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Thread: NKF issues revisited

  1. #41
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    Default Re: NKF issues revisited

    Quote Originally Posted by xtemujin
    Ministry "honest overlook" ?
    With millions of $$. Don't play play man.

  2. #42
    Senior Member redstone's Avatar
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    Default Re: NKF issues revisited

    Why wasn't Richard Yong, the chairman investigated?

  3. #43

    Default Re: NKF issues revisited

    Quote Originally Posted by redstone
    Why wasn't Richard Yong, the chairman investigated?
    investigations are now underway.

  4. #44

    Default Re: NKF issues revisited

    Quote Originally Posted by xtemujin
    Does not look good as now the heat is on the accounting firm Pricewaterhouse instead of the Ministry not doing their job. Ministry "honest overlook" ?
    The common misconception centred on the understanding or more precisely, lack thereof on what are the auditor’s duties and responsibilities.

    In the famous judgment on Kingston Cotton Mills (1896) more than hundred years ago, Lord Justice Lopes, perhaps unintentionally, shaped the very ethos of the audit profession for the next century by saying that :


    "It is the duty of an auditor to bring to bear on the work he has to perform that skill, care and caution which a reasonably competent, careful and cautious auditor would use.

    An auditor is not bound to be a detective or as was said, to approach his work with suspicion or with a foregone conclusion that there is something wrong. He is a watchdog, but not a bloodhound.


    Auditors must not be made liable for not tracking out ingenious and carefully laid schemes of fraud, when there is nothing to arouse their suspicion ...So to hold would make the position of an auditor intolerable."


    In the watchdog approach, the profession adopted a passive approach to an audit, together with an implicit presumption that the representations made by management could be and indeed should be relied upon.


    The current Auditing Standard requires auditors to be more proactive and “maintain an attitude of professional skepticism throughout the audit, notwithstanding the auditor's past experience about the honesty and integrity of management and those charged with governance” as it recognizes the possibility that a material misstatement due to fraud could exist.

    However, this standard does not require an auditor to be a bloodhound, it does seem to move well beyond the parameters of just being a watchdog.

    In the light of recent corporate debacles in Singapore, the audit profession appears to have been caught off-guard again and made a scapegoat or was it?


    In fairness, it will always be difficult for the auditor to detect fraud, particularly management fraud as the Auditing Standard focuses on the auditor’s responsibilities with respect to fraud and error in an audit of financial statements.

    Hence, the prevailing view remains that “audits are not designed to detect management fraud”.

    The primary responsibility for the prevention and detection of fraud and error rests with both those charged with corporate governance and the management of the entity.

    The Companies Act expressly requires directors of every company to present financial statements that comply with the prescribed Financial Reporting Standards (FRS) and also reflect a true and fair view of the profit and loss, as well as the state of affairs of the company as at the end of the period to which it relates [Sections 201(1A), (3) and (3A)].

    A director who fails to comply with these provisions would be liable upon conviction to a fine of up to $50,000 [Section 204(1)].

    Auditors are similarly required to state in their Auditor’s report whether the accounts comply with the FRS and give a true and fair view of the company’s profit and loss, as well as the state of affairs of the company [Section 207(2)].

    “True and fair view” is not an accounting criterion. Rather, it is a legal test, as set out in case law, which is essentially that the accounts must not mislead the members or other interested stakeholders.

    The accounts of each company must therefore pass a two-stage test. First, it should be prepared in accordance with and therefore comply with the FRS. However, compliance with the FRS is itself insufficient as it must also present a true and fair view, which is the legal test, to pass the second stage.

    Should the audit profession move beyond the passive philosophy (Watchdog Approach) espoused in the judgment of Lord Justice Lopes or be a master of its own fate and push a radical reform agenda (Bloodhound Approach) to improve auditing and assurance standards that will meet the interest of the various stakeholders?

    I believe that it would require a seismic shift in audit approach and coverage, thereby incurring higher auditing cost.

  5. #45

    Default Re: NKF issues revisited

    Sigh what a big mess. Hope the old NKF management and board of directors will be brought to task. They really lost their focus by paying so much emphasis on fundraising. The clinical folks doing the real work must feel let down.

  6. #46
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    Default Re: NKF issues revisited

    Quote Originally Posted by AEC
    The common misconception centred on the understanding or more precisely, lack thereof on what are the auditor’s duties and responsibilities.

    In the famous judgment on Kingston Cotton Mills (1896) more than hundred years ago, Lord Justice Lopes, perhaps unintentionally, shaped the very ethos of the audit profession for the next century by saying that :


    "It is the duty of an auditor to bring to bear on the work he has to perform that skill, care and caution which a reasonably competent, careful and cautious auditor would use.

