TWO former senior employees of UOB Kay Hian Private Limited (UOBKH) were charged on Wednesday for allegedly lying to the Monetary Authority of Singapore (MAS) in relation to reports on a then Catalist aspirant. Lan Kang Ming, 38, and Wee Toon Lee, 34, each face three charges of providing MAS with false information in October 2018 in relation to due diligence reports on an unidentified company applying to list on the Catalist board of the Singapore Exchange. MAS said in a media statement on Wednesday that it was performing an onsite inspection of UOBKH between June and August 2018, to assess the latter's controls, policies and procedures in relation to its role as an issue manager for Initial Public Offering (IPOs). During the examination, Lan and Wee were said to have provided different versions of a due diligence report relating to background checks on a company applying to be listed on the Catalist board of the Singapore Exchange. UOBKH had acted as the issue manager
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Reuters
02 June 2011
A rash of Chinese accounting scandals has raised questions about whether audit firms are doing enough to detect fake money trails and confirm companies’ cash, the most basic number that auditors are supposed to check.
The risks in auditing bank balances came to the fore last week when Longtop Financial Technologies Ltd, a Chinese software company with shares listed in the US, said that its auditor had resigned amid questions about its cash.
In its resignation letter, auditor Deloitte Touche Tohmatsu CPA Ltd said that it found falsified financial records and bank confirmations and that its audit opinions for Longtop should no longer be relied on.
Deloitte - which declined to comment for this story - has not been accused of wrongdoing, and accounting experts said that it did the right thing by insisting on more verification of Longtop’s bank balances and resigning when it failed to get them.
Even so, questions have been raised about whether auditors need to beef up procedures for confirming bank statements. Cash is the lifeblood of any company, and bank balances have figured in a number of recent Chinese accounting scandals.
Many Chinese companies have found it easier to get a listing in the US than on Chinese exchanges. Yet they have fallen through a regulatory loophole, partly because US audit inspectors have not been allowed inside China where the audits are done. Accounting problems often come to light only when short- sellers target these companies, posting negative research and profiting when a stock falls.
Some veteran auditors who have worked in China said that extra diligence can catch some of the kinds of trickery being alleged. Electronic confirmation of bank balances, used in many parts of the world, could also provide more safety, accounting experts said.
Most frauds eventually get reflected in misstated cash balances, said Paul Gillis, an accounting professor at Peking University in Beijing.
‘If a company is reporting false revenues, the fraud is usually first covered up in accounts receivable,’ Prof Gillis said. ‘But in time, that balance will become too large and the fraud becomes obvious, so the amount is moved to cash.’
Since March, more than two dozen China-based companies have disclosed auditor resignations or accounting problems, according to the Securities and Exchange Commission (SEC). Many of those cases involved difficulties in confirming cash or accounts receivable, according to an April 27 letter to a Congressional subcommittee from SEC chairman Mary Schapiro.
An SEC task force is probing accounting at US-listed foreign firms.
Auditors often confirm bank balances by sending a confirmation form to the bank, but they are supposed to go further if they see red flags. Given all of the accounting problems in China, some auditors routinely do much more.
‘When you’ve got an item on the balance sheet that significantly impacts the net worth, you have to go through more than just your typical procedures to assure that you have confirmed the right balance,’ said Steven Levey, chief executive officer at GHP Horwath.