Protecting the company’s budget

The balance sheet is the numerical expression, organized according to accounting rules, of a company’s positive and negative position.
It is of paramount importance to the company, shareholders and creditors alike.
Through it, partners and shareholders estimate the value of their shares in the company.
Creditors know the strength of the financial position of the company they are dealing with.

This budget may be subject to what is called (budget beautification), which is a common and well-known term among specialists and is different from the term budget manipulation.)
The latter means using illegal or irregular means and methods or violating the requirements of regulatory and supervisory authorities to show the financial position as it really is.
As for the first (budget embellishment), it means using legal and legal methods to show the strengths of the company’s financial statements or overlooking the weaknesses of the company.
Budget beautification is used by accountants who do not fear God and do not respect the honor of their profession to satisfy those in charge of the company.
Examples include (1) changing the depreciation rate for fixed assets to affect the company’s final results.

• No allowance for impairment of loss-making long-term investments.

• Some fixed assets are included in the company’s assets even though the transfer of ownership to the company has not been completed.

• No mention of losses resulting from long-term investments on the grounds that accounting standards do not require it.

• No allowance for impairment of loss-making long-term investments.

  For this extreme importance of the balance sheet.
  The Saudi regulator has mandated special protection for it through provisions that protect and preserve it to be true and honest and express the truth of the company’s financial position.
  Article (211) of the new Saudi Companies Law issued in 1437 AH stipulates that
  A term of imprisonment of not more than five years and a fine of not more than five million riyals shall be punished.
  Or one of these two penalties for any director, officer, board member, auditor or liquidator who records false or misleading statements in the financial statements or in subsequent reports to the partners or the general assembly.
  Or omits to include in these lists or reports material facts with the intention of hiding the company’s financial position from the partners or others.
  This text, when compared to its counterpart in the old Companies Law (issued in 1385 AH), bypassed two issues that were criticized in my opinion.
  There are others that I would like to briefly mention in this text

  The first of them:
  This criminalization provision should be intended to address anyone who can alter the company’s documents, including the balance sheet.
  As well as anyone who can add false data to these documents, whether a partner, board member, auditor, auditor, office worker, director, liquidator, employee of the company or others.
  By mentioning the phrase “every person…) or (whoever …… It is not limited to addressing only board members, directors, auditors and liquidators.
  This is because this crime can be committed by those who are not exclusively included in this criminalization text.
  For example, an employee whose position is not included in this text may create a business course for himself in a tourist country.
  This course does not exceed two days.
  He makes it recorded in accounting as ten days with the costs of the driver, car, accommodation and food, and included in the financial reports as such.
  This is not a hypothetical example, but something that happens in practice.
  Therefore, eliminating this limitation in the criminal text and making it general to include everyone who can commit this crime gives more protection to the budget and prevents those who manipulate it from going unpunished.
  In general, this generalization to any person without limiting it to specific names can be found in similar commercial laws in the Arab world.

  Secondly:
  The criminalization provision is limited to financial statements and reports submitted to the partners or the general assembly, which is not correct.
  The criminalization text is supposed to include all company records and documents that clarify the company’s finances and accounts.
  This, in turn, will provide excellent protection for the company’s balance sheet from any manipulation that may occur, even if it is minor.

  Thirdly:
  In this criminal provision, the Saudi regulator punished the crime in its intentional form only, without addressing the unintentional form, such as negligence and the like, whether within this text or in a separate text.
  Some laws have done so, including Bahraini law, where the Companies Law stipulates a prescribed penalty for this offense in

  Its unintentional form (negligence) is punishable by a fine …..
  He neglects to mention material facts in the budget or profit and loss account, which results in the financial position of the company being different from the truth.)

  IV:
  Some laws did not limit the criminalization to merely recording false statements or omitting material facts in lists or reports, as the Saudi Companies Law did, but added the act of preparing or presenting these reports and documents as well.

  A note of caution regarding the Saudi regulator’s use of the term false statements.
  This wording is not without merit.
  It is known that false statements are acts of forgery, but the Saudi regulator did not want to use the description of forgery (false statements), but wanted to criminalize lying even if it is abstract and does not rise to the level of forgery.
  This is to further protect the trust that a company should enjoy.
  And secondly, to avoid delving into whether the conditions for forgery are met or not, which in turn opens the way for perpetrators to escape punishment.
  Therefore, we find it stipulated the criminalization of false statements so that the general rules for the crime of forgery do not apply to them.