    An auditor is not bound to be a detective or as was said, to approach his work with suspicion or with a foregone conclusion that there is something wrong. He is a watchdog, but not a bloodhound.


    Auditors must not be made liable for not tracking out ingenious and carefully laid schemes of fraud, when there is nothing to arouse their suspicion ...So to hold would make the position of an auditor intolerable."


    In the watchdog approach, the profession adopted a passive approach to an audit, together with an implicit presumption that the representations made by management could be and indeed should be relied upon.


    The current Auditing Standard requires auditors to be more proactive and “maintain an attitude of professional skepticism throughout the audit, notwithstanding the auditor's past experience about the honesty and integrity of management and those charged with governance” as it recognizes the possibility that a material misstatement due to fraud could exist.

    However, this standard does not require an auditor to be a bloodhound, it does seem to move well beyond the parameters of just being a watchdog.

    In the light of recent corporate debacles in Singapore, the audit profession appears to have been caught off-guard again and made a scapegoat or was it?


    In fairness, it will always be difficult for the auditor to detect fraud, particularly management fraud as the Auditing Standard focuses on the auditor’s responsibilities with respect to fraud and error in an audit of financial statements.

    Hence, the prevailing view remains that “audits are not designed to detect management fraud”.

    The primary responsibility for the prevention and detection of fraud and error rests with both those charged with corporate governance and the management of the entity.

    The Companies Act expressly requires directors of every company to present financial statements that comply with the prescribed Financial Reporting Standards (FRS) and also reflect a true and fair view of the profit and loss, as well as the state of affairs of the company as at the end of the period to which it relates [Sections 201(1A), (3) and (3A)].

    A director who fails to comply with these provisions would be liable upon conviction to a fine of up to $50,000 [Section 204(1)].

    Auditors are similarly required to state in their Auditor’s report whether the accounts comply with the FRS and give a true and fair view of the company’s profit and loss, as well as the state of affairs of the company [Section 207(2)].

    “True and fair view” is not an accounting criterion. Rather, it is a legal test, as set out in case law, which is essentially that the accounts must not mislead the members or other interested stakeholders.

    The accounts of each company must therefore pass a two-stage test. First, it should be prepared in accordance with and therefore comply with the FRS. However, compliance with the FRS is itself insufficient as it must also present a true and fair view, which is the legal test, to pass the second stage.

    Should the audit profession move beyond the passive philosophy (Watchdog Approach) espoused in the judgment of Lord Justice Lopes or be a master of its own fate and push a radical reform agenda (Bloodhound Approach) to improve auditing and assurance standards that will meet the interest of the various stakeholders?

    I believe that it would require a seismic shift in audit approach and coverage, thereby incurring higher auditing cost.
    Totally agree. Before the MOH lays into PWC, we need to know what the remit of the audit was. I'm really surprised that KPMG would be so critical of fellow professionals, knowing full well what the roles and limitations of a financial auditor are.

  7. #47
    vince123123
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    Default Re: NKF issues revisited

    I'm not an accountant or an auditor, but from the last few posts, what then is the role of an auditor? Rubber stamping audit approvals based on the management saying that everything is fine?

  8. #48

    Default Re: NKF issues revisited

    Quote Originally Posted by ricohflex
    the report is founded upon the scope laid out by the auditor.
    based on paper documents.
    which is why it was said in press conference someone fed up why previous audits found nothing wrong.

    but of course !!!

    an auditor can at the outset decide he will not ask such and such questions
    he does not want to know. I repeat.

    he does not want to know.

    It is outside of the scope of his audit.

    serious wrongdoings are not recorded on paper for you to conveniently audit.

    will others be able to uncover criminal acts? wait and see.

    I think u are wrong. If we are talking about routine audit, then I got no say. But PcW was ask specifically to check for wrong doing over many times because of complaint. Yet they said everything was ok. Pcw failed to discharge their duties. Even Arthur Anderson has recommendation in their report which NKF ignore.

  9. #49

    Default Re: NKF issues revisited

    Quote Originally Posted by reachme2003
    he said mom is pressing charges, in consultation with ag's chambers. i do not think he said he is bent on taking (legal) action against them.

    he admitted that he was misled, along with other vvvips.

    I think the gov can consolidate all the charges. Police should be interested in NKF public deception with the patient figures. Quite serious as it is like swindling money. Similar to those on the streets prowling on old people for money claiming they are poor or representing a charity.

  10. #50
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    Default Re: NKF issues revisited

    Quote Originally Posted by vince123123
    I'm not an accountant or an auditor, but from the last few posts, what then is the role of an auditor? Rubber stamping audit approvals based on the management saying that everything is fine?
    I agree with you. Then on what basis government should trust the audit report that NFK is clean? Is it as good as the NFK tells Govt that it is clean?

  11. #51
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    Default Re: NKF issues revisited

    It takes 2 hands to clap - on the one hand, the chap at the helm got himself too much power and so started to abuse it. On the other, all the authorities, auditors and so forth simply missed out or overlooked it. So there you are, the result.

    We should not look at only Charitable Organisations, but there are many other NGOs collecting lots of funds. One example is some Churches that collects like 10% of the congregation's salaries, which could result in huge amounts. Another one is the Clan associations. Something could be done before we see another scandal.
    I love big car, big house, big lenses, but small apertures.

  12. #52

    Lightbulb Re: NKF issues revisited

    thank you for the paras and paras of legalistic case presented. sorry, i have not much interest nor desire to read them.

    the sentiments among us, lay people, is that they cannot reconcile what was presented to MOH after PwC and KPMG's audits(not the most recent one) and what has surfaced in the recent 'massive' audit. in the words of khaw, 'if we cannot rely on the professional (auditors), then who does one rely on?'.

    Quote Originally Posted by AEC
    The common misconception centred on the understanding or more precisely, lack thereof on what are the auditor’s duties and responsibilities.

    In the famous judgment on Kingston Cotton Mills (1896) more than hundred years ago, Lord Justice Lopes, perhaps unintentionally, shaped the very ethos of the audit profession for the next century by saying that :


    "It is the duty of an auditor to bring to bear on the work he has to perform that skill, care and caution which a reasonably competent, careful and cautious auditor would use.

    An auditor is not bound to be a detective or as was said, to approach his work with suspicion or with a foregone conclusion that there is something wrong. He is a watchdog, but not a bloodhound.


    Auditors must not be made liable for not tracking out ingenious and carefully laid schemes of fraud, when there is nothing to arouse their suspicion ...So to hold would make the position of an auditor intolerable."


    In the watchdog approach, the profession adopted a passive approach to an audit, together with an implicit presumption that the representations made by management could be and indeed should be relied upon.


    The current Auditing Standard requires auditors to be more proactive and “maintain an attitude of professional skepticism throughout the audit, notwithstanding the auditor's past experience about the honesty and integrity of management and those charged with governance” as it recognizes the possibility that a material misstatement due to fraud could exist.

    However, this standard does not require an auditor to be a bloodhound, it does seem to move well beyond the parameters of just being a watchdog.

    In the light of recent corporate debacles in Singapore, the audit profession appears to have been caught off-guard again and made a scapegoat or was it?


    In fairness, it will always be difficult for the auditor to detect fraud, particularly management fraud as the Auditing Standard focuses on the auditor’s responsibilities with respect to fraud and error in an audit of financial statements.

    Hence, the prevailing view remains that “audits are not designed to detect management fraud”.

    The primary responsibility for the prevention and detection of fraud and error rests with both those charged with corporate governance and the management of the entity.

    The Companies Act expressly requires directors of every company to present financial statements that comply with the prescribed Financial Reporting Standards (FRS) and also reflect a true and fair view of the profit and loss, as well as the state of affairs of the company as at the end of the period to which it relates [Sections 201(1A), (3) and (3A)].

    A director who fails to comply with these provisions would be liable upon conviction to a fine of up to $50,000 [Section 204(1)].

    Auditors are similarly required to state in their Auditor’s report whether the accounts comply with the FRS and give a true and fair view of the company’s profit and loss, as well as the state of affairs of the company [Section 207(2)].

    “True and fair view” is not an accounting criterion. Rather, it is a legal test, as set out in case law, which is essentially that the accounts must not mislead the members or other interested stakeholders.

    The accounts of each company must therefore pass a two-stage test. First, it should be prepared in accordance with and therefore comply with the FRS. However, compliance with the FRS is itself insufficient as it must also present a true and fair view, which is the legal test, to pass the second stage.

    Should the audit profession move beyond the passive philosophy (Watchdog Approach) espoused in the judgment of Lord Justice Lopes or be a master of its own fate and push a radical reform agenda (Bloodhound Approach) to improve auditing and assurance standards that will meet the interest of the various stakeholders?

    I believe that it would require a seismic shift in audit approach and coverage, thereby incurring higher auditing cost.

  13. #53

    Lightbulb Re: NKF issues revisited

    fundamentally, they are competitors.

    kpmg is doing "their share of national service" with regards to the scale and resources deployed in the latest audit. in the words of Ee, the massive audit would have cost $2 mill but kpmg is charging them $100K only. why?

    Quote Originally Posted by dkw
    Totally agree. Before the MOH lays into PWC, we need to know what the remit of the audit was. I'm really surprised that KPMG would be so critical of fellow professionals, knowing full well what the roles and limitations of a financial auditor are.

  14. #54

    Lightbulb Re: NKF issues revisited

    do you remember arthur andersen's role as auditors in Enron's? total disappointment in them.

