Cooking the Books: The Case of Malaysian Listed Companies

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http://ijbssnet.com/journals/Vol_4_No_13_October_2013/20.pdf​

Posted by Jeremy TAN Leming, Year 4 undergrad at the School of Accountancy, Singapore Management University

International Journal of Business and Social Science Vol. 4 No. 13; October 2013 179

Cooking the Books: The Case of Malaysian Listed Companies

Abstract

Cooking the books refers to fraudulent accounting activities undertaken by a business to falsify its financial statements. Thus, the objectives of this study are to investigate what the cooking-the-books activities carried out by businesses consist of, how they conduct them, and what the impact is on the business and its shareholders. The case study sample companies are two Malaysian companies that had received various awards from reputable third-party organizations. On the other hand, the activities undertaken in both companies have caused them to be labelled as Malaysian mini Enrons. We employ a qualitative research methodology as most prior research employs a quantitative methodology to investigate the determinant factors in businesses’ cooking-the-book activities. The result of the study shows that the managers have used their positions, prior experience, and regulatory loopholes in their activities. Furthermore, the financial report restatement and higher reported earnings are the early warning signals of their activities. As a result of this, the Malaysian Securities Commission has revised the corporate governance code, and among others incorporated the Audit Oversight Board, known in the US as the Public Company Accounting Oversight Board.

Embattled ASX-listed education company Vocation crashes to $273m loss, audit problems flagged

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http://www.smh.com.au/national/education/vocation-crashes-to-273m-loss-audit-problems-flagged-20150302-13s95f.html?skin=text-only

Earlier post: Vocation chief Mark Hutchinson ‘should have been axed earlier’ after a damning audit review into the quality and practices of two of its businesses and the aggressive revenue recognition practices; How hedge funds predicted Vocation’s collapse

Vocation crashes to $273m loss, audit problems flagged

Date: March 02 2015
Simon Evans

Embattled education company Vocation crashed to a $273 million loss for the first half of 2014-15 because of heavy write-downs and fewer enrolments due to its battered reputation over the quality of some of its courses. The company has made extra provisions for the outcomes of regulatory audits which are pending in another business, outside those which were in the spotlight late in 2014 and which have already caused serious damage to the company. Vocation announced on Monday it had suffered a $273 million bottom-line loss for the six months ended December 31, 2014, compared with a loss of $4 million for the same time last year. Continue reading →

IBM Corp was sued by a shareholder that said it committed securities fraud by failing to write down a money-losing semiconductor unit before agreeing to pay another company $1.5 billion to take that unit off its hands

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http://www.reuters.com/article/2015/03/02/us-ibm-lawsuit-fraud-idUSKBN0LY2JC20150302

IBM shareholder sues company, alleging it overvalued chip unit

5:38pm EST

By Jonathan Stempel

NEW YORK (Reuters) – IBM Corp was sued on Monday by a shareholder that said it committed securities fraud by failing to write down a money-losing semiconductor unit before agreeing to pay another company $1.5 billion to take that unit off its hands. The lawsuit filed in Manhattan federal court arose from IBM’s announcement last Oct. 20 that it would sell the unit to GlobalFoundries Inc, and take a related $4.7 billion pre-tax charge. IBM also announced third-quarter results that day. Its share price fell 9 percent over the next two trading days, wiping out more than $18 billion of market value. Continue reading →

FELDA Global Ventures Holdings Bhd’s (FGV) ills go beyond accounting standards; under the rules of “fair value accounting”, the company is compelled to make provisions for its land lease agreement (LLA)

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http://www.thestar.com.my/Business/Business-News/2015/02/28/FGVs-ills-go-beyond-accounting-standards/?style=biz

FGV’s ills go beyond accounting standards

Saturday, 28 February 2015

FELDA Global Ventures Holdings Bhd’s (FGV) worst enemy is turning out to be the new accounting standards, so say the top executives of the plantation giant that draws more attention for its political prowess than commercial interest. But is this really the case, or is the suffering of the plantation company now due to the lack of medication and care rendered to the plantation assets and related investments when it was under Felda? And is it because FGV is viewed as a political entity rather than a listed company?

