The AC and Internal Audit Services.

It's CNY, found myself at Open Houses, one of which I was in the midst of Audit Committee members. After the normal blah blah blah, the topic meandered to the new regulations and what was needed to be done. 

It was very comical, I thought, that AC members did not know that their performance needed to be reviewed by the Nominating Committee and that there were those that thought how ironical it was that they would be reviewing themselves, simply because many companies do not have sufficient independent directors to keep the Nominating Committee and Audit Committee membership separate. Oh well, I suppose there will be some creativity, lets wait and see and see what Bursa will do about it.

More interestingly is when the topic of IA quality reviews were discussed I found out that the IIA(M) was peddling this service! I, as with many professional, find this unthinkable, that an institute formed to promote, educate and certify practitioners of a particular profession would themselves be undertaking the very services that they certify. This would be like the Institutes of Chartered Accountants or The Certified Accountants Associations undertaking statutory/external audits! 

To better understand why this Institute was at odds with the norm, I did my Inspector Clouseau stuff and this is what I found out.

1. Yes the IIA(M) undertakes such because the world IIA body does similarly, so its permitted.

2. Does the IIA(M) have a team of professional staff to undertake the engagements? No the rely on a team of contractors.

3. How does the IIA(M) ensure quality, I am told that it is done via its secretriat that has certifiers!

4. I was further told by my informent, "we don't get involved with this becuase it really is a tick the box approach. So much for looking at the qualitative approach, and the SC saying that the MCCG should not be embraced with a tick the box approach! 

I would even place a wager that the Quality Review is based on the Guidance on Internal Audit Function that can be found on BM's website. Personally I thought it was a very poor document and I was totally surprised that BNM, SCM and BM would lend their name to it, this especially so when BNM in the late 90s came out with a GP on IA that was world class.

Finally I wish AC members all the best as under revised rules they will be required to not only approve the Internal Audit Plan but also the IA Program! 

   

Its all about impariment

A large shipping company that is intimately involed with the oil and gas industry recently posted siginificantly lower earnings, the main reason given was that they made higher imparment charges in the fourth quarter.

Now what was missing was whether the impairment was only made in the 4th qtr or whether there were impairment charges made in the 1st, 2nd and 3rd qtrs too. I am told by an ex audit partner friend that impairment needs to be accounted for immediately and its not a year end charge! 

If this be the case, than perhaps,

1. That the Corporate Survillance department of the SC needs to review the accounts and provide assurances that the previous quarterly announcements were not false or misleading(possible painting a rosier picture than it is).

2. I was puzzled by the decision of the Board to declare a dividend. This surprised me because a good part of the announcement related to the bleak situation in the o&g shipping industry citing oversupply etc etc and the challenges relating to o&g. 

Sometimes, no, most times I wonder whether good corporate governace is a myth and whether its just spoken of to say "WE ALSO HAVE IT"

       

A case for the Securities Commission

Over the past month we have been informed that in two of the pure play entities not all is as rosy as it is made out to be.

1. We have been advised that all is not well at the Battersea Power Project, that it requires an injection of aproximately RM8b.

2. Recently we have come to read reports that not all is well with the plantation investment in West Africa.

I tried to locate the prospectus, but till now I have not been able to, simply to see is these risks or other information relating to these were highlighted, after all under the disclosure based regime its all about,

• Governance
• Disclosure
• Diligence.

My simple mind suggest to me that if these material inormation were made know than the market would have talked about it or worse the opposition bloggers would have had a field day. So I am going out on a limb and conclude, rightly or not, that such information was not highlighted.

Now if that be the case should the SCM not take action against the promoters and the IBs for witholding material information in the prospectus. 

I cannot honestly say that I expect any answers because those that are privileged are never taken to task and those that are nobodys are normally the ones paying the price to make up the KPIs!