Investors on the Jamaica Stock Exchange (JSE) have all but become used to more frequent delay notices for quarterly financials, audited financial statements and annual reports since March 2020 when the novel coronavirus totally disrupted the world. However, three years on, the problem has apparently persisted with several companies audited financials still being published late. This begs the question as to why so many reports are late?

Under normal circumstances, a company is required to file its unaudited quarterly financial statements within 45 days after the quarterly period ends. With respect to the financial year-end of companies, they can submit an unaudited fourth-quarter report in 45 days and the audited financial statements in 90 days from the year-end or the audited financial statements 60 days from the year end.

Thus, Sagicor Group Jamaica Limited’s unaudited first-quarter report would be due by May 15 based on the quarter ending on March 31; Eppley Caribbean Property Fund Limited SCC’s unaudited fourth quarter report being due on November 14 and audited financial statements due by December 29 based on the September 30 year end; GraceKennedy’s audited financial statements being due by March 1 based on its December 31 financial year (FY).

JSE listed companies were given an additional 15 days for any report that was due between March to April 2020. However, in April 2021, a 45-day extension window was given for companies seeking to file audited financials and annual reports by the end of that month. This extension has been renewed into 2023 based on continued delays observed in publishing these reports.

The JSE’s RMOD (Regulatory and Market Oversight Division) monthly regulatory report for February 2023 showed that of the 33 audited financials due for the period, nine requested an extension relief with only two out of five annual reports being submitted on time. Six out of the nine late companies were Junior Market companies while the remaining were Supreme Ventures Limited (SVL), Victoria Mutual Investments Limited (VMIL) and Caribbean Cement Company Limited. The change in systems for SVL and VMIL was mentioned as a reason for their delayed numbers. If audited financials are late, the annual report for any company will inevitably be late as well.

When the Business Observer reached out to the JSE for insight, Managing Director Marlene Street-Forrest responded, “Based on our assessment and engagement with the Institute of Chartered Accountants of Jamaica (ICAJ), the delays in filing of audited financial statements occurs in periods where there is a significant number of audited reports due. One such period is in March 2023 where a total of 47 audited financial statements became due. In addition to the bottleneck of servicing a large number of issuers who are required to produce audited financial statements in March, ICAJ has informed of the challenges being faced by auditors and tax preparers to receive responses to audit confirmations, which also contributes to delays in producing the audited results.”

Commentary received from chief executive officers, chief financial officers and auditors revealed that the current audit season was one of the hardest seen by many in several years. Some highlighted that the auditors dug into their operations even more which ironically coincided with the news of alleged fraudulent events at Stocks and Securities Limited.

According to a May 2017 PricewaterhouseCoopers (PwC) publication, “An audit consists of evaluation of a subject matter with a view to express an opinion on whether the subject matter is fairly presented. To enhance the degree of confidence in the financial statements, a qualified external party (an auditor) is engaged to examine the financial statements, including related disclosures produced by management, to give their professional opinion on whether they fairly reflect, in all material respects, the company’s financial performance over a given period(s) (an income statement) and financial position as of a particular date(s) (a balance sheet) in accordance with relevant GAAP (Generally Accepted Accounting Principles).”

The audit delays have been exasperated even further by the accountant shortage being experienced in the country and additional lines of defence by audit firms to control audit quality through secondary and foreign reviews. Dolphin Cove Limited’s delay notice mentioned that their auditors (KPMG) had to conduct several new administrative procedures and quality reviews while EduFocal Limited’s delay notice mentioned that they were working with their auditors (Baker Tilly Strachan Lafayette) to ensure they (auditor) were satisfied with their assurance procedures.

“The war for talent is not unique to our industry or company. The global shortage of auditors, exacerbated by the COVID-19 pandemic, will have impacted all large firms across all markets, not just in Jamaica. As we are a multidisciplinary and global firm, our people also have the opportunity to take up international secondments or transfers to other locations, as well as to move into other parts of the business, as we are not only an audit firm. We understand that not all our people will stay with us, but we are confident that we can send them out into the world more capable, prepared, and resilient as they take on new challenges,” said KPMG Country Managing Partner Rajan Trehan in an e-mail.

While the KPMG head did not address an update surrounding the accountant shortage, dropping of clients and new audit procedures, Caribbean Cream Limited (KREMI) noted that its audited financials would be late because of the change in its external auditors. Before this change, KPMG audited 29 companies on the JSE while its close competitor PwC audited 24 companies. Several KPMG and PwC clients have been late in the last year with other audit firms being late as well.

A December article with senior partner of KPMG in Caricom Tarun Handa revealed that there was a shortage of experienced persons and that they had cut ties with some clients while smaller firms had to wait until larger client audits were complete. KPMG’s audit fees charged to Scotia Group Jamaica Limited went up four per cent to $75.16 million while PwC’s fees charged to NCB Financial Group Limited (NCBFG) went up 16 per cent to $609.58 million. NCBFG as a company was charged 23 per cent more by PWC to the tune of $323.05 million.

Some listed companies and even private companies have cited difficulty in finding trained accountants with one person highlighting that North American economies gobble up all the professionals from the Caribbean to fill their gaps. This issue also extends to other professional bodies which are critical to completing an audit.

“As indicated in the notice, the delay in presenting our audited financial statements is directly due to delays in us receiving reports from certain independent valuation experts. We have recently received draft reports which we are now discussing with the experts. The audited financial statements should be ready shortly after completion of those discussions,” stated Seprod Limited Chief Financial Officer Damion Dodd last week.

With respect to the situation arising at Facey Commodity Company Limited, Dodd added, “For the avoidance of doubt, the delay in presenting our audited financial statements is totally unconnected to the fraudulent activities to which you refer. The fraudulent activities were uncovered in Q1 2022, approximately a year prior to the police making arrests and making the public statements. We remain very grateful for the efforts of the police in investigating the matter. The fraudsters saw gaps in our internal control environment which arose directly as a result of the fire that destroyed our distribution centre in October 2021 [such as the fact that fire destroyed certain records] and took advantage of those gaps. The gaps were closed as we recovered from the fire [which also resulted in us uncovering the fraudulent activities].”

Financial statements are impacted by the effectiveness of operating controls in a business with an audit reviewing those controls and the impact on the financials. A financial statement audit will involve planning, risk assessment, audit strategy and plan, gathering evidence and finalisation. Gathering evidence will involve controls testing and substantive testing which includes physically inspecting the assets, obtaining confirmation from third parties that the company does business with and examining records.

Proven Group Limited is the latest JSE company to indicate a delay in submitting its audited financials and expects to submit by June 30 due to the audit review of several related entities. Newly listed company Spur Tree Spices Jamaica Limited’s 2022 audited financials and first quarter report have both been delayed and should have been published on Monday. The implementation of a new accounting standard has pushed the first quarter financials for some general insurers back by a month.

“During the first quarter of 2023 listed companies were advised of the cessation of extension relief with March 2023 being the final period where an extension relief of 45 days was provided for listed companies to provide their audited financial statements and annual reports,” Street-Forrest explained.