Grig says...

Dear Edgar,

Thanks for your kind support during last year. I feel my MBA at least 30% yours because according to my classmates accounting was the most difficult module.

Grig
25 Dec 2006

Merry Christmas!

If someone will grant me a wish for or maybe if there is enough of us to pray for peace, happiness and a stop to the degradation of the environment, the world would be a better place for all.

My friends, take care.

Serene, I thank you too :)

Hi Edgar,

I was your student in your main & revision classes this year (ie. 2006) from Jan to May, I took my CBE exam for paper 1.1 last week and am pleased to tell you I've passed!!!

To me, this exam was a difficult one, though I only managed to score 76 marks but I believe I had done my best and am glad I've cleared the paper!

I would like to take this opportunity to thank you for being an inspiring lecturer, though I was confused sometimes but over all I thoroughly enjoyed and am enriched from your lectures. Keep up the good work and may you enjoy more success in the coming Jul term!

Best wishes and God Bless You!!

Regards,

Serene
28 June 2006

Auditors to pay $775,000 damages

Who sue who and for what?

Gaelic Inns (of Muddy Murphy's Irish Pub and Penny Black of Boat Quay) sued Patrick Lee Public Accounting Corporation for $1 million losses suffered by Gaelic Inns.

How was the monies stolen?

The then Group Finance Manager, Ms Denise Ang did not banked in the daily bar takings between March 2003 and May 2004.

What is the Hon Judge Belinda Ang's decision and basis?

The Judge ruled in favour of Gaelic Inns and awarded $775,000 plus interest.

Judge said "while an auditor is not expected to be a detective, the duty to audit carries with it an incidental duty to warn... managementt or the directors of fraud or irregularities uncovered".

Was it uncovered by the auditor?

The audit was in progress in March 2004 while the crime was still in progress.

Mr Lawrence Phong, the audit manager in charge then, was reviewing the bank reconciliation statements. There was a discrepancy of about $680,000 noted between cash balance as per accounts and actual cash in bank!

Mr Phong was faulted for not doing an indepth investigation immediately upon its discovery, tardy in follow-ups and lastly for not highlighting the matter to the management.

Conclusion

Does this decision further increase audit risk to the auditors? Lawyer Philip Fong, representing Gaelic Inns, seems to think so. The decision highlighted the need to review process and audit procedures of cash, particularly in F&B or retail businesses.

However, such annual audits are still not expected to discover frauds unless specially commissioned to do so. In this case, the auditor had laid his hands on the most glaring documents highlighting the crime ie. bank recon statements. And thus the decision.

Good night.

P/S - Pic of December's rain clouds

Can you give some pointers to the new students?

Dear students, past and present,

Need your help to contribute some advice to the new students coming in in next academic term.

Advice on the following:-
How to manage time between work, studies, family and bfs/gfs?
How many subjects should I take?
How should I study? Read textbook or not?
How to deal with lecturers to get them to help?

Given that you guys and gals have now got the experience of going through at least one exam, let me have your views.

No right or wrong view. It is your view. - So just type :)

Stock Grant vs Stock Option

What is stock grant?
Company buys shares from open market and gives them to its staff according to an incentive programme.

What is stock option?
A company issues papers to its employees giving them the right to subscribe to shares of the company at a pre-determined price (usually below current market price) after a certain vesting period.

Similarities
Both forms of incentive plan enable the company to motivate employees to achieve superior performance as well as to align the interests of employees and shareholders'.
Both costs of incentive plan have to be expensed off against profit.

Differences
Expenses incurred to do stock grant is tax deductible as per cash compensation to employees. Stock option expenses are NOT tax deductible.
Determination of cost for stock grant is more definitive. There has been constant debate over the valuation of stock options.

Conclusion
SIA, SembCorp Industries, SMRT and StarHub, are recent adopters that have awarded employees with stock grants for the first time this year.

More expected to follow forth.

AirAsia may have to restate earnings?

Issue
In early Nov 2006, AirAsia, the Malaysian budget airline, have indicated that it may have to restate its earnings for its fiscal year ended June 2006. This is a result of difference in interpretation of a certain accounting policy. The dispute would translate to RM40mio swing in profit.

What is the accounting policy under dispute?

The focus is on FRS 112 under the Malaysian standard.

AirAsia has maintained their position that the International Financial Reporting Standard (IFRS) allows it to recognise unused investment tax allowances as deductible temporary differences.

It argued that its accounts for year ended 30 Jun 2006 will not present a true and fair view of the company's financial performance if it were to comply strictly with FRS 112 under the Malaysian standard.

Malaysia's Securities Commission (SC) had asked AirAsia to restate its accounts.

The Malaysian Accounting Standards Board (MASB) confirmed recently that FRS 112 was not a new standard, and that it is also consistent with the international standard.

Bottomline
AirAsia's accounts could be qualified. The profit definition difference would have no impact on its financial position as the accounting treatment is non-cash in nature.

Anybody got any update on this case?