The Securities Commission of Zimbabwe will take punitive action against listed companies which flout international financial reporting standards. SECZ chief executive Mr Tafadzwa Chinamo issued the warning in the wake of findings by international accounting and auditing experts, tasked by SECZ to review financials of ZSE firms, that there was a "shocking omission" of critical information.
The revelations were made at a workshop organised by SECZ and the Public Accountants and Auditors Board on financial reporting requirements.
The anomalies noted made it difficult for investors and prospective investors to make informed decisions about their investments.
SECZ has since come up with new legislation to enforce full financial disclosures and would, from now on, take punitive measures against any delinquent public listed companies.
"No company passed the assessment 100 percent," he said. "Some of the accounts did not even deserve to be approved as financial accounts. We will let that go for now, but if we see it again we will take action against the companies.
"The more severe punishment will see us suspend the company (from ZSE) until they publish something that is in line with (international financial reporting) standards," he said.
Breaching the rules again would also result in severe penalties against the firms' finance directors or chief finance officers.
Public Accountants and Auditors Board technical expert Mr Graham Cheater, who was part of the review team, said ZSE firms should publish accounts investors can understand.
Mr Graham said only 12 percent of the companies disclosed significant changes to aspects of their businesses in the course of the year. Another 12 percent indicated the material changes to the business, but did not proffer any comments.
This means that investors have poured millions of dollars into companies whose financial state or potential they did not clearly understand.
For instance, IFRS require publicly listed companies to adequately explain significant changes to their borrowing positions.
A number of firms also omitted the financial results of some group companies in breach of international accounting practices.
In addition, only 50 percent of firms on the local bourse indicated that their interim financial results were audited, but neither of them gave information on the audit report nor the auditor.
Furthermore, just over two thirds of the publicly listed companies showed that their financials had been prepared in line with international financial reporting standards.
"On reference to other requirements, only 56 percent indicated compliance, for example, with the Companies Act," said Mr Cheater.
Only 31 percent indicated compliance with ZSE listing requirements, none showed that the financial accounts were true, fair and fairly stated, while only 63 percent indicated that the results were in line with standard accounting policies.
Mr Cheater said: "The published reports did not do justice to International Financial Reporting Standards in any sense whatsoever.
"What the reader of financial information wants I did not see that information. Investors and those planning to invest need to have the information to change their investments, leave it in the company or decide whether to invest in the company.
"They (accounts) should tell people about the entity, so that interested investors will have the information to do that."
The disclosures are supposed to be highlighted in the companies' interim and end of year results.