ގަވާއިދު ނަންބަރު 152-އާރ/2021 (Regulation on the Audit and Accountability of State-Owned Enterprises)

` ަމޯހ 2021 ުރަބްނެވޮނ 22 – 1443 ުރިޚާއްލުޢީބަރ 17 :ުޚީރާތ 303 :ުދަދައ 50 :ްމުއިލޮވ 2021/R-152 :ުރަބްނަނ ުދިއާވަގ Regulation on the Audit and Accountability of State-Owned Enterprises ް ސީފޮއ ެގާޔްއިރޫހްމުޖްލުސީއަރ ިދެއ ްށަމުނިދްށޮކުޢިއާޝ ިއަގުޓެޒެގ ްއަތުލޫސުއ ިއާކަތުދިއާވަގ • ު ގަމުނާފުރުކަތުޑޮބ .ެވެށައ legalaffairs@po.gov.mv ީނާވްއުނޮފ ެ ޖްއާރިހެވިދ ،ެލާމ 3336211 :ުނޯފ 7242885 :ްލިއަބޯމ www.gazette.gov.mv :ްޓިއަސްބެވ ޓް ެޒގެ ެގރު ާކުރަސ ިހެވިދ 2021/R-152 :ުރަބްނނަ ުދއި ާވަގ 303 :ުދަދައ 50 :ްމއު ިލޮވ c REGULATION ON THE AUDIT AND ACCOUNTABILITY OF STATE-OWNED ENTERPRISES This regulation is made pursuant to the authority granted to the Auditor General by the Audit Act (Law No.4/2007). 3 ޓް ެޒގެ ެގރު ާކުރަސ ިހެވިދ 2021/R-152 :ުރަބްނނަ ުދއި ާވަގ 303 :ުދަދައ 50 :ްމއު ިލޮވ REGULATION ON THE AUDIT AND ACCOUNTABILITY OF STATE-OWNED ENTERPRISES 1. Introduction and citation (a) This regulation is made pursuant to the authority granted to the Auditor General by section 7(d) of the Audit Act (Law No. 4/2007). (b) This regulation may be cited as “Regulation on the Audit and Accountability of State-Owned Enterprises”. 2. Objectives (a) To provide a framework for auditor reporting on State-Owned Enterprises (SOEs) governed by this regulation; (b) To increase transparency and accountability of those SOEs through audits; (c) Enhance communications between the auditor, shareholders, those charged with governance and other stakeholders; (d) To obtain assurance on compliance with applicable legislations and frameworks; and (e) To obtain assurance on the effectiveness of fraud prevention mechanism and governance structures. 3. Application (a) This regulation shall apply to SOEs established by a Presidential Decree and companies registered under the Companies Act of the Maldives (Law No.10/96), which are required to be audited by the Auditor General under the provisions of the Audit Act (Law No. 4/2007) with the exception of listed companies and financial institutions regulated by Capital Market Development Authority and Maldives Monetary Authority respectively. (b) This regulation shall also apply to subsidiaries of SOEs stated in subsection (a). 4 ޓް ެޒގެ ެގރު ާކުރަސ ިހެވިދ 2021/R-152 :ުރަބްނނަ ުދއި ާވަގ 303 :ުދަދައ 50 :ްމއު ިލޮވ 4. Appointing external auditors (a) The external auditor engaged to audit the financial statements of SOEs subject to this regulation shall be appointed by the Board of Directors. The external auditor shall be appointed at the Annual General Meeting as per the Companies Act of the Maldives (Law No. 10/96) and Privatisation and Corporatisation Board’s directives. If circumstances prohibit timely appointment of external auditor, auditor shall be appointed at an Extraordinary General Meeting. (b) The external auditor shall be a licensed audit firm registered as a Public Interest Entity Auditor (PIE auditor) with the Institute of Chartered Accountants of the Maldives. (c) The Board of Directors may consider other factors to evaluate the capacity and capability of the external auditor, including