F8: Answer for Audit Report

Dear Hard-working ACCA F8 Candidates,

Pleased to provide the answer below for your good reference.

Work HardER,
Marcus

Answer E for Question on Audit report
ISA 260: Reports to Management requires auditors to communicate with management over the following matters namely:
• Ethical threats discovered during the audit engagement that may question the Professional due care, independence, objectivity and integrity of the audit team members and/or engagement partner.
• Stating the overall scope of audit and its limitation especially highlighting reliance on client’s internal controls and the limitations of using sampling when performing Test of Details substantive test.
• Highlight the significance of accounting policies change impact on client’s presentation of accounts.
• Requiring significant audit adjustments. This means the item misstatements have exceeded AUDIT THRESHOLD.
• Significant disagreement with management on Financial Statements and/or Disclosures.
• Expected Audit Report Modification if management continue to REFUSE to make adjustments.
• Material uncertainties affecting the entity’s ability to continue as a going concern. Auditors require SOFP to be valued as a BREAK UP Basis.
• Highlighting the material weaknesses in entity’s internal controls.
• Highlighting the failure of entity to comply with laws, local regulations or stock market requirements.

Would you like to 'earn' (Unethically & Immorally) RM25million (US$8.34 million)?

Relevant to P1 and P7























Pic 01: Quiz: Which two directors are charged for corruption? One is from Singapore and another is a "Datuk". (Clue: Read the article below)

Pic 02: Profitable Monkey Business?


Dear ACCA Candidates,

We are all taught to calculate Risks and Rewards Balance. What if your spend 2-10 years in a business with some hardship of long ‘idle’ hours but assured of Returns based on no investment of RM26 million? Interested? Well, Malaysia Legal and Corporate Governance would afford your such opportunity. If caught, you get to spend 'idle' time in Sg. Buloh jail.

Two directors of a Public Listed company, Multi-Code Electronics Bhd, were accused of cheating the company of that amount. The punishment is… are you ready? – minimum 2 years imprisonment, extendable to 10 years with early discharge for good behaviour. Here is the unethical part, you only pay a fine of RM1 million and that is maximum! Yes, you get to keep the balance of RM25 million. Where is the justice? It seems that Malaysia is encouraging such ‘profitable’ business.

Is it any wonder the country became more corrupt from year 2009 to 2010? According to 2009, Malaysia is MORE corrupt than South Africa, Republic of Czechoslovakia and Casino Land Macau! Its positioned at 56. In 2010, it fell to position 59! The cleanest or least corrupt lands are New Zealand, Singapore and Denmark. Not surprisingly, these are dynamic vibrant economies. Yes, corruption kills businesses, economy and social livelihood.

Fortunately, ACCA instill ethics such as Professional Due Care and Integrity among its members. We hope you ACCA candidates will change the perception when dealing with business. After all, cheating millions is no different from a common thief. What is so great about that? Can you sleep soundly knowing you have destroyed lives of others? Can you smile when others praised you for your ‘success’? The only difference between humans and animals is we have ‘conscience’. If our answers to afore questions are we can sleep and smile, then we are no longer humans!

Work hardER and achieve through honest means to provide for yourself and family. Success is based on financial and non-financial factors like integrity, honesty and industriousness.

As for P1 (ACCA), there is serious failure in Corporate Governance.

As for P7 (ACCA), tremondous opportunity to conduct Forensic Audit.

Medidate on the article below.

Marcus

___________________________________________________________________________________________

Tuesday September 28, 2010
Ex-directors charged with CBT

KUALA LUMPUR: Two former company directors have been ordered to enter their defence on four charges relating to fraud and criminal breach of trust on Dec 20.
Sessions Court judge Jagjit Singh ruled yesterday that the prosecution had proven a prima facie case against both the accused Gordon Toh Chun Toh, 59, from Singapore, and Datuk Abul Hasan Mohamed Rashid, 67.

“I am satisfied with the oral and documentary evidence adduced throughout the trial that both the accused had withdrawn the fixed deposits belonging to Multi-code Electronics Industries (M) Bhd amounting to RM18.1mil,” he said.

For the criminal breach of trust (CBT) charges, the court was of the view, that based on the evidence as a whole, both the accused had dishonestly misappropriated a sum of RM26mil.

On March 13 last year, Toh was charged with defrauding Multi-Code, a manufacturer of automotive spare parts, by using the company’s money at Kenanga Investment Bank Bhd in Menara Pelangi in Johor Baru between March 26 and 27, 2007.

Toh, a former Multi-Code managing director, faces an alternative charge of committing criminal breach of trust of RM26mil belonging to the company at Jalan Kuning, Johor Baru, between March 23 and March 28, 2007.

Former Multi-Code executive director Abul Hasan is accused of abetting Toh in the offences.

If convicted for fraud under Section 87A(b) of the Securities Industry Act 1983 (Act 280), Toh and Abul Hasan could be fined a minimum of RM1mil and jailed for a maximum of 10 years.

They also face imprisonment of a minimum two years and maximum 20 years and whipping and can be fined if found guilty under Section 409 of the Penal Code for criminal breach of trust.

Deputy Public Prosecutors Nor Rifhan Raimi Rozi and Ahmad Faiz Munawar appeared for the prosecution. Toh was represented by counsel Kevin Joshua while Abul Hasan was represented by counsel Ng Aik Guan. A total of 31 witnesses took the stand.The case is fixed for hearing from Dec 20 to Dec 22.






Pic 03: What is Hobbes (Tiger) reply to Calvin's (Boy) Comments on corruption? Read "Post A Comment" section below


Sources:

1)The Star, 2010, Ex-directors charged with CBT, http://thestar.com.my/news/story.asp?file=/2010/9/28/courts/7111785&sec=courts, September 28
2)CPI, 2009, http://www.transparency.org/policy_research/surveys_indices/cpi/2009/cpi_2009_table, Date visited: 13th October
3) Multi-Code Electronics Annual Report, 2007.

Uncles Tans and Aunties Maggies that Never Learn

- related to F8, P1 and P7 ACCA students

























From Left to Right:
Pic 1: Uncle, got burned?
Pic 2: Perhaps I should listen to my ACCA son studying F8 on avoiding poor Corporate Governance firm?
Pic 3: Do you board a plane after knowing the pilots are negligent? What about Executives on Board?


In 2008, I highlighted in F8 classes the working tools of corporate governance involving External Auditors. (Please visit earlier blogs below). OilCorp executive directors were adamant on their accounting treatment for valuation of asset upgrades involvingi RM20 million in which auditor Baker Tilly disputed.

As shareholders, one will be wise to heed the 'check and balance' call from External Auditors. Surprisingly, Oilcorp berhad's shareholders were 'upset' with External Auditors for causing the fracas and resulting in shares sell down. You know what- shareholders in AGM voted to replace the External Auditors!! Whose duty it is to prepare Financial Statements? Why are auditors punished for highligting to shareholders on Executive Directors' negligence pertaining to accounts preparation?

Well, its proven that the highlight Corporate Governance in at work that the Executives have too much opportunisim and self interest resulting in poor execution of strategy.

Today its dying financially. Declared as PN17 meaning insolvent. Do you know what is the surprising shareholders reaction? Punters, investors mainly uncles and aunties are 'speculating' the stock. The company is at risk of defaulting payments to creditors. How much do you think a shareholder will get if it winds up? Zilch! Zero! Thus if its now at 3sen per share, its way too expensive to buy. Sighh... guess our investors never learn. Uncle Tans and Auntie Maggies that Never Learn the risks of investing in poorly governed company.

Read the article for your F8, P1 and P7 enlightenment.

