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Ernie_ SG

Is Singapore cooperate governance adequate ? so many scandals have surface recently, Informatics, CAO, Citiraya, ACCS …. are there more to come ? Are the rights of investors protected ?

dragg SG

accounting firms are unbelievable. one after another.

Qitai SG

There has been a lot of such news lately. And of course, we have to remember Baring Bank incident years back. Auditors are getting less and less trustworthy in ensuring financial reports are proper. In fact, I think Auditing firms should be charged a penalty each time any such case happens again. This will ensure they really do their job well. They should be ban from working secondary as financial consultants too so that there is no conflic of interest. This is what happens exactly for the Enron case in USA.

diggo SG

At the end of the day, it is the integrity of the mgt that is impt. Auditor can onli do so much.

In an accounting firm, audit is loss making... however most recovered from the consultancy/tax/restucture etc etc. Junior staffs, tight dealine, small budget all goes against the auditor judgement. Had been one and have been dealing with them... Nothing much they can do if there is really a fraud.

Lowclassman SG

Pap only know how to make $$$ from us. They won't bother to protect us, the investors. Just look at Clob International, we become lan ..lan.... and Ex prime minister of Malaysia said that we have been trading without approvals from the Malaysian's Authorities. So ...isn't it illegal?????

What can we say!!! Freaking gov.

Qitai SG

Going by that arguement, we should forgo auditors completely. Relaying on the integrity of the mgmt??!! Since when is mgmt suppose to have integrity??!! You mean you really do trust them?

dragg SG

the govt should take action against the auditors. how can they not noticed that something was amissed in the books.

ridiculous. what happened recently is as good as companies cheating its shareholders.

crazy monkey SG

send the cheats to jail and cane them Mad

diggo SG

Not tat we should forego the auditors. The auditor is good when there is a conflict of interest between parties in the companies... then they can unearth the fraud easily. If the mgt is in co-hoot, eg the CEO, CFO, Board is all in agreement of a transactions... there is nothing the auditor can do.

Take CAO for example. Wat the auditors turn out?? Nothing. Citiraya? Even Eron, worldcom, nothing is turn out.

The mgt can disguise the transactions to ensure tat it will appear legal from the auditor perspective (I do my fair share of these as well). So at the end of the day, wat u can rely on is juz the integrity of the mgt.

dragg SG

too bad. when it comes to money these people forgot about integrity.

Qitai SG

The auditor can highlight their concerns in the auditor statement even when every is okay in terms of legal. And in the Enron case in USA, Arthur Anderson actually advised Enron how to cheat in their financial statement to make it look like they are still earning money. And they are the Auditors. So . . . . . . .

dragg SG

so..

corporate governance is nearly non-existence.

macjoe SG

There is corporate governance but I think many give it lip service.

Cool

diggo SG

So u agreed that the auditors are BSing... u r onli left with the mgt then.

U have also mix up the auditors role... their role is to check whether the financial statements is true and fair and whether it is in complaiance with the local GAAP.

They do not need to state whether the mgt are correct. For example, the auditor can issue a statement saying the company is true and fair blah blah blah but the company is making a loss. The loss maybe due to legal transactions that benefits one / some other parties.

In Enron case, the auditors are not at fault... becos the transactions are all legal. So is the consultant that set up the transactions... since there is a contract between enron and AA tat they provide financial services.

Wat is missing from the picture is ethics and integrity. Which nowadays more and more ppl are doing lips service to.

Qitai SG

Well, as I said, the auditors always do have a page for them to make comments about the financial report. For example, if some items are depreciated too quickly or revenue are declared too early, they can always highlight these concerns even if they are all very legal. I am no accountant, but I believe you are. And I believe you do know that the GAAP does allow a lot of room for the CFO to make judgement call on what and how much can be put into the depreciation and into the regconized revenue. Now, I believe Auditors should be professional enough to see any such unusual activities.

Do you dare to say than that the Auditors are totally unaware of all these happenings? If that is case, then I guess I have to now classified Auditors as being just incompetent. And if they are aware, and they are not highlighting these in the Auditor statement, then you mean they do not have any obligation to highlight that these unusual activities might be of concern??!!