but not limited to audit fees, duration, industry knowledge and expertise, reputation and proposed audit strategy. (d) The engagement letter signed by the SOE and the external auditor shall prescribe provisions to comply with this regulation. In the event of a conflict between this regulation and any provision in the Engagement Letter, the regulation shall take precedence over any such provision in the Engagement Letter. (e) The SOE shall submit a copy of the Engagement Letter of the appointed external auditor to the Auditor General’s Office within five working days of signing the Engagement Letter. 5. Submission of financial statements for external audit (a) The SOE shall submit financial statements to the external auditor by 31 March of the succeeding year. (b) A copy of the financial statements in subsection (a) shall also be submitted to the Auditor General’s Office by 31st March of the succeeding year by the SOE. (c) If the SOE fails to submit the financial statements to the external auditor and the Auditor General’s Office within the deadline stated in subsection (a) and (b), the Board of Directors of the SOE shall inform the Auditor General’s Office within 10 days of non-submission with reasons for delay and revised deadline for submission. 5 ޓް ެޒގެ ެގރު ާކުރަސ ިހެވިދ 2021/R-152 :ުރަބްނނަ ުދއި ާވަގ 303 :ުދަދައ 50 :ްމއު ިލޮވ 6. Rotation of external auditors and cooling-off period (a) An audit firm shall not be appointed to act as the external auditor of an SOE for more than four consecutive years. The SOE shall adopt an external auditor rotation policy to this effect. (b) The rotated external auditor stated in subsection (a) above shall serve a cooling- off period of at least two consecutive years before they are being allowed to bid again for the service of an external auditor of the SOE. (c) If business, legal or economic circumstances necessitate the engagement of the same external auditor for periods of more than four years, the SOE shall obtain a prior approval from the Auditor General’s Office for signing such engagements. (d) For the purpose of this regulation, the external auditor shall maintain the audit files for at least seven years. 7. Obtaining “other services” from the external audit firm (a) SOE shall not obtain from the external auditor or any third party that is related to the external auditor, advisory and other services including internal audits, valuation services, consultancy services and other non-audit services which may result in a conflict of interest. (b) Notwithstanding the prohibition of “other services” in subsection (a), the SOE may, however, engage the external auditor to provide assurance related services relating to the financial statements such as “interim financial statements” where there is an economic justification to engage the external auditor and there are safeguards to protect the independence of the external auditor. The SOE shall obtain prior approval from the Auditor General’s Office to engage the external auditor for such other services. 