Regards


News : Oilcorp suspended from Oct 12, faces delisting

PETALING JAYA: Trading in Oilcorp Bhd shares will be suspended with effect from Oct 12 and the securities of the company risk being delisted from the local bourse on Oct 14 unless an appeal is submitted to Bursa Malaysia within the stipulated timeframe.

The move comes after the PN17 (Practice Note 17) company failed to submit its regularisation plan to the Securities Commission or Bursa within the prescribed deadline.

According to a Bursa statement, financially-troubled Oilcorp will be given up to Oct 11 to file its appeal pertaining to the delisting of its shares. Any appeal submitted after that date will not be considered.

In the event Oilcorp submits its appeal within the timeframe, the removal of the its securities from the official list of Bursa on Oct 14 shall be deferred pending the exchange’s decision.

On the other hand, should Oilcorp be delisted, it would continue to exist as an unlisted entity.

The company would still able to continue its operations and business, proceed with its corporate restructuring and its shareholders can still be rewarded by its performance.

Oilcorp was supposed to submit regularisation plans to the regulators by Sept 22, but it had early last month requested for an extension of time until March 22, 2011, claiming that it was still in the midst of discussing and negotiating with its creditors.

Oilcorp was classified as a PN17 company last September because it failed to make an overdue interest payment amounting to RM1.6mil.

In addition, the company also could not provide the exchange with a solvency declaration.

Source:
The Star, 2010, http://biz.thestar.com.my/news/story.asp?file=/2010/10/5/business/7160219&sec=business, October 12.

Blog references:
http://marcusong88.blogspot.com/2008/08/auditors-appointment-professional.html
http://marcusong88.blogspot.com/2010/02/oilcorp-corporate-governance-works.html

S$3,000 (RM6,983) Monthly Salary Sustainable?

relevant to hardworking ACCA candidates



























Above pictures: Singapore. An Attraction?

Dear ACCA Candidates,

Yep, that's right. When you graduate from ACCA, RM6,983.00 per month pay is what you attract working in Singapore. That is without experience! But is it sustainable? Singapore has attracted more than 500,000 talents issuing them Permanent Residence. Now the locals are worried they were outnumbered, out-competed and outside the rapid Singapore economic growth. Thus the public dissent.

What a happy problem they have! Too many talents lead to further strong growth. Please refer to P3 (Business Analysis, ACCA) on Porter's Diamond Theory. There are every indication that the world's 9th richest economy will have stronger growth than even developing economies like BRIC Countries.

There are many Malaysian talents there, but they are invited to convert PR to Singapore citizenship, many declined as this means giving up Blue IC or Malaysian citizenship. Looks like Singapore is a place to 'harvest' earning much and return to Malaysian soil to retire.

What is the appropriate strategic move?
Continue invest heavily in time and efforts to optimally prepare your ACCA exams and GRADUATE. In Kasturi College, we have strong performance on number of graduates and some pleasant surprise seen in certain papers like F5 and F8. For example many scored more than 65% and above.

Work very hard and you will gain rich rewards (monetarily) and enjoy good stuff in Singapore like Sands, Universal Studios, World’s best restaurants concentrated in Orchard Road, addictive shopping malls like Takashimaya and the new One Orchard.

Read the following ‘happy problem of Singapore’.

Work HardER,
Marcus


New division to handle foreign talent

THE number of Singapore Permanent Residence (PR) applications to be granted this year will drop, due to the tightening of immigration criteria introduced last last year, said Mr Wong Kan Seng, Deputy Prime Minister and Minister for Home Affairs, in a written Parliament answer on Thursday.

Compared to 2009, where slightly more than half of the number of applications to the government were approved, Mr Wong replied that the number of PRs to be granted in 2010 will be noticeably lesser.

A total of 132,200 applications were received in 2009 and 2010. Out of 115,900 applications processed, 51 per cent were successful.

Mr Wong's response was in reply to Nominated MP (NMP) Assoc Prof Paulin Tay Straughan's question on the number of successful PR applications in the past year.