Another point is who makes the recommendation on what is to be included in the GAAP?? If my guess is right, it should come right from some association of Auditors/Accountants.

And by your statement on Enron, if one day a lawyer or policeman comes up with an idea of teaching the criminals how to kill a person totally legally, these parties should never be faulted since it is perfectly legal??!!

lwflee SG

I think the problem with auditors is that they are paid by the coys to perform a service. If they provide what the coys perceive to be a bad service, then surely that coy will not approach them next time. Perhaps the law should be amended to deal with this conflict of interests.

PS: I THINK this is the way it works. I am not sure, so correct me if i am wrong.

diggo SG

EErrr... the auditors only provide an opinion as to the preparation of the financial statement, whether it is true and fair in the figures. In process of testing whether it is true and fair, they will test the internal controls blah blah...

If there is a material departure from the GAAP, then it will be highlighted. If not then nothing will be disclose. That is the auditors obligation. So even if the transactions is unusual (speculating a lot of your oil position as i CAO), if the transactions is technically and legally correct, then it is ok.

They are not in the position to say whether the judegment call is correct... just to ensure that they are technically and legally correct.

Take for example, a company is OKed by the auditors, that means it financials are ok. However, the company is making a loss, so are they suppose to say that the management judgement is wrong?

FYI, in the US, they have enacted the Sarbane -Oxley Legislation, which the management has to signed off individually with regard to the operations and that there are no fraud involved. IF there is during their watch, they will be criminally procecuted.

Put yourself in the auditor's shoes, you will not want to disclose too much in your opinion.

Correct with regard to the GAAP.

As to the killing... technically still possible... i think we will have to look for a criminal lawyer for these. Razz

diggo SG

Auditors is employed by the shareholders of the company. IF they provide a bad service, the shareholders will vote in the annual general meeting as to whether they want to continue to employ them.

And normally, the management is not equal to share holders.

That is not the case of most of the SGP locally listed company.

Qitai SG

What you are saying is essentially "This is where our responsibilities ends, the rest is not our problem". This leaves us where we started - "Who is there to protect the shareholders?"

Now, I understand that we cannot blame Auditors for bad management. But they are in the best position (as an outsider) to actually know of any potential risk. And from that point of view, they are in the best position highlight or make even make changes in the GAAP to protect the shareholders. And if they refuse to take on this responsibility, then it really does means that we can only relay on the mgmt's integrity. And I don't really like that idea.

Anyway, for the CAO and Baring bank issue, I do think it is beyond Auditor's role. The problem in those cases are that these companies are allow to trade in derivatives in a volume much more than just protection/insurance needs. And that will fall under MAS's judistication I think. For the rest, I still think the Auditors could have done better.

diggo SG

Who is there it protect the shareholders (SH)? SH themselves.

Take for example there is a really small company that is asking whether you should put in some $$$ into it... wat would you do?

I would look at the financials (if i dun noe, i would employ a professional to do it... ie the auditors). If it is profitable, then you will want to know who is running the show in the company and whether he/she can be trusted with ur $$$. If the fella is a crook, then i dun think u will invest rite? Or alternative you would want to employ someone (the mgt) which you can trust (with integrity) to run the show for you. ie to make u $$$.

That is why those fund managers (the top one esp) talk and interview the mgt in the company that they are investing in... so as to get a feel of their ability... and sometimes integrity.

At the end of the day, the SH is suppose to take all the risk (and the rewards) of their investment.

Changes will be make to the GAAP constantly to accomodate the ever changing business environment... and auditors is one of the impt contributors to this function.

OK... maybe ACCS and Citijaya is a case of undisclosed transactions. However, the auditors is not there to find fraud. I am not defending them, but i was involved in these sort of audit before andI can vouch that it is almost impossible to find anything wrong when the CEO, CFO (90% of the time they already have extensive audit background), MD etc etc are all in cohoot to convince the auditors otherwise.

That is the reason I say that in the end, it is the integrity of the mgt.