Transcript FRS 101 PRESENTATION OF FINANCIAL STATEMENTS

DIALOGUE WITH
AUDITORS OF
PUBLIC LISTED
COMPANIES
MALAYSIAN INSTITUTE OF
ACCOUNTANTS
28 AUGUST 2007
17/07/2015
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OBJECTIVES
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INTRODUCTION
CONCERNS BY THE CAPITAL MARKET
REGULATORS
FINDINGS OF THE FINANCIAL STATEMENTS
REVIEW COMMITTEE
FINDINGS OF THE PRACTICE REVIEW
COMMITTEE
FINANCIAL REPORTING STANDARDS
IMPLEMENTATION COMMITTEE
INITIATIVES OF THE INSTITUTE
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INTRODUCTION
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‘Front line’ role of auditors is well
established in the securities and company
law; namely
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Section 99E(1) of the Securities Industries Act
Section 174(8A) of the Companies Act
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CASES REPORTED TO SC
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Only 2 auditors have voluntarily reported to SC
pursuant to Section 99E (1) of the SIA
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SC had issued directives to 4 auditors pursuant to
Section 99E (3) of SIA to perform specific
examination and report their findings
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IMPACT ON CAPITAL MARKET DUE
TO THE LACK OF VIGILANCE OVER
FINANCIAL REPORTING
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PN4 (2001 to 2004): 128 companies
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Accumulated losses of at least RM56 billion
Mainly mismanagement/misconduct involving
directors
Blatant irregularities not picked up by auditors
PN 17 (from 2005): 68 companies
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Accumulated losses of at least RM14.8 billion
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ISSUES HIGHLIGHTED BY SC
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Some key findings on PN4 & selected
companies
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Inflating sales vide false invoicing
Creation of debtors to support false sales
Transferring debtors balance to fixed assets
Falsification of sales/purchase invoices to raise
bankers acceptance to siphon money
Settlement of debtors using own funds
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ISSUES HIGHLIGHTED BY SC
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Based
on
SC’s
investigation
and
surveillance, a pattern of lapses of conduct
is revealed as follows:
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Cozy relationship/collusion between management
and auditors resulting in inadequate scrutiny
Lack of supervision of audit partners over audit
team’s work
Failure to alert audit committees, board of
directors & regulators
Review over audit work is “mechanical”
Superficial review of bank reconciliations, hence7
FINANCIAL STATEMENTS
REVIEW COMMITTEE
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Scope of FSRC
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Has been extended to include hot pursuit to
safeguard public interest
Referring offenders to the appropriate regulators
Penalty Tariff System
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Three category – minimum action of informing
members to rectify the irregularities to referring
the member/member firm to the Investigation
Committee/Practice Review Committee for their
further action
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FINANCIAL STATEMENTS
REVIEW COMMITTEE FINDINGS
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Going Concern
Inadequate Disclosures
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Non-disclosures of fair values of financial guarantees
Non-current financial assets/liabilities
The amount due by/to subsidiary companies and
associated companies
Method and assumptions used to estimate fair value
Compliance Costs
Clarity of Presentation
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FINANCIAL REPORTING
STANDARDS IMPLEMENTATION
COMMITTEE
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Main function
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To provide assistance to MIA members on
matters of common interest relating to
accounting standards by way of providing
implementation guidance to both preparers and
auditors
FRSIC has received 20 issues submitted
by preparers and auditors
In May 2007 – first guidance was issued on
Deferred Tax, effective 1 August 2007
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FINANCIAL REPORTING
STANDARDS IMPLEMENTATION
COMMITTEE
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Submission of issues to FRSIC
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Members and the public can submit issues to
FRSIC by filling up a form which is available from
the Institute’s website at www.mia.org.my
Issues submitted should be on points of principle
and not solely relevant to a specific company
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INITIATIVES BY THE
INSTITUTE
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Enhancements to the
Investigation/Disciplinary Processes of the
Institute
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Fast tracking of cases referred by the regulators
to safeguard public interest
Practice Review Program
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To introduce a risk based approach
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INITIATIVES BY THE
INSTITUTE
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Consultative Document – A New
Framework for the Accountancy Profession
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17/07/2015
Proposing several models of framework for the
profession to ensure that it is transparent,
accountable, effective and able to cater to
changing business and financial environment
A framework that protects public interest
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INITIATIVES BY THE
INSTITUTE
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The proposed models of framework are primarily
focused on establishing an oversight board to
monitor the disciplinary and compliance
mechanism
Disciplinary mechanisms comprise
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Investigation Committee
Disciplinary Committee
Disciplinary Appeal Board
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INITIATIVES BY THE
INSTITUTE
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Compliance Mechanism comprise
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Financial Statements Review
Practice Review
Proposing to create the oversight body under a
separate Act altogether, in the name of
independence
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INITIATIVES BY THE
INSTITUTE
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Proposing to enhance the Professional aspects
of the profession
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To incorporate accountancy practices so that they
can be regulated in order to protect public interest
Conducting competency assessment for future
accountants
Empowering Council to determine the criteria and
process for recognition of qualifications
Allowing temporary admission of foreign
accountants
Expecting feedback by or before 15 September
2007
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OTHER MATTERS
SC’s proposal on Panel System for advisers
for submissions relating to Initial Public
Offering (IPO), Reverse Take Over (RTO)
and Distressed Listed Companies (DLC)
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OTHER MATTERS
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Criteria based on size and competency
2 routes proposed:
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Route I – Min of 5 partners and 8 CAs and 3
IPO/RTO/DLC submission in the last 3 years
Route 2 - Min of 3 partners and 5 CAs and
audited a number of PLCs and also had attended
MIA Reporting Accountants programme
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OTHER MATTERS
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MIA’s Counter proposal:
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One Route – Min 3 partners and 5 CAs
Experience:
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3 IPO/RTO/DLC submission in the last 5 years;
3 listed companies; or
Relevant experience determined by SC
Attended MIA Reporting Accountant Programme
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MEMBERS
WHAT ARE THE CHALLENGES FACED BY
YOU AND HOW CAN THE INSTITUTE BE
OF HELP?
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