She also asked whether the fall in proportion of PRs is due to more stringent immigration policies and the implications of this restriction in the long term.

He explained that majority of those who were granted PRs were qualified under the Professional, Technical and Skilled Workers Scheme.

Others who were granted are dependants of Singaporean citizens or are dependants of these economic PRs.

The Minister added that the government will "continue to be stringent in our requirements for PR and that residency will only be granted to "those of sustainable quality".

"If we were to close our doors to immigrants tomorrow, we can expect the old-age support ratio to fall very fast.

"In short, we would still need immigration to make up for the shortfall of babies and help
ease the pressure of an ageing population," said the Minister.

Apart from immigration, the government has made extensive efforts to tackle declining birth rates to address the challenges of an ageing population, added Mr Wong.

Source: AsiaOne, 2010, Fewer PR applications to be approved, http://news.asiaone.com/News/AsiaOne%2BNews/Singapore/Story/A1Story20100916-237564.html, Sep 16

Ethical Dilemma : Should Batman kill the Joker?

- relevant to young, curious and energetic people
- relevant to P1 (PA) and P7 (AAA)
- don’t forget : rate this article by ticking the boxes below.
- Your comments are fun and insightful

























From Left to right:
Pic 01: Hey pal, time to change to anti-dandruff shampoo
Pic 02: Joker on wickedness, "I am ahead of the curve."
Pic 03: All dressed up for F8 class. A Battle, man.



Visit "Batman Dark Knight" video

Studies can be fun. In ACCA, don’t hesitate to apply to fiction or non-fiction scenarios. Even famed comic heroes have something to teach us. Now, I am not saying this is a green card to go cinemas at the expense of your responsibility to spend hours on end poring over books, lecture notes and question bank.

Just interesting to note that P1 appeals to our inbuilt morality, the need to do the acceptable thing. Here is one example – Batman.

For years, fans of the Batman comics have puzzled over a mystery at the heart of the series: why doesn't Batman just kill his arch-nemesis, the murderous Joker?

The two have engaged in a prolonged game of cat-and-mouse. The Joker commits a crime, Batman catches him, the Joker is locked up, and then invariably escapes.

Wouldn't all this be much simpler if Batman just killed the Joker? What's stopping him?


Should Batman kill the Joker?
Batman should kill the Joker.

How many of us would agree with that? Quite a few, we'd wager. Even Heath Ledger's Joker in "The Dark Knight" marvels at Batman's refusal to kill him. After all, the Joker is a murderous psychopath, and Batman could save countless innocent lives by ending his miserable existence once and for all.

Of course, there are plenty of masked loonies ready to take the Joker's place, but none of them has ever shown the same twisted devotion to chaos and tragedy as the Clown Prince of Crime.

But if we say that Batman should kill the Joker, doesn't that imply that we should torture terrorism suspects if there's a chance of getting information that could save innocent lives? Of course, terrorism is all too present in the real world, and Batman only exists in the comics and movies. So maybe we're just too detached from the Dark Knight and the problems of Gotham City, so we can say "go ahead, kill him." But, if anything, that detachment implies that there's more at stake in the real world - so why aren't we tougher on actual terrorists than we are on the make-believe Joker?

Pop culture, such as the Batman comics and movies, provides an opportunity to think philosophically about issues and topics that parallel the real world. For instance, thinking about why Batman has never killed the Joker may help us reflect on our issues with terrorism and torture, specifically their ethics.

Three major schools of ethics provide some perspective on Batman's quandary.

Utilitarianism
Utilitarianism, based on the work of Jeremy Bentham and John Stuart Mill, would probably endorse killing the Joker, based on comparing the many lives saved against the one life lost.

Deontology
Deontology, stemming largely from the writings of Immanuel Kant, would focus on the act of murder itself, rather than the consequences. Kant's position would be more ambiguous than the utilitarian's: While it may be preferable for the Joker to be dead, it may not be morally right for any person (such as Batman) to kill him. If the Joker is to be punished, it should be through official procedures, not vigilante justice. More generally, while the Joker is evil, he is still a human being, and is thus deserving of at least a minimal level of respect and humanity.

