Professional Ethics

Topics: Auditing, Audit, External auditor Pages: 5 (1250 words) Published: June 12, 2013
BAC3654 PROFESSIONAL ETHICS TRIMESTER 3, 2012/2013

REPORT

Assignment:No.1

Former Transmile directors sentenced to jail and fined

ISSUES 1. The directors who are the members of the Audit Committee and members of Board of Directors commit fraud by submitting a misleading statement to Bursa Malaysia. “Two former independent directors of Transmile Group Berhad guilty for having authorized the furnishing of a misleading statement to Bursa Malaysia in Transmile’s ‘Quarterly Report on Unaudited Consolidated Results for the Financial Year Ended 31 December 2006’.” 

RECOMMENDATION Bursa Malaysia should check the financial statement at the first place before approve and establish it to the users. Bursa Malaysia can enforce companies to submit their audited financial report on every quarter so that they can easily compare them. Furthermore, any misstatement or misrepresentation could be easily detected. The reliability of the financial statement is important for the users since it can cause to misunderstanding and other bigger problem such as loss to the investors. In this case, the directors itself commit the fraud. This shows that they are not responsible as member of the company Board of Directors. Thus, in assisting the Board in carrying out its responsibilities, specific responsibilities should be delegated to the Board Committees, all of which have their written term of reference. The committees can have the authority to examine particular issues and report back to the Board with their recommendations. The fraud committed by the two directors is a serious offence done in a financing organization. Their service should be terminated when their action is detected. Other members of Board of Directors can vote to remove them. In practice, it can be quite difficult to remove a director by a resolution in general meeting. In many legal systems, the director has a right to receive special notice of any resolution to remove him; the company must often supply a copy of the proposal to the director, who is usually entitled to be







heard by the meeting. The director may require the company to circulate any representations that he wishes to make. Furthermore, the director's contract of service will usually entitle him to compensation if he is removed, and may often include a generous "golden parachute" which also acts as a deterrent to remove. However, directors may also leave office by resignation or death. In some legal systems, directors may also be removed by a resolution of the remaining directors (in some countries they may only do so "with cause"; in others the power is unrestricted). So, other members of BOD can persuade them to resign.

2. Unaudited revenue figures were reported to Bursa Malaysia. “The misleading statement was with respect to the unaudited revenue figures which were reported to the stock exchange for both the 4th quarter of 2006 as well as the cumulative period for 2006.”



Every Listed Company under Clause 41 of the Listing Agreement is required to furnish unaudited quarterly results on a quarterly basis in the prescribed format to the concerned Stock Exchanges within 45 days of the end of the quarter. Listed company has been given the option to furnish either audited or unaudited results within 45 days from the end of the respective quarter (other than last quarter). It is also stated that company that are ready with audited financial statement after 45 days after the end of the respective quarter will be able to disclose such results without bothering to first disclose unaudited results. The audited results shall be accompanied by the auditor report. However, it is better if the financial statements that will be submitted to Bursa Saham are audited by the internal auditor of Transmile. Internal auditor will follow all procedures before submitting the financial statement. As a public listed company, it is a

3. Company did not put higher priority to the



public...

References: (using APA Style: http://owl.english.purdue.edu/owl/section/2/10/): Issue no.1&2 Berhad, B. D. (n.d.). Annual Report 2004. Retrieved March 23, 2013, from bursamalaysia.com: http://announcements.bursamalaysia.com/edms/subweb.nsf/7f04516f8098680348256c6f0 017a6bf/95a07fbc831a19da482570150022a322/$FILE/BDB-CorpGov-DirectorsRptFinancialStat-ProxyForm%20(658KB).pdf Board of Directors. (2013, March 23). Retrieved March 23, 2013, from wikipedia: http://en.wikipedia.org/wiki/Board_of_directors Quarterly Audited/Unaudited Results and Limited Review By Listed Companies. (n.d.). Retrieved March 23, 2013, from wirc-icai.org: http://wirc- icai.org/wirc_referencer/Company%20Law/Quarterly%20Half.htm Issue no.3&4 By-Laws (On Professional Ethics, Conduct and Practice) of the Malaysian Institute of Accountants. Retrieved March 24, 2011, from: http://www.mia.org.my/handbook/bylaws_new/MIA_By_Law_revised_Jan_2011.pdf Deloitte, Audit committees for public interest entities. Retrieved 24 March, 2013, from: http://www.deloitte.com/assets/DcomIreland/Local%20Assets/Documents/Audit/IE_A_PublicInterestEntities_0910.pdf Issue no.5 Financial Reporting Standard 118. (n.d.). Retrieved March 23, 2013, from Malaysian Accounting Standard Board: http://www.masb.org.my/index.php?option=com_content&view=article&id=329: frs118-pg4&catid=6:masb-exclude-private
OTHER POINTS NOTED DURING CLASS DISCUSSION:
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