8. Auditor Reporting 8.1 Audit Report (a) The audit of the financial statements of the SOEs subject to this regulation shall be completed by 31st May of the succeeding year. (b) The External auditor shall adopt International Standard on Auditing (ISA) 701 and report on Key Audit Matters in their audit report. 6 ޓް ެޒގެ ެގރު ާކުރަސ ިހެވިދ 2021/R-152 :ުރަބްނނަ ުދއި ާވަގ 303 :ުދަދައ 50 :ްމއު ިލޮވ 8.2 Management Letter (a) The auditor shall submit a management letter (ML) to the SOE by 31st May of the succeeding year, specifying important issues that in the auditor’s judgement need attention of the management and Board. (b) The management shall provide comments to the issues highlighted in the ML within 15 days of receipt of the ML from the external auditor. 8.3 Submission of the audit report and management letter The SOE shall submit the audited financial statements in subsection 8.1 (a) and management-commented ML in subsection 8.2 (b) above to the Auditor General’s Office within five working days of receiving them. 8.4 Report to the Auditor General on Internal Controls over Financial Reporting, on Compliance and Other Matters based on an Audit of Financial Statements (a) The external auditor shall issue a separate report titled “Report to the Auditor General on Internal Control over Financial Reporting, Compliance and Other Matters Based on an Audit of Financial Statements”. (b) The external auditor shall design and carry out the audit to evaluate internal control over financial reporting, compliance with applicable legislation and frameworks and other matters. These are detailed as follows: (i) Key Internal Controls Significant issues in design and implementation of internal controls over financial reporting and recommendations for improvement. (ii) Fraud risk Fraud risks that the audited entity is exposed to and how the audit was designed to consider such risk and significant audit findings related to fraud and corruption along with recommendations for improvement. (iii) Compliance with Procurement Guidelines and Practices The auditor shall report on instances of significant departures from Procurement Procedures and Guidelines for SOEs of Maldives issued by the Privatisation and Corporatisation Board along with recommendations for improvement. 7 ޓް ެޒގެ ެގރު ާކުރަސ ިހެވިދ 2021/R-152 :ުރަބްނނަ ުދއި ާވަގ 303 :ުދަދައ 50 :ްމއު ިލޮވ (iv) Compliance with Corporate Governance Code The auditor shall report on instances of departures from provisions of the Corporate Governance Code for State Owned Enterprises issued by the Privatisation and Corporatisation Board along with recommendations for improvement. (v) Compliance with Other Directives issued by Privatisation and Corporatisation The auditor shall report on instances of significant departures from other directives issued by the PCB along with recommendations for improvement. (c) The external auditor shall include an analysis of financial statements in the ML. Such analysis shall include financial ratios on the profitability, liquidity, solvency, gearing, efficiency including the year-on-year changes and the auditor’s recommendation resulting from their analysis. (d) The external auditor shall submit the report stated in subsection (a) to the Auditor General’s Office within 30 days of receiving the management-commented ML. (e) The Auditor General’s Office may publish on its website a template for the report stated in subsection (a). (f) Schedules A and B of this regulation provides guidance on the reporting of matters stated in subsection 8.4 (b) and (c). 