Minister of State for Finance, Mdm Lim Hwee Hua said that Accounting Standards Board (ASB) will replace the Council on Corporate Disclosure and Governance (CCDG).

Effective Sept 1, 2007.

It will comprise key regulators, senior accounting professionals, and leading users of financial information.

Why the change?
Except for expanded responsibilities of issuing standards to cover entities such as charities, societies and co-operatives, I wonder why the need to change the name when essentially almost everything else remains unchanged.

Probably the name change is just that ie. to signify the addition of responsibilities.

Good night…

Need to up the profile of accountants.

Why? General increase in demand for accountancy services due to:-

• increasing regulation
• hot economy
• record levels of M&A
• adoption of international accounting standards

In Australia, there is only one accountant for every 4 job openings.

How to raise the x-factor in accountancy for the supply?
Besides the standards thrills and frills of bigger pay packages, signing on bonuses, etc etc etc,

• Hong Kong Institute of Certified Public Accountants (HKICPA), through its office in Beijing, will help to train 1,500 mainland accountants over 10 years.
• The most interesting idea of all – Institute of Chartered Accountancy of India (ICAI) want to add the prefix “CA” (ie. Chartered Accountant) to the names of all licensed CPAs ie. as per “Dr” for doctors.

So signing off now at 1.45am, CA Edgar Wong 🙂

Reference – Feb 2007, “Making Accounting Cool”, CFO Asia.

• To shrink its massive production capacities to match shrinking demand.
• To change their product lines of trucks and petrol-guzzling SUVs to producing smaller, more fuel efficient vehicles.
• To clear up its pension commitment to 38,000 employees.
• To remove 14,000 white-collar managers.

Our students are often asked, “What are the various financial statements?”

• Balance Sheet
• Income Statement
• Notes to the Account
• Cash Flow Statement
• Statement of Changes in Equity

• What are company’s relationships with important parties, such as customers, employees and suppliers?
• Are the products of company of certain quality?
• Are your employees committed to the company?
• What is the key source of future revenue and profit in a firm?
• What is the state of product innovation?
• What is the level of brand loyalty and strength?
• What is the level effectiveness of the board and top management?

Most of the white-collared executives surveyed in Europe said they would prefer to see more incisive information on their companies’ key non-financial drivers of success.

How to make such information on key non-financial drivers a reality?

• Set industry standards to measure these crucial drivers. Without such standards, reliability of such information would be a big concern.
• Coerce a mindset change in companies that non-financial measures do affect profitability. I believe the companies will get the message when the market reacts to such information compared across companies and industries.
• It is also important to have board members and executives who are knowledgeable about non-financial measures. In similar vein, the scope of auditing would expand too and will thus require the necessary expertise beyond accounting and/or auditing.

These non-financial measures would help us to see the company’s future prospect better.

Reference – “Inadequacies of Financial Statements”, Business Times, Michelle Quah, February 4, 2005.

Auston International Group’s former chief financial officer, Chua Peck Wee, 32, was sentenced yesterday to seven months in jail – for playing a part in the falsification of the company’s accounts four years ago. The charge carries a penalty of a fine and/or a maximum seven-year jail term.

Auston is a listed company in the education business.

What was the accounting falsification done?
The former CFO admitted to instructing its accounts staff to record a payment of $268,525 as ‘academic cooperation fees’ to the Upper Iowa University for FY2003.

This amount was actually a payment made by Auston to the University of Wollongong for university fees for FY2002.

What is the impact?
By falsely recording the amount as academic cooperation fees instead of university fees, Auston could capitalise it as a development cost and subsequently amortise the amount over three to five years from FY2003.

Essentially, Auston had avoided recognising $268,525 as expenses for FY2002. It increased the net profit for Auston’s IPO prospectus in 2003.

The ex-CEO said the ex-CFO had came up with the wonderful idea of smoothening out the expense. The ex-CFO said he was too weak to stand up against the ex-CEO’s demands.

Whatever the circumstances preceding the crime, you Mr ex-CFO had helped to pass the necessary entries. So you got to pay for it!

Reference – Jan 12, 2007, “Ex-Auston CFO gets seven months’ jail”, Business Times, Michelle Quah.

Subsequent to Ms Michelle Quah’s article on Xpress and its auditors, Mr Christopher Chong, Chairman, Audit Committee, Xpress Holdings Limited and Mr Mak Yuen Teen, director of Corporate Governance and Financial Reporting Centre NUS Business School presented their respective views on the Jan 9/10, 2007 respectively.

Mr Chong covered the following areas in his letter:-

• He said the statement that ” ‘problems’ began in Nov 2006 with the dismissal of Deloitte & Touche (‘Deloitte’)” is incorrect. He said the issue with Deloitte started in Sep 2006 and the committee reacted with increase allocation of resources to address those concerns raised. So Mr Chong, are you making an issue on the 2 month’s difference?
• The statement by Ms Quah that Deloitte ‘refused to pass the company’s accounts’ is wrong as per Mr Chong. From his response, I couldn’t see what is wrong with the statement. Yes I can read from Mr Chong’s letter that Xpress has taken steps to address the concerns of Deloitte. But I am also sure the brains in Deloitte must have taken all these into consideration before deciding not to complete the audit exercise.
• To be fair to Xpress, I note that it has secured help and endorsement from other experts such as RSM Nelson Wheeler in Hong Kong, KPMG Corporate Finance Pte Ltd and Foo Kon Tan Grