HO HUP under PN17
Saturday August 2, 2008 More accounting irregularities? By ANDREW GAN PETALING JAYA: Accounting discrepancies may be cropping up again, judging by the failure of several public-listed companies to issue their audited financial statements on time as required under the stock exchange’s listing requirements. On Thursday, seven companies announced delays in the submissions of their accounts – Golden Plus Holdings Bhd, LFE Corp Bhd, Oilcorp Bhd, Axis Inc Bhd, Fotronics Corp Bhd, Ho Hup Construction Co Bhd and Wimems Corp Bhd. Bursa Malaysia and the Securities Commission are believed to have sent an investigative report to each of the seven companies on their non-submission of audited accounts. “External auditors are not in the practice of qualifying their clients’ annual audited financial statements,” said Ferrier Hodgson MH Sdn Bhd partner Patrick McPhee. “If an accounting issue arises during the course of the audit that has a material impact on the financial statements, the external auditor is obligated to satisfy themselves as to being able to verify that all relevant supporting documentation supports the numbers being reported in the financial statements,” he said. On the part of the company, “lack of corporate governance and accountability, and fear of being placed under PN17 if the company’s financial position is precarious is the source of the problem (accounting tardiness),” he said. Companies that are unable to meet the submission deadline are obliged to appoint auditors for a special audit and inform Bursa Malaysia accordingly. While the announcements show the seriousness with which accounting discipline, responsibility and integrity are currently being pursued by the regulators and accountants, what concerns most people is whether the latest developments are a sign of more accounting irregularities to come and why the resurgence now. Few investors would be drawn to companies that are riddled with accounting uncertainties. Listed companies, whether they practise it or not, are accountable to their shareholders and the investing fraternity since their activities – and accounts – should be able to pass public scrutiny. According to The Institute of Internal Auditors Malaysia (IIA Malaysia) president Walter Sandosam, an IIA survey in 2006 found that 11% of the public-listed companies did not have an internal audit function and they were mainly second board and Mesdaq companies. Having an internal auditing function firmly in place provided assurance to management and the board of directors that internal controls and business processes are effective and operating as planned, he said. “This is one way to avoid the emergence of any accounting fiasco. All companies need to have an internal audit function with professionals, who are competent, have adequate training, experience and the correct blend of requisite skills. “In fact, the internal audit function best serves an organisation when it operates in accordance with the professional standards and rules of conduct issued by the IIA standards,” Sandosam said. With the current financial reporting season, it remains to be seen whether more companies would run foul of the reporting deadline. “I would like to remain hopeful that accounting scandals in Malaysia are not on the increase,” McPhee said. In the meantime, overall market sentiment does not seem to have been affected, possibly because the companies’ market capitalisation is not substantial.
Saturday August 2, 2008 More accounting irregularities? By ANDREW GAN PETALING JAYA: Accounting discrepancies may be cropping up again, judging by the failure of several public-listed companies to issue their audited financial statements on time as required under the stock exchange’s listing requirements. On Thursday, seven companies announced delays in the submissions of their accounts – Golden Plus Holdings Bhd, LFE Corp Bhd, Oilcorp Bhd, Axis Inc Bhd, Fotronics Corp Bhd, Ho Hup Construction Co Bhd and Wimems Corp Bhd. Bursa Malaysia and the Securities Commission are believed to have sent an investigative report to each of the seven companies on their non-submission of audited accounts. “External auditors are not in the practice of qualifying their clients’ annual audited financial statements,” said Ferrier Hodgson MH Sdn Bhd partner Patrick McPhee. “If an accounting issue arises during the course of the audit that has a material impact on the financial statements, the external auditor is obligated to satisfy themselves as to being able to verify that all relevant supporting documentation supports the numbers being reported in the financial statements,” he said. On the part of the company, “lack of corporate governance and accountability, and fear of being placed under PN17 if the company’s financial position is precarious is the source of the problem (accounting tardiness),” he said. Companies that are unable to meet the submission deadline are obliged to appoint auditors for a special audit and inform Bursa Malaysia accordingly. While the announcements show the seriousness with which accounting discipline, responsibility and integrity are currently being pursued by the regulators and accountants, what concerns most people is whether the latest developments are a sign of more accounting irregularities to come and why the resurgence now. Few investors would be drawn to companies that are riddled with accounting uncertainties. Listed companies, whether they practise it or not, are accountable to their shareholders and the investing fraternity since their activities – and accounts – should be able to pass public scrutiny. According to The Institute of Internal Auditors Malaysia (IIA Malaysia) president Walter Sandosam, an IIA survey in 2006 found that 11% of the public-listed companies did not have an internal audit function and they were mainly second board and Mesdaq companies. Having an internal auditing function firmly in place provided assurance to management and the board of directors that internal controls and business processes are effective and operating as planned, he said. “This is one way to avoid the emergence of any accounting fiasco. All companies need to have an internal audit function with professionals, who are competent, have adequate training, experience and the correct blend of requisite skills. “In fact, the internal audit function best serves an organisation when it operates in accordance with the professional standards and rules of conduct issued by the IIA standards,” Sandosam said. With the current financial reporting season, it remains to be seen whether more companies would run foul of the reporting deadline. “I would like to remain hopeful that accounting scandals in Malaysia are not on the increase,” McPhee said. In the meantime, overall market sentiment does not seem to have been affected, possibly because the companies’ market capitalisation is not substantial.