9. Responsibilities of those charged with governance pertaining to this regulation (a) Appointing suitably qualified external auditor to audit the financial statements of the SOE. (b) Ensuring that the SOE has adequate systems in place to provide external auditors with financial statements in a form and content that is appropriate for the external auditor to conduct the financial statements audits on time. (c) Ensuring that the financial statements are submitted to external auditor for audit by 31st March of the succeeding year. (d) Ensuring that the financial statements submitted for audit are also sent to the Auditor General’s Office by 31st March of the succeeding year. (e) Ensuring that management-commented ML is sent back to the external auditor within 15 days of receiving it for comments. 8 ޓް ެޒގެ ެގރު ާކުރަސ ިހެވިދ 2021/R-152 :ުރަބްނނަ ުދއި ާވަގ 303 :ުދަދައ 50 :ްމއު ިލޮވ (f) Addressing the recommendations provided in the ML referred to in Section 8.2 of this regulation. (g) Ensuring that the audited financial statements and ML are submitted to the Auditor General’s Office in a timely manner. 10. Responsibilities of the external auditor pertaining to this regulation (a) Submit to the Auditor General’s Office the report stated in Section 8.4 (a) of this regulation within 30 days of receiving the management-commented ML. (b) External auditor shall provide necessary explanations and access to supporting documents and audit teams for the reviews carried out by the Auditor General’s Office under this regulation. The External auditor shall provide copies of working papers upon request by the Auditor General’s Office. 11. Review of the Report to the Auditor General on Internal Control over Financial Reporting and on Compliance and Other Matters based on an Audit of Financial Statements (a) The Auditor General’s Office shall carry out a review of the report stated in Section 8.4 (a) of this regulation. (b) Following the review in subsection (a), the Auditor General’s Office shall compile a report based on financial audit and other matters referred to in Section 8.4 of this regulation and communicate its findings to the President of Maldives, Parliament, relevant ministries and public institutions and shall publish the report on Auditor General’s Office’s website. (c) A guideline to carry out the review of the report stated in Section 8.4 (a) of this regulation shall be published by the Auditor General’s Office. 12. Post Completion Review of the audit (a) The Auditor General’s Office shall undertake a post completion review of the audit for quality. The external auditor shall provide access to the audit file and to the audit team that carried out the audit. The External auditor shall provide copies of working papers upon request by the Auditor General’s Office. 