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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Shirley Yam
06 September 2014
It’s been such a depressing week. Let’s share some jokes.
And the best jokes are the financial figures of many mainland private enterprises, and the fact that some investors actually believe them.
Talk to any auditor or forensic accountant and he or she will tell you why. Here are a few real cases. Sales confirmation is where audit work begins before an initial public offering. Letters are sent to a company’s buyers to verify if it has indeed sold what it claims.
More than a decade ago, unsuspecting accountants trusted company management to post the letters seeking confirmation from buyers on their behalf. Unsurprisingly, many got burned by falsified confirmations.
Auditors began to post the letters themselves. Once again, they were cheated. How? Apparently some staff of companies planning listings kindly showed the auditor his or her way to the nearest mail box or office, which turned out to be a fake or a real office with a “fake” postman.
The auditors switched to couriers. By now, some of you will have rightly guessed that companies began to hire “actors” to dress up as courier men to collect the parcels.
The trick was uncovered in one case when some hundreds of confirmation letters, supposedly delivered by couriers and then purportedly returned by mail by buyers from all over the mainland were found to bear the chop of just one post office.
The logical response was for auditors to get their own staff to take the letters to the couriers’ collection points, listed on their official websites.
Sounds fool-proof? Not necessarily. In at least one case, the company got hold of the reference numbers for the parcels, tracked them down, recalled them, manipulated them and then posted them back to the auditor.
It’s no easy task. Think about getting dozens or even hundreds of men and women to bring falsified confirmations to various parts of the country so that they will bear stamps from different post offices on different days to make them look real.
Bank statements are another way to verify a company’s numbers. If the business is real, it should show up in their accounts.
But some auditors were met by “actors” dressing up as bank managers in real or fabricated offices. When auditors then resorted to online statements, other tricks cropped up.
The company’s finance officer would insist that the online statement be viewed in his office for security reasons. So under the eyes of the auditor, the officer would log on to his computer, key in the password to the account and show that every number was in line with his claims.
“In our case, it was uncovered by one of our junior staff who jotted down the website on the screen, searched for it in Hong Kong and found nothing,” said an auditor at a mid-sized firm.
When confronted, the finance officer said: “Oh, because of security concerns, it can only be reached by a computer within the mainland.” It was subsequently confirmed to be a fake.
How about site visits and stock counting to check the figures? Well, staging a robust business using workers, stock and even factories borrowed from friends is not unheard of.
When suspecting auditors began to hide outside factories to count the number of trucks bringing goods in and out, drivers were hired to run empty trucks around the clock. When some smart auditors uncovered lies from the shallow tyre prints of the trucks, stones and bricks were added to make it appear they were carrying products from the factory.
These tricks may sound crude and become obsolete as the mainland economy increasingly becomes digitised and transparent. The cat-and-mouse-style evolution of the scams, however, tells of unyielding determination and creativity in book-cooking.
This is because the returns are massive. Upon listing, one gets three things: the cash from the public offering; cheap bank loans by pledging the listing proceeds and a controlling stake.
At the same time, the penalties are minimal. After all, the Hong Kong regulators cannot throw you in jail unless you are stupid enough to cross the border or you have messed up with someone powerful.
Remember China Forestry, which was found to have cooked its books with falsified bank statements in 2011? No one has been penalised so far.