Audit exemption criteria for Groups?

a Japanese chef who has left this

The current law on audit exemption applies to individual company but not to a group of companies. So say Mr Joseph Alfred, Technical Advisor for ACCA Singapore.



Which law?

• Companies Act's Section 205(2) says companies are required to appoint auditors.
  
• Companies Act's Section 205A says private exempt companies with less than $5mio turnover and dormant companies are exempted from audit.

Where is the problem?

Let me illustrate with a simple example. Holding company has a turnover of less than $5mio and may be exempted from audit.

Subsidiary company has a turnover of more than $5mio and thus its financial statements would be audited. So far so good.

But when it comes to Group's consolidated financial statements, the regulator has confirmed that there is no legal compulsion for them to be audited.

Joseph opined that a Group with a turnover of of more than $5mio should NOT be exempted.

As for me, I am still not convinced with the need to audit the consolidated statements. As some practitioners have said, the need to audit should rest primarily on who are the ultimate key users of the statements. We should not just rely on mere criteria.

Four banks vs Asia Pacific Breweries for $109mio

"The best defence is offence."

Well that is the basic position of the four banks against APB in trying to claim back $109mio of their lost funds. Disregarding the bank's internal control failure to detect the fraud, the banks have chosen to place the faults on APB.

• One of the banks argued that Chia Teck Leng's acts were carried out in his capacity as APB's finance manager - and the company must shoulder the blame.


• Senior counsel Steven Chong, who represents two of the foreign banks, told the court that the fundamental issue was how Chia was able to perpetrate the fraud for almost five years and remain undetected. The obvious answer, he said, is that APB has vested wide powers and authority on Chia without any proper checks and balances in place.


• Chia was also able to ensure that correspondence from the banks was never opened by anyone other than him. His secretary was specifically never to open letters from banks addressed to him.

Background

From 1999 to 2003, Chia, now 47, had submitted to the banks fictitious documents with forged signatures of top APB executives, which convinced the banks to give him credit facilities in APB's name.

What did Chia do with the monies? He blew $62 million in casinos around the world, before being convicted and sentenced to 42 years' jail in 2004. Some millions still cannot find.

While Mr Chia sits in prison for the remaining 39 years, many bank officers' career have been scarred.