Numerous investors have been left in the dark as nearly a third of companies have reported delays in publishing their audited financial statements, a trend which has been on the rise over the last five years on the Jamaica Stock Exchange (JSE).

Of the 34 companies which were required to publish their audited financials by February 29, 12 companies have formally notified the JSE that their financials will be released at a later date. Different reasons have been expressed by these firms such as external valuations, additional procedures for major transactions, but the keynote has been about the auditors needing additional time to complete the audit.

“This delay is attributed to the unforeseen internal resource challenges being experienced by the auditing firm,” stated Carreras Limited’s notice with the company’s financials being published on March 4. Carreras’ external auditors are KPMG Chartered Accountants.

In the case of VM Investments Limited (VMIL), their release stated, “The reason for the delay relates to various complex transactions and acquisitions executed by the Company, as part of its strategic plans during the reporting period which require external valuations and assessments to be conducted by third parties as part of the validation process in order to publish the audited financial statements.”

VMIL has indicated that their financials should be released by April 30, nearly two months later when the financials were due and on the same day its annual report is also due. This is the second-consecutive year where VMIL’s audited financials have come out at the end of April. As a result, investors currently have no idea as to the state of the business except for the September 30 numbers which were published on November 9.

EduFocal Limited, a firm which listed in March 2022, has mentioned that their audited numbers should be ready by April 22, 2024. Supreme Ventures Limited has also indicated that their 2023 audited numbers should be ready by March 29.

All publicly listed companies are required to file audited financial statements within a defined time frame, something which is normal across the globe.

On the JSE, companies can file their audited financials in 60 days subsequent to their year end or they elect to file an unaudited fourth quarter report in 45 days and then publish the audited financials in 90 days from the year end. So, a company like GraceKennedy Limited which has a December 31 year end was required to publish its audited financials by February 29 (March 1 in non-leap years). Guardian Holdings Limited (GHL) published its unaudited fourth quarter report on February 15 and its audited financials are now due by March 31. There are 17 other companies that elected to follow GHL’s route and will be reporting their audited numbers on the same date.

Following the advent of COVID-19, there has been a massive increase in companies publishing their audited numbers late or reporting errors in their published numbers. An assessment by the Jamaica Observer revealed that out of 101 audited financials due in the last year, only 45 have filed on time with the remaining 55 per cent being filed late.

This increased lateness has been attributed to the increased complexity of changing accounting standards and requirements to complete an audit according to public accounting bodies, but the primary complaint has been the shortage of staff in order for audit firms to complete these external audits. An external audit to produce financial statements encompasses two major tests: a test of details and a test of the effectiveness of operating controls. This typically involves associates visiting the locations of their clients to examine records and complete these tests before the partners sign off on the audited statements. If there is a delay in the production of a certain document or information, an auditor will not sign off on the numbers until all relevant concerns have been satisfied.

A recent Bloomberg article referenced that there are 340,000 fewer accountants in the last five years based on United States Bureau of Labor Statistics. The article highlighted the cost to become a licensed certified public accountant (CPA) relative to the student debt that can be incurred relative to the earning potential of different roles like financial analysts and software engineers.

Even accountancyage.com referenced the American Institute of Certified Public Accountants’ (AICPA) own data that mentioned 75 per cent of CPAs reaching retirement eligibility by 2020 as a factor that impacts the talent crunch.

Locally, different persons in the space have complained about the pay relative to the workload of the job which sometimes requires working up to 3 am with a salary that doesn’t match the effort. This has pushed some to the private sector which is also grappling with its own miniature crisis of finding talent for jobs. Some persons have even moved from their big four firm in Jamaica to the USA counterpart which can mean staying in Jamaica with a much higher salary.

Different listed companies have also reported a significant jump in the audit fees charged by their auditors in the last five years as well. Access Financial Services Limited’s audit fees doubled to $7.76 million in their 2019 financial year (March 31) before rising to $10.68 million in 2022. That figure doubled to $22 million in 2023. At their 2023 annual general meeting (AGM), Access Financial director Charmaine Boyd-Walker defended the increased fees as she mentioned changes by the overseas public accounting bodies, different local requirements and context around KPMG international.

NCB Jamaica’s audit fees have also grown from $62.47 million in 2020 to $76.46 million in 2023 while BNS Jamaica’s audit fees rose from $27.02 million to $38.19 million over the same time period. NCBJ uses PricewaterhouseCoopers (PwC) while BNSJ uses KPMG.

During 2023, KPMG resigned as auditors for Jamaican Teas Limited, Caribbean Cream Limited, Salada Foods Jamaica Limited while Kingston Wharves Limited replaced them with PwC, a move influenced by the change in parent company to Pan Jamaica Group Limited. As a result, PwC produces the most audited financials on the JSE to the tune of 26 reports or 26 per cent of the entire market. KPMG produces the second most audits with 22 reports, BDO Chartered Accountants with 14, Crichton, Mullings and Associates (CMA) with nine reports, and Ernst & Young with six reports. The Firm CB is the newest auditor to the listed company space following iCreate’s AGM where CMA’s role was not renewed.

So, with the accountant shortage not likely to ease up any soon, what changes can be made to ensure investors are kept abreast of the developments of listed companies? Dolla Financial Services Limited switched to the 45/90 setup for its current audit which ensured that investors didn’t have to wait an extra month for a financial update. Should the JSE amend its rules to require companies who expect to file late beyond a week to submit an unaudited fourth quarter report to the market?