Virtue ethics
Finally, virtue ethics, dating back to the ancient Greeks (such as Aristotle), would highlight the character of the person who kills the Joker. Does Batman want to be the kind of person that takes his enemies' lives? If he killed the Joker, would he be able to stop there, or would every two-bit thug get the same treatment?

Taking these three ethical perspectives together, we see that while there are good reasons to kill the Joker, in terms of innocent lives saved, there are also good reasons not to kill him, based on what killing him would mean about Batman and his motives, mission and character.

The same arguments apply to the debate over torture: While there are good reasons to do it, based on the positive consequences that may come from it, there are also good reasons not to, especially those based on America's national character. Many Americans who oppose torture explain their position by saying, "It's not who we are," or "We don't want to turn into them." Batman often says the same thing when asked why he hasn't killed the Joker: "I don't want to become that which I hate."

Ethical Dilemma – Spiderman Perspective

- relevant to young, curious and energetic people
- relevant to P1 (PA) and P7 (AAA)
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Pic 01 Ethical Dilemma: Is Peter Parker morally obliged to be a superhero? (Image courtesy Marvel)

Spiderman, a Marvel Comic hero, is serious business both as box office smashing success and an ethical dilemma. Is it true that great powers come with great responsibility? Initially Peter Parker didn’t think so. Who cares is the attitude? Ethics will have it as “love your neighbour as yourself” and “Do unto others if you want others do unto you”.



"Philosophy starts with Socrates in the streets of Athens taking his message to the people and speaking in their language - agricultural analogies and common mythology." Through the centuries, though, philosophers retreated into academia, creating a convoluted vocabulary that can appear inaccessible to the average first-year university student - those "deontological" ethics for example.

Great power, great responsibility?
Superhero-based thought experiments can help people grapple with ethical dilemmas in an unsentimental fashion.








Pic 02: Great powers come with great responsibility?


Peter Parker's Uncle Ben told him that with great power comes great responsibility, an axiom that thematically recurs through the series (Image courtesy Marvel Entertainment)

Imagine for example, that you are Peter Parker (aka Spider-Man) and you have just discovered that you have superpowers. Do you have a moral obligation to use your new-found powers to help others?

The question to explore consequentialism, an approach to morality which, as the name suggests, judges the rightness or wrongness of an action based solely on its outcomes.

A consequentialist would be likely to argue that Peter Parker has a moral responsibility to be Spider-Man because that decision would bring about the greatest good.

But Peter Parker was also a talented scientist, so a non-consequentialist could argue that fulfilling his scientific vocation could be an equally valid choice for him. Perhaps being Spider-Man is above and beyond the call of duty - the answer is murky.















Pic 03: Consequentialists or Non-consequentialist approach?

The conversation does not end with superheroes, of course. Mr Robichaud of Harvard University encourages students to take the framework they have learned and apply it to decisions in their own personal and professional lives.

But he says it is a neutral way to start talking about ethical issues that people often find provocative or confronting.
"Ethics is one of those hard things to teach because for a lot of people the answers are very personal," Mr Robichaud told the BBC. "If you make it about artificial examples at first, then it allows people to think a little bit more safely and clearly about ethical issues."

Questions:
1) Is Peter Parker obliged to be a superhero?
2) Can he use the ill-gotten gains from villains to support his heroic work? Or he must work part time in pizza delivery?

Next article, I shall explore another superhero. Serious movie that sends our head spinning.

Source:
Katie Connolly, BBC News, Teaching philosophy with Spider-Man2010 12 August

British Petroleum : UK Governance at Play

- related to "7-11" P1 ACCA students
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Pic 01: Outgoing CEO (Forefront) with Incoming CEO (Background)

Watch the video on "Media Pressure" on BP.

