
To ensure the filing process for your financial statements is completed with minimal disruption we look at the following 5 common mistakes when filing your financial statements and what you can do to ensure you avoid these next time, you file your financial statements.
5 Common Mistakes
1. Missing or incorrect audit report
This may come as a surprise given my background but it has been confirmed that an incorrect audit report will give rise to financial statements being rejected for filing from the companies office. The most common reasons audit reports are rejected are:
- The audit report does not comply with section 207B of the Companies Act 1993 (the Act);
- The audit report refers to incorrect page numbers;
- The audit report refers to the incorrect balance date, or the balance date is not consistent throughout the audit report;
- The audit report refers to the incorrect company name. The name referred to in the audit report must match the name on the financial statements and that on the Register. If, for example, the word ‘Limited’ is omitted in the audit report, the financial statements will be rejected.
- The audit report incorrectly refers to ‘Group’. The audit report must correctly refer to ‘Group’ if the financial statements include group or consolidated accounts. If the financial statements do not include group or consolidated accounts, the audit report must not make any reference to group.
- The audit report is not signed or dated by the auditor. The audit report must be signed and dated.
- The audit report is dated before the financial statements. The audit report must be signed and dated on or after the day that the directors have signed and dated the financial statements
2. Missing or incorrect director(s) signatures
Section 201(b) of the Act requires that the financial statements are signed and dated by two directors (or one if the company only has one director). The directors who sign the financial statements must be current directors at the date of signing. Financial statements cannot be signed by a person other than a director.
3. Incorrect or incomplete set of financial statements submitted
This is generally confined to specific types of entities however as a refresher if you would like to know what financial statements should include Read more about the contents of the financial statements here. Common entities that require specific mention include:
Group financial statements
If FMC reporting entities or large overseas and overseas owned companies have subsidiaries, only the group financial statements are required to be registered. This does not apply to issuers filing under section 55 of the Financial Reporting Act 2013.
New Zealand branch financial statements
‘Large’ overseas companies are required to register New Zealand branch financial statements only if their New Zealand branch is ‘large’. This does not apply to overseas companies that are FMC reporting entities or issuers. They are required to register overseas company and/or group financial statements and New Zealand branch financial statements, regardless of the size.
4. Incorrect balance date
When submitting financial statements online, the balance date (month and year) of the financial statements must match those on the online filing checklist.
If you find that your balance date is different please request a balance date change prior to filing the financial statements. If financial statements are submitted under the wrong balance date they will be rejected. The balance date of the New Zealand branch and the overseas company accounts must be the same.
5. Poor image quality
As most companies filing financial statements would be doing so electronically for convenience, the image quality could be jeopardised if printers haven’t had a clean for a while. Common issues however relate to the following:
- A clear, legible copy of the financial statements is required to be submitted for registration.
- All information and data must be readable.
- Please ensure the financial statements are scanned upright as they cannot be turned once submitted.
The nature of the above points come back to the quality control procedures that are in place. As we continue to navigate through these changes in reporting requirements having a sound review process that (where possible) involves a second person that reviews key documents before filing of the financial statements will help ensure the filing process is a smooth one. Accordingly, here are some simple tips that will assist you next time you file your financial statements
- Update key information on the Companies office records – This should be an annual check that is scheduled into your diary. Changes will include board movements, balance date changes etc
- Ensure key documents go through a ‘final’ review prior to finalisation. If possible, include a ‘peer review’ step (get another person to review). This is important as new audit reports have become effective for audit reports issued for companies with a year ending 31 December 2016 or beyond.
- It is not uncommon to provide a draft of the audit report as part of your communication with those charged with governance prior to finalisation. Generally provided along with the management letter and financial statements for signing providing this earlier in the process will mean you look at this earlier and potentially at a time that is less time critical i.e. on the day of filing.
- Give notice to company directors to organise signing of financial statements on a timely basis. Commonly this could be completed at a board meeting.
- Where a director whereabouts is a challenge, consider the use of electronic signatures (documenting their permission of this)
- Electronic copies of documents are accepted however ensure the scanner function on the printer is of a reasonable quality.
- Consider removing ‘shaded’ areas within columns as this could affect the readability of this information (commonly used for comparative information).
The above points were taken from a notice issued by the Companies office in 2015. These points predominantly come down to the quality control you have in place to ensure these do not occur again. The lower number of filers, better use of resource and the monitoring program implemented by the registrar is working.