The Financial Reporting Surveillance Programme aims to review all listed issuers over a three to four year period. On completion of the next Cycle, Cycle 7, the Commission would have achieved this aim. Issuers listed on Unlisted³ and non-listed issuers are also included in the Cycle reviews.

Issuers are also selected on particular criteria, including the risk profile of the entity and/or sector, and the balance date of the issuer to ensure timely feedback. Issuers can be reselected for a subsequent review where the nature of issues identified in an earlier Cycle raised concerns.

In reviewing all listed issuers, dual and overseas listed issuers are also selected. Four overseas listed issuers were selected this Cycle.

Dual listed issuers are issuers incorporated in Australia which are admitted on the Australian Stock Exchange's (ASX) Official List and are also listed on the New Zealand Exchange (NZX) (as defined in NZX Listing Rules 1.1.2).

Overseas listed issuers are issuers domiciled or incorporated outside New Zealand which have a recognised stock exchange as the home exchange and are also listed on NZX (as defined in NZX Listing Rules 5.1.1 (b)).

With dual and overseas listed issuers, the Commission first writes to the regulator in the overseas jurisdiction to determine whether a review of the financial reporting of the issuer has already been undertaken locally. If so, these issuers are not reviewed by the Commission. Where the issuer has not been reviewed by the overseas regulator the Commission undertakes a reasonableness review of the annual report, NZX announcements and current prospectus if applicable. Findings are communicated to the applicable overseas regulator.

A desk-top review of each financial report is performed in the wider context of the annual report and, in the case of listed issuers, any stock exchange announcements for the period. While these were not comprehensively reviewed, any obvious issue related to continuous disclosure, disclosure of relevant interests by directors and officers, and substantial security holder disclosure, is followed up.

Matters identified in the review are referred to as matters raised or other matters. Previously the Commission has referred to matters raised as significant matters.

The Commission's approach is to write to an issuer on a matter identified in a review where the nature of the matter prompts us to write to the issuer; because the matter is considered to be of regulatory importance or further clarification or information is needed. For example, the Commission is likely to write to issuers where a matter:

The Commission writes to issuers requesting additional information and in some cases asks issuers to revise or enhance disclosures in future financial statements.

When writing to an issuer in respect of matters raised, the Commission also includes other matters found in the review.

The Commission's policy is not to write to issuers whose reports raised only other matters, unless the numbers of those matters are so numerous that it is useful to provide feedback to the issuer.

Financial reporting requires the exercise of professional judgement. The Commission takes this into account when reviewing the financial reports and determining which matters to follow up.

In each case where the Commission writes to an issuer, a copy of the letter is also sent to the issuer's auditor. This practice acknowledges the role of auditors in helping to maintain and improve the standard of financial reporting in New Zealand. Auditors have an important role in encouraging companies to comply not only with the statutory requirements but also with best practice. The Commission encourages auditors to be vigilant in the audit of financial statements. High quality external auditing is critical to integrity in financial reporting and to the efficiency and integrity of the securities markets.

Where issues of a much more serious nature are identified that may have a significant market impact, the matter is removed from the Financial Reporting Surveillance Programme and considered separately as an enforcement matter. No such matters were identified in this Cycle.

Referrals are made to relevant bodies where matters identified under the surveillance programme are likely to be considered a breach of the: