Dubai: Former CFO Penalized with 122,000 Dirhams Fine for Misleading Financial Statements
According to a recent decision released by the Dubai Financial Services Authority (DFSA) on Thursday, a former CFO in Dubai received a fine of 122,000 dirhams. The penalty was imposed due to their involvement in breaching accounts and somehow the dissemination of deceptive information about a company listed to the public.
The DFSA has recognized Remi Ishak as the individual in question. He held the position of CFO at Equitativa as well as Emirates REIT, which is a publicly traded fund listed on Nasdaq Dubai. This fund boasts a diverse array of properties, encompassing retail, commercial, and educational assets.
In December of 2021, the DFSA took action against Equitativa for various violations. These included making deceptive statements regarding the Emirates REIT, failure to adhere to International Financial Reporting Standards (IFRS) while preparing financial statements and neglecting to ensure the reporting of relevant information to auditors.
Dubai Financial Services Authority (DFSA) discovered that Ishak had been part of those rule-breaking actions. In 2018, Ishak, serving as the Chief Financial Officer (CFO), publicly stated concerning a school where the previous tenant had left with unpaid rent exceeding 9 million dirhams. These statements conveyed the securing of a new tenant set to commence in the upcoming academic year. However, these statements were misleading as they suggested that the revenue as well as valuation of the asset would remain unaffected, despite the absence of a binding offer or contract at that time.
The executive further approved Emirates REIT’s half-year financial statements for 2018, neglecting to include an allowance for the outstanding rent or a reduction in the asset’s value of the school, which is a requirement under IFRS. The authority stated that the asset appeared to be fully occupied, assuming the presence of a long-term tenant.
Ishak failed to guarantee that Equitativa or its employees disclosed specific information pertaining to the asset’s recoverability to Emirates REIT’s external auditors. This information was crucial for the auditors to review the financial statements for the first half of 2018.
According to the authority, Ishak violated Principle 2 in the ‘Principles for Authorised Individuals’ of the DFSA by neglecting to fulfill his responsibilities as a finance officer at Equitativa with the required level of skill, diligence, and care.
Ian Johnston, the chief executive of the DFSA, emphasized the crucial responsibility of CFOs in listed and public funds, highlighting their role in guaranteeing the fairness and accuracy of financial statements as well as any related public disclosures.
In-house CFOs, or whether you are utilizing CFO advisory services ,must make sure that all pertinent facts relating to the preparation of financial statements are disclosed to external auditors completely and with transparency. The presence of a competent CFO is essential in upholding these standards and ensuring the integrity of financial reporting in public companies.