9 ޓް ެޒގެ ެގރު ާކުރަސ ިހެވިދ 2021/R-152 :ުރަބްނނަ ުދއި ާވަގ 303 :ުދަދައ 50 :ްމއު ިލޮވ (b) A guideline to carry out the post completion review of the audit shall be published by the Auditor General’s Office. 13. Rating the Reviews (a) The Auditor General’s Office shall give a rating for the reviews stated in Section 11 and Section 12 of this regulation. The rating for the reviews shall be as follows: (a) Good; (b) Satisfactory; or (c) Unsatisfactory (b) If the rating for either or both of the reviews stated in Section 11 and Section 12 is “unsatisfactory”, the Auditor General’s Office has the discretion to “Black List” the appointed auditor from bidding for external audit service of SOEs, in addition to writing to the Institute of Chartered Accountants of the Maldives (CA Maldives) for further disciplinary action against such a blacklisted PIE Auditor. (c) If an auditor is classified as Black Listed, such an auditor is barred from bidding for the external audit service of the SOEs for a period of three years from the date of blacklisting. Further, an SOE shall not accept audit bid from such an auditor for external audit service for a period of three years from the date of blacklisting the auditor. 14. Offences and Penalties (a) According to section 20 (a) 1 of the Audit Act (Law No. 4/2007), non-compliance with this regulation is an offence, and the Auditor General has the authority, pursuant to section 20 (c) of the Audit Act (Law No. 4/2007), to levy fines and penalties and take other legal actions against the SOE or external auditor that commits such an offence. Fines and penalties for offences are given below. Offence SOE Category Penalty Penalties for the SOE Failure to submit the Category A (business Fine between MVR financial statements to with annual turnover 30,000/- and MVR the AGO by the above MVR 100 40,000/- deadlines stated in million) 10 ޓް ެޒގެ ެގރު ާކުރަސ ިހެވިދ 2021/R-152 :ުރަބްނނަ ުދއި ާވަގ 303 :ުދަދައ 50 :ްމއު ިލޮވ Section 9 (d) of this Category B (business Fine between MVR regulation. with annual turnover 20,000/- and MVR between MVR 20 30,000/- million and MVR 100 million) Category C (business Fine between MVR with annual turnover 10,000/- and MVR below MVR 20 20,000/- million) Failure to submit the Category A (business Fine between MVR audited financial with annual turnover 30,000/- and MVR statements and above MVR 100 40,000/- management-commented million) ML to the Auditor Category B (business Fine between MVR General’s Office within with annual turnover 20,000/- and MVR the deadline stated in between MVR 20 30,000/- Section 8.3 of this million and MVR 100 regulation. million) Category C (business Fine between MVR with annual turnover 10,000/- and MVR below MVR 20 20,000/- million) Penalties for external auditors appointed by the SOE Failure to submit to the Category A (business Fine between MVR Auditor General’s Office with annual turnover 30,000/- and MVR the report stated in above MVR 100 40,000/- section 8.4 (a) of this million) regulation within 30 days Category B (business Fine between MVR of receiving back with annual turnover 20,000/- and MVR management-commented between MVR 20 