Right from the beginning, FGV was a tricky listing proposition because it had some elements that would not have gone down well by normal commercial standards. An example is the age profile of its trees, which is 20 years and above that forms some 50% of its total plantation assets. Continue reading →

Companies Drag Feet on Updating Fraud Safeguards; Some feel no urgency to adopt new standards, even after clock runs out on old ones

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http://www.wsj.com/articles/companies-drag-feet-on-updating-fraud-safeguards-1425346394

Companies Drag Feet on Updating Fraud Safeguards

Some feel no urgency to adopt new standards, even after clock runs out on old ones

MAXWELL MURPHY

March 2, 2015 8:33 p.m. ET

Corporate safeguards to prevent financial errors and fraud are like armor: unpolished they rust, and by then it’s too late. The most widely followed standards for these safeguards—or internal controls—were updated more than a year and a half ago. A deadline to adopt the new, more detailed standards passed in December.

But that hasn’t stopped more than 300 companies, with a combined market value of more than $450 billion, from sticking with internal-control guidelines that were written more than two decades ago, according to a review of regulatory filings by The Wall Street Journal. That number is expected to climb as more companies close their books for 2014 and disclose whether they have made the switch. Continue reading →

Investors and brokers want Singapore Exchange stripped of regulatory powers

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http://www.scmp.com/print/business/article/1727464/investors-and-brokers-want-singapore-exchange-stripped-regulatory-powers

Investors and brokers want Singapore Exchange stripped of regulatory powers

Monday, 02 March, 2015, 10:34am

Reuters in Singapore

Singapore Exchange (SGX) may have just begun its search for a new chief executive but investors and brokers already know what change they want to see: the bourse stripped of its regulatory powers and a rebuilding of its stock market business. Continue reading →

Regulators Zero in On Audits of Related Parties; The subject of related parties continues to be a focal point of regulators and government prosecutors seeking to bring civil or criminal legal actions

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http://ww2.cfo.com/auditing/2015/02/regulators-zero-audits-related-parties/

Regulators Zero in On Audits of Related Parties

The subject of related parties continues to be a focal point of regulators and government prosecutors seeking to bring civil or criminal legal actions.

Howard Berkowitz

February 26, 2015 | CFO.com | US

“Good friends help you move. Real friends help you move dead bodies.” Perhaps this ubiquitous (and anonymous) quote sheds some light on auditing standard setters’ recent emphasis on updating guidance regarding related-party transactions. Of course, by “real friends” I refer to a company’s related parties – and who better and more trustworthy to help conceal some of its dirty secrets?

In light of major corporate accounting scandals of the past two decades (think Enron, Tyco, or more recently, Olympus), which were perpetrated with the assistance of related-party transactions, auditing standard-setters have focused their attention on the heightened risk of fraudulent financial reporting that accompanies related-party transactions. But even if transactions and arrangements with related parties are not for nefarious purposes, standard-setters have recognized that activity with related parties increases the risk of error that financial statements are not presented fairly and will require an auditor’s careful inspection. Continue reading →

Kroll: Understanding the mind-set of the Chinese entrepreneur, how business is done in China, and recognizing the tell-tale signs of fraud

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http://fraud.kroll.com/articles/pre-empting-fraud

Posted by Low Hwan Hong, Year 4 undergrad at the School of Business, Singapore Management University

Written by: Violet Ho

China: The Business Pearl of the Orient? While attractive, China has gained a reputation as a place where deals and contracts are often treated more like ideas than bona fide agreements. In recent years, however, the business climate and regulatory structure in China have improved, and many analysts predict that with a little effort and knowledge, launching a venture in China could be an effortless exercise. But to succeed, it is important to understand the Chinese culture of doing business and the mind-set of the Chinese entrepreneur.Chinese entrepreneurship has for centuries been built upon two important attributes: Continue reading →

Fraud detection and prevention

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http://www.mb.com.ph/fraud-detection-and-prevention

Posted by Low Hwan Hong, Year 4 undergrad at the School of Business, Singapore Management University

by Wilma Miranda
April 7, 2014

Fraud is an old game and even in the Old Testament times when Jacob deceives his father to get his blessing over Esau (who is supposed to be deserving of the blessing because he is the firstborn) is a simple example of fraud. But through the years people became more sophisticated in perpetrating this kind of scheming activity. Alan Greenspan, former Chairman of the US Federal Reserve once said “.. It is not that humans have become any greedier than in generations past. It is that the avenues to express greed had grown so enormously…” Continue reading →