United Kingdom’s strong governance at play with such effectiveness that USA President Obama has turned from anger to emotional appeal that British Petroleum giant oil company should stay and demonstrate repentance by cleaning up Mexico Gulf and contributing to American economy. Note the articles below on:

1. Governance tool: Transparency principle in that BP reveals action to shut the spill soonest within a week
2. Chairman’s tool: Through Nomination committee replaced the ineffective CEO
3. Chairman’s tool: As spokesperson for BP, met and appease USA President
4. Remuneration Committee: Set the severance pay for outgoing CEO
5. Media pressure a form of governance: Attention on the new CEO’s actions. Praises and encouragement for him
6. iNEDS tool: Have a succession plan in place. Deputy CEO considered the best choice for No.1 position.

RESULT: Share prices rebound by 37% since the departure of outgoing CEO. A neat piece of governance work safeguarding BP Shareholders’ interests!

Enjoy the following articles:
Article 01:
President Obama spoke yesterday with the chairman of the board of BP about their change in leadership, but BP CEO Tony Hayward's departure is "immaterial" to the company's obligations to the Gulf Coast in the wake of the oil spill, a White House spokesperson said today.
"The key is that BP can't leave and should not leave the Gulf," White House Press Secretary Robert Gibbs said at a briefing. "I think that's the viewpoint of everyone that's involved here, that they have obligations and responsibilities as the responsible party in this instance that have to be met, regardless of who the CEO is or who the chair of the company is."
BP announced Tuesday that embattled CEO Tony Hayward would step down from his position on October 1, and his American deputy, Bob Dudley, would take his job.
When asked by the British press whether his ouster was fair, Hayward replied, "Life's not fair," and said he was forced to leave because he was demonized by the American media. He also said he may be "too busy" to attend American hearings on the oil spill.
"What's not fair is what's happened on the Gulf," Gibbs responded today to the remarks. "What's not fair is that the actions of some have caused the greatest environmental disaster that our country's ever seen."
He added, " don't think that a lot of people in any country are feeling overly sorry for the former CEO of BP."

ARTICLE 02
British oil giant BP announced Tuesday morning that embattled CEO Tony Hayward would step down from his position on October 1, and his American deputy, Bob Dudley, would assume to top job.

In a statement accompanying its earnings update on Tuesday, BP said the decision was made by "mutual agreement."

The company said Dudley would be based in London when he takes up his appointment and will hand over his present duties in the United States to Lamar McKay, the chairman and president of BP America.

The newly named CEO said Tuesday his top priority would be sealing the company's blown oil well for good, and cleaning and restoring the Gulf of Mexico.

Hayward has been slammed by U.S. officials - including President Obama - for his handling of the Gulf oil spill.

Hayward is the bone being thrown to the angry dog of public opinion, reports CBS News correspondent Mark Phillips.

And as sacrificial lambs go, Hayward is an expensive one. Phillips reports the golden handshake from BP will involve a year's salary of $1.6 million, a pension worth roughly another million dollars every year, and BP shares that could be worth many more millions -- if the company's stock price recovers.

BP said Tuesday the company was allocating $32.2 billion to cover the costs of cleaning up after the spill and compensating the thousands of Gulf Coast residents put out of work by the waves of crude oil. The company said it would sell $30 billion worth of assets over 18 months to help foot the bill.

The cost figures were released along with BP's quarterly earnings report -- a record loss of $17 billion for the second quarter.

SOURCES:
Stephanie Condon, 2010, Obama Talks to BP Chairman About Hayward's Ouster,
http://www.cbsnews.com/8300-503544_162-503544.html?keyword=Tony+Hayward&tag=contentMain;contentBody, July 27

CBS NEWS BUSINESS, 2010,BP Confirms Tony Hayward Out, Bob Dudley In,http://www.cbsnews.com/stories/2010/07/27/business/main6716254.shtml?tag=contentMain;contentBody, July 27