30,000/- ML million and MVR 100 million) 11 ޓް ެޒގެ ެގރު ާކުރަސ ިހެވިދ 2021/R-152 :ުރަބްނނަ ުދއި ާވަގ 303 :ުދަދައ 50 :ްމއު ިލޮވ Category C (business Fine between MVR with annual turnover 10,000/- and MVR below MVR 20 20,000/- million) Failure to provide Category A (business Fine between MVR necessary explanations with annual turnover 30,000/- and MVR and access to supporting above MVR 100 40,000/- documents and audit million) teams for the reviews Category B (business Fine between MVR carried out by the with annual turnover 20,000/- and MVR Auditor General’s Office between MVR 20 30,000/- under this regulation. million and MVR 100 million) Category C (business Fine between MVR with annual turnover 10,000/- and MVR below MVR 20 20,000/- million) (b) Penalties for other offences Non-compliance with any other provision of this regulation is punishable in according with Section 20 (c) of the Audit Act (Law No. 4/2007). 15. Effective Date This regulation comes into effect upon publication in the government Gazette. 12 ޓް ެޒގެ ެގރު ާކުރަސ ިހެވިދ 2021/R-152 :ުރަބްނނަ ުދއި ާވަގ 303 :ުދަދައ 50 :ްމއު ިލޮވ Schedule A FINANCIAL ANALYSIS AND INTERPRETATION REPORT Interpretation of Financial Ratios To understand the financial position of [COMPANY NAME] we have performed a Financial analysis for the years ………………. Our Calculations and the interpretations on the ratio are stated below. (i) Profitability Ratios The main profitability ratios are as follows. (a) Gross Profit Margin 𝐺𝐺𝐺𝐺𝐺𝐺𝐺𝐺𝐺𝐺 𝑃𝑃𝐺𝐺𝐺𝐺𝑃𝑃𝑃𝑃𝑃𝑃 (b) Net Profit Margin ×100 𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅 𝑁𝑁𝑅𝑅𝑃𝑃 𝑃𝑃𝐺𝐺𝐺𝐺𝑃𝑃𝑃𝑃𝑃𝑃 𝑏𝑏𝑅𝑅𝑃𝑃𝐺𝐺𝐺𝐺𝑅𝑅 𝐼𝐼𝑅𝑅𝑃𝑃𝑅𝑅𝐺𝐺𝑅𝑅𝐺𝐺𝑃𝑃 𝑎𝑎𝑅𝑅𝑎𝑎 𝑇𝑇𝑎𝑎𝑇𝑇 (c) Return on Capital Employed ×100 𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅 𝑃𝑃𝐺𝐺𝐺𝐺𝑃𝑃𝑃𝑃𝑃𝑃 𝑏𝑏𝑅𝑅𝑃𝑃𝐺𝐺𝐺𝐺𝑅𝑅 𝐼𝐼𝑅𝑅𝑃𝑃𝑅𝑅𝐺𝐺𝑅𝑅𝐺𝐺𝑃𝑃,𝑇𝑇𝑎𝑎𝑇𝑇 𝑎𝑎𝑅𝑅𝑎𝑎 𝐷𝐷𝑃𝑃𝑅𝑅𝑃𝑃𝑎𝑎𝑅𝑅𝑅𝑅𝑎𝑎𝐺𝐺 ×100 𝑇𝑇𝐺𝐺𝑃𝑃𝑎𝑎𝑇𝑇 𝐶𝐶𝑎𝑎𝐶𝐶𝑃𝑃𝑃𝑃𝑎𝑎𝑇𝑇 𝐸𝐸𝐸𝐸𝐶𝐶𝑇𝑇𝐺𝐺𝐸𝐸𝑅𝑅𝑎𝑎 𝑃𝑃𝑅𝑅𝑖𝑖𝑇𝑇𝑅𝑅𝑎𝑎𝑃𝑃𝑅𝑅𝑖𝑖 𝑃𝑃𝑅𝑅𝑃𝑃𝑅𝑅𝐺𝐺𝑅𝑅𝐺𝐺𝑃𝑃 𝑏𝑏𝑅𝑅𝑎𝑎𝐺𝐺𝑃𝑃𝑅𝑅𝑖𝑖 𝑎𝑎𝑅𝑅𝑏𝑏𝑃𝑃 (d) Return on Equity 𝑃𝑃𝐺𝐺𝐺𝐺𝑃𝑃𝑃𝑃𝑃𝑃 𝑎𝑎𝑃𝑃𝑃𝑃𝑅𝑅𝐺𝐺 𝐼𝐼𝑅𝑅𝑃𝑃𝑅𝑅𝐺𝐺𝑅𝑅𝐺𝐺𝑃𝑃,𝑇𝑇𝑎𝑎𝑇𝑇 𝑎𝑎𝑅𝑅𝑎𝑎 𝑃𝑃𝐺𝐺𝑅𝑅𝑃𝑃𝑅𝑅𝐺𝐺𝑅𝑅𝑅𝑅𝑖𝑖𝑃𝑃𝑎𝑎𝑇𝑇 𝐷𝐷𝑃𝑃𝑅𝑅𝑃𝑃𝑎𝑎𝑅𝑅𝑅𝑅𝑎𝑎𝐺𝐺 ×100 𝐸𝐸𝐸𝐸𝑅𝑅𝑃𝑃𝑃𝑃𝐸𝐸 𝐶𝐶𝑎𝑎𝐶𝐶𝑃𝑃𝑃𝑃𝑎𝑎𝑇𝑇 Auditors Interpretation ……………………………………….. Recommendation for improvements …………………………………………… 13 ޓް ެޒގެ ެގރު ާކުރަސ ިހެވިދ 2021/R-152 :ުރަބްނނަ ުދއި ާވަގ 303 :ުދަދައ 50 :ްމއު ިލޮވ Management Comments (ii) Liquidity Liquidity relates to the amount of cash available to the business. Cash position of the firm is looked upon to assess the liquidity. In addition, the future cash position by comparing short term assets (which should translate into cash relatively soon) with short term liabilities (which will require cash to settle them relatively soon). The main liquidity ratios are as follows: (a) Current Ratio Current Assets : Current Liabilities (b) Acid Test Ratio (Current Assets – Inventory) : Current Liabilities Auditors Interpretation ……………………………………….. Recommendation for improvements …………………………………………… Management Comments (iii) Gearing Gearing refers to the way the company is financed. It is concerned with two types of financing, namely Debt (borrowings) and Equity (shareholders’ funds). Gearing can be understood as long term liquidity. There are