  15. #55
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    Default Re: NKF issues revisited

    Quote Originally Posted by reachme2003
    do you remember arthur andersen's role as auditors in Enron's? total disappointment in them.
    Never more than agree with you bro.

  16. #56
    vince123123
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    Default Re: NKF issues revisited

    Agreed, the second checkers will always find ways to say the first checkers failed, to make themselves look good and their competitors look bad.

    Quote Originally Posted by reachme2003
    fundamentally, they are competitors.

    kpmg is doing "their share of national service" with regards to the scale and resources deployed in the latest audit. in the words of Ee, the massive audit would have cost $2 mill but kpmg is charging them $100K only. why?

  17. #57

    Default Re: NKF issues revisited

    i has agreed to some of cser's comment. but pls bear in mind tt there is a limit and scope of duties of auditors, they can possibly check and drill every single pcs of info all the time. but, this does not exempt them from exercising due care during their work. Dun think it is a fair comments to put all the blame on KPMG or AA or PwC.

    in NKF case, if the fraud is perpetrated by top mgt, there is even more difficult to be detected. mgt shld account for most of the blame for not having proper check and bal .

  18. #58
    vince123123
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    Default Re: NKF issues revisited

    Again I then wonder why have checkers who only rubber stamp?

    Quote Originally Posted by MuthuCurry
    i has agreed to some of cser's comment. but pls bear in mind tt there is a limit and scope of duties of auditors, they can possibly check and drill every single pcs of info all the time. but, this does not exempt them from exercising due care during their work. Dun think it is a fair comments to put all the blame on KPMG or AA or PwC.

    in NKF case, if the fraud is perpetrated by top mgt, there is even more difficult to be detected. mgt shld account for most of the blame for not having proper check and bal .

  19. #59
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    Default Re: NKF issues revisited

    Quote Originally Posted by earthlings
    I think u are wrong. If we are talking about routine audit, then I got no say. But PcW was ask specifically to check for wrong doing over many times because of complaint. Yet they said everything was ok. Pcw failed to discharge their duties. Even Arthur Anderson has recommendation in their report which NKF ignore.
    hi,

    well we live in an asian society
    and you know how it is.

    china, japan, korea, vietnam, thailand, cambodia, and india had thousands of years of imperial rule.
    somehow the experience of suffering and living under powerful centric rulers passed through the genes through the generations to all of us.

    I believe there were enough rules, "watchdogs" regulatory bodies, etc... etc... existing and in place long before the fiasco.

    Lack of coordination between regulatory bodies was the reason for failing to detect? Wow, quite creative.

    basically it boils down to this >

    When someone was still (pa****) of the charity during those years of abuses, who was in charge of the whole of Singapore at that time?

    Well in ancient China, chinese peasants do not audit and find that an institution (strongly supported by some one very close to the Emperor) had committed wrongdoings.
    It just cannot be done in ancient China. Period. Try it and you are in trouble.

    So in the creep's heyday, which auditor dares to "discover" something was wrong?
    Especially when people were trigger happy to sue (a classmate for heaven's sake!) even for casual spoken remark between two persons.

    Now it is different. The powers that be has given clear signals that they have distanced themselves from him.
    That it is now "open season" for hunting.

    So of course now auditors can suddenly find something not quite correct with the charity.

    I think someone commented that the "power" had gone to somebody's head. This observation is correct.

    The MOST frightening thing about this fiasco is that the "system" did not uncover and expose the wrongdoings. It was simply power drunkeness that led someone to over-reach and thus the whole thing got exposed in Court. Unlike simple individuals who were previously sued, SPH had the money, power and resources to carry out a full investigation to do battle with him in Court. If not for this, he would still be living a grand life and have high prestige. And all of us none the wiser.

    Las Vegas "study trip" !!!!! $77,000 !!! frittered away money donated by poor old ladies/ guys who stinge on their food to save.

    What did they "study"? The roulette wheel? The blackjack table? The Las Vegas showgirls?
    Of course 1st class air travel all the way.

  20. #60

    Lightbulb Re: NKF issues revisited

    with actual cases eg. enron, isn't it timely reminder to review their role? it would seem that the current role of auditors is inadequate.

    Quote Originally Posted by MuthuCurry
    i has agreed to some of cser's comment. but pls bear in mind tt there is a limit and scope of duties of auditors, they can possibly check and drill every single pcs of info all the time. but, this does not exempt them from exercising due care during their work. Dun think it is a fair comments to put all the blame on KPMG or AA or PwC.

    in NKF case, if the fraud is perpetrated by top mgt, there is even more difficult to be detected. mgt shld account for most of the blame for not having proper check and bal .
    Last edited by reachme2003; 23rd December 2005 at 02:13 PM.

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