three main ratios used to assess gearing: (a) Debt / Equity Ratio 𝑇𝑇𝐺𝐺𝑃𝑃𝑎𝑎𝑇𝑇 𝐼𝐼𝑅𝑅𝑃𝑃𝑅𝑅𝐺𝐺𝑅𝑅𝐺𝐺𝑃𝑃 𝐵𝐵𝑅𝑅𝑎𝑎𝐺𝐺𝑃𝑃𝑅𝑅𝑖𝑖 𝐷𝐷𝑅𝑅𝑏𝑏𝑃𝑃 𝑇𝑇𝐺𝐺𝑃𝑃𝑎𝑎𝑇𝑇 𝐸𝐸𝐸𝐸𝑅𝑅𝑃𝑃𝑃𝑃𝐸𝐸 (b) Debt / Total Capital 𝑇𝑇𝐺𝐺𝑃𝑃𝑎𝑎𝑇𝑇 𝐼𝐼𝑅𝑅𝑃𝑃𝑅𝑅𝐺𝐺𝑅𝑅𝐺𝐺𝑃𝑃 𝐵𝐵𝑅𝑅𝑎𝑎𝐺𝐺𝑃𝑃𝑅𝑅𝑖𝑖 𝐷𝐷𝑅𝑅𝑏𝑏𝑃𝑃 (c) Interest Cover 𝐷𝐷𝑅𝑅𝑏𝑏𝑃𝑃+𝐸𝐸𝐸𝐸𝑅𝑅𝑃𝑃𝑃𝑃𝐸𝐸 𝑃𝑃𝐺𝐺𝐺𝐺𝑃𝑃𝑃𝑃𝑃𝑃 𝑏𝑏𝑅𝑅𝑃𝑃𝐺𝐺𝐺𝐺𝑅𝑅 𝐼𝐼𝑅𝑅𝑃𝑃𝑅𝑅𝐺𝐺𝑅𝑅𝐺𝐺𝑃𝑃 𝑎𝑎𝑅𝑅𝑎𝑎 𝑇𝑇𝑎𝑎𝑇𝑇 𝐼𝐼𝑅𝑅𝑃𝑃𝑅𝑅𝐺𝐺𝑅𝑅𝐺𝐺𝑃𝑃 𝐶𝐶𝑎𝑎𝐸𝐸𝑎𝑎𝑏𝑏𝑇𝑇𝑅𝑅 14 ޓް ެޒގެ ެގރު ާކުރަސ ިހެވިދ 2021/R-152 :ުރަބްނނަ ުދއި ާވަގ 303 :ުދަދައ 50 :ްމއު ިލޮވ Auditors Interpretation ……………………………………….. Recommendation for improvements …………………………………………… Management Comments (iv) Activity / Efficiency Activity ratios try to assess how well the business utilizes the resources at its disposal. The main areas of concern are as follows: (a) Asset turnover 𝑆𝑆𝑎𝑎𝑇𝑇𝑅𝑅𝐺𝐺 𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅 𝑇𝑇𝐺𝐺𝑃𝑃𝑎𝑎𝑇𝑇 𝐴𝐴𝐺𝐺𝐺𝐺𝑅𝑅𝑃𝑃𝐺𝐺−𝐶𝐶𝑅𝑅𝐺𝐺𝐺𝐺𝑅𝑅𝑅𝑅𝑃𝑃 𝑇𝑇𝑃𝑃𝑎𝑎𝑏𝑏𝑃𝑃𝑇𝑇𝑃𝑃𝑃𝑃𝑃𝑃𝑅𝑅𝐺𝐺 (b) Stock turnover 𝐶𝐶𝐺𝐺𝐺𝐺𝑃𝑃 𝐺𝐺𝑃𝑃 𝑆𝑆𝑎𝑎𝑇𝑇𝑅𝑅𝐺𝐺 𝐴𝐴𝑅𝑅𝑅𝑅𝐺𝐺𝑎𝑎𝑖𝑖𝑅𝑅 𝐼𝐼𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑅𝑃𝑃𝐺𝐺𝐺𝐺𝐸𝐸 (c) Trade receivables collection period (in days) 𝑇𝑇𝐺𝐺𝑎𝑎𝑎𝑎𝑅𝑅 𝑅𝑅𝑅𝑅𝑖𝑖𝑅𝑅𝑃𝑃𝑅𝑅𝑎𝑎𝑏𝑏𝑇𝑇𝑅𝑅𝐺𝐺 ×365 𝐶𝐶𝐺𝐺𝑅𝑅𝑎𝑎𝑃𝑃𝑃𝑃 𝑆𝑆𝑎𝑎𝑇𝑇𝑅𝑅𝐺𝐺 (d) Trade payables payment period (in days) 𝑇𝑇𝐺𝐺𝑎𝑎𝑎𝑎𝑅𝑅 𝐶𝐶𝐺𝐺𝑅𝑅𝑎𝑎𝑃𝑃𝑃𝑃𝐺𝐺𝐺𝐺𝐺𝐺 ×365 (e) Expenses as % of sales 𝐶𝐶𝐺𝐺𝑅𝑅𝑎𝑎𝑃𝑃𝑃𝑃 𝑃𝑃𝑅𝑅𝐺𝐺𝑖𝑖ℎ𝑎𝑎𝐺𝐺𝑅𝑅𝐺𝐺 𝑇𝑇𝐺𝐺𝑃𝑃𝑎𝑎𝑇𝑇 𝑅𝑅𝑇𝑇𝐶𝐶𝑅𝑅𝑅𝑅𝐺𝐺𝑅𝑅𝐺𝐺 ×100 𝑆𝑆𝑎𝑎𝑇𝑇𝑅𝑅𝐺𝐺 (f) Operating Cycle Inventory days + Receivables days – Payables days 15 ޓް ެޒގެ ެގރު ާކުރަސ ިހެވިދ 2021/R-152 :ުރަބްނނަ ުދއި ާވަގ 303 :ުދަދައ 50 :ްމއު ިލޮވ Auditors Interpretation ……………………………………….. Recommendation for improvements …………………………………………… Management Comments (v) Investor Ratios These ratios are especially relevant to investors, especially in quoted companies which have a verifiable share value. The most important ones are as follows: (a) Earnings per share 𝑃𝑃𝐺𝐺𝐺𝐺𝑃𝑃𝑃𝑃𝑃𝑃 𝑎𝑎𝑃𝑃𝑃𝑃𝐺𝐺𝑃𝑃𝑏𝑏𝑅𝑅𝑃𝑃𝑎𝑎𝑏𝑏𝑇𝑇𝑅𝑅 𝑃𝑃𝐺𝐺 𝐺𝐺𝐺𝐺𝑎𝑎𝑃𝑃𝑅𝑅𝑎𝑎𝐺𝐺𝐸𝐸 𝐺𝐺ℎ𝑎𝑎𝐺𝐺𝑅𝑅ℎ𝐺𝐺𝑇𝑇𝑎𝑎𝑅𝑅𝐺𝐺𝐺𝐺 (b) Price earnings ratio 𝑁𝑁𝐺𝐺.𝐺𝐺𝑃𝑃 𝑂𝑂𝐺𝐺𝑎𝑎𝑃𝑃𝑅𝑅𝑎𝑎𝐺𝐺𝐸𝐸 𝑆𝑆ℎ𝑎𝑎𝐺𝐺𝑅𝑅𝐺𝐺 𝑃𝑃𝐺𝐺𝑃𝑃𝑖𝑖𝑅𝑅 𝐶𝐶𝑅𝑅𝐺𝐺 𝐺𝐺ℎ𝑎𝑎𝐺𝐺𝑅𝑅 (c) Earnings yield 𝐸𝐸𝑎𝑎𝐺𝐺𝑅𝑅𝑃𝑃𝑅𝑅𝑖𝑖𝐺𝐺 𝐶𝐶𝑅𝑅𝐺𝐺 𝐺𝐺ℎ𝑎𝑎𝐺𝐺𝑅𝑅 𝐸𝐸𝑎𝑎𝐺𝐺𝑅𝑅𝑃𝑃𝑅𝑅𝑖𝑖𝐺𝐺 𝐶𝐶𝑅𝑅𝐺𝐺 𝐺𝐺ℎ𝑎𝑎𝐺𝐺𝑅𝑅 ×100 (d) Dividend per share 𝑃𝑃𝐺𝐺𝑃𝑃𝑖𝑖𝑅𝑅 𝐶𝐶𝑅𝑅𝐺𝐺 𝐺𝐺ℎ𝑎𝑎𝐺𝐺𝑅𝑅 𝑇𝑇𝐺𝐺𝑃𝑃𝑎𝑎𝑇𝑇 𝐺𝐺𝐺𝐺𝑎𝑎𝑃𝑃𝑅𝑅𝑎𝑎𝐺𝐺𝐸𝐸 𝑎𝑎𝑃𝑃𝑅𝑅𝑃𝑃𝑎𝑎𝑅𝑅𝑅𝑅𝑎𝑎 𝑃𝑃𝐺𝐺𝐺𝐺 𝑃𝑃ℎ𝑅𝑅 𝐸𝐸𝑅𝑅𝑎𝑎𝐺𝐺 (e) Dividend yield 𝑁𝑁𝐺𝐺.𝐺𝐺𝑃𝑃 𝐺𝐺𝐺𝐺𝑎𝑎𝑃𝑃𝑅𝑅𝑎𝑎𝐺𝐺𝐸𝐸 𝑆𝑆ℎ𝑎𝑎𝐺𝐺𝑅𝑅𝐺𝐺 𝐷𝐷𝑃𝑃𝑅𝑅𝑃𝑃𝑎𝑎𝑅𝑅𝑅𝑅𝑎𝑎 𝐶𝐶𝑅𝑅𝐺𝐺 𝐺𝐺ℎ𝑎𝑎𝐺𝐺𝑅𝑅 ×100 (f) Dividend cover 𝑃𝑃𝐺𝐺𝑃𝑃𝑖𝑖𝑅𝑅 𝐶𝐶𝑅𝑅𝐺𝐺 𝐺𝐺ℎ𝑎𝑎𝐺𝐺𝑅𝑅 𝐸𝐸𝑎𝑎𝐺𝐺𝑅𝑅𝑃𝑃𝑅𝑅𝑖𝑖𝐺𝐺 𝐶𝐶𝑅𝑅𝐺𝐺 𝐺𝐺ℎ𝑎𝑎𝐺𝐺𝑅𝑅 𝐷𝐷𝑃𝑃𝑅𝑅𝑃𝑃𝑎𝑎𝑅𝑅𝑅𝑅𝑎𝑎𝐺𝐺 𝐶𝐶𝑅𝑅𝐺𝐺 𝐺𝐺ℎ𝑎𝑎𝐺𝐺𝑅𝑅 16 ޓް ެޒގެ ެގރު ާކުރަސ ިހެވިދ 2021/R-152 :ުރަބްނނަ ުދއި ާވަގ 303 :ުދަދައ 50 :ްމއު ިލޮވ Auditors Interpretation ……………………………………….. Recommendation for improvements …………………………………………… Management Comments Overall Conclusion on the Financial position of the Company: Financial ratio analysis is more meaningful when it is compared against calculation financial ratios of two-time period of the firm. Based on the calculated figures, a brief conclusion (positive/negative/adverse/good) shall be included in the report. Over all Recommendations Recommendation shall be based on the calculated figures and depth analysis of the each and every items of the financial statements. And also a depth critical analysis, knowledge on the particular industry and financial ratios and experience of the auditor. 17 ޓް ެޒގެ ެގރު ާކުރަސ ިހެވިދ 2021/R-152 :ުރަބްނނަ ުދއި ާވަގ 303 :ުދަދައ 50 :ްމއު ިލޮވ Schedule B Report to the Auditor General on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Introduction This report is produced pursuant to section 9 of the Regulation on the Audit and Accountability of State-owned Enterprises. This report has six sections. They are: a) Assessment on compliance of PCB Corporate Governance Code; b) Assessment on Key Internal Controls; c) Assessment on Fraud Risks; d) Assessment on the Compliance with Procurement Procedures and Guidelines for SOEs of Maldives issued by PCB; and e) Other Matters Our conclusions, findings and recommendations for the above areas are discussed below. Section A: Assessment on Compliance of Corporate Governance Code Based on our review, we conclude that [COMPANY NAME] significantly complies/does not comply with PCB Corporate Governance Code for State Owned Enterprise. However, there are areas to be improved which are discussed below. Finding 1 ………………………………………….. Implication ………………………………………………… Recommendation for improvements ………………………………………………… Management Comments …………………………………………… 18 ޓް ެޒގެ ެގރު ާކުރަސ ިހެވިދ 2021/R-152 :ުރަބްނނަ ުދއި ާވަގ 303 :ުދަދައ 50 :ްމއު ިލޮވ Section B: Assessment on Key Internal Controls Based on our review, we conclude that (COMPANY NAME) significantly complies/does not comply with COSO Internal Control – Integrated Framework. However, there are areas to be improved which are discussed below. Finding 1 ………………………………………….. Implication …………………………………………… Recommendation for improvements …………………………………………….. Management Comments ………………………………… Section C: Assessment on Fraud Risks Based on our review, we conclude that COMPANY NAME significantly complies/does not comply with COSO Fraud Risk Management Guide. However, there are areas to be improved which are discussed below. Finding 1 …………………………………….. Implication ……………………………………….. Recommendation for improvements …………………………………………… Management Comments Section D: Assessment on the Compliance with Procurement Procedures and Guidelines for SOEs of Maldives Based on our review, we conclude that [COMPANY NAME] significantly complies with PCB Procurement Procedures and Guidelines for SOEs of Maldives and procurement guidelines issued by the Ministry of Finance. However, there are areas to be improved which are discussed below. Finding 1 ……………………………………………… Implication ………………………………………………. Recommendation for improvements 19 ޓް ެޒގެ ެގރު ާކުރަސ ިހެވިދ 2021/R-152 :ުރަބްނނަ ުދއި ާވަގ 303 :ުދަދައ 50 :ްމއު ިލޮވ ………………………………………………….. Management Comments …………………………………………………….. Section F: Assessment on the Compliance with Other Directives issued by PCB Based on our review, we conclude that COMPANY NAME significantly complies with the directives issued by PCB. However, there are areas to be improved which are discussed below. Finding 1 ……………………………………………… Implication ………………………………………………. Recommendation for improvements ………………………………………………….. Management Comments …………………………………………………….. Section G: Other Matters Any other matters that the auditor may want to address; along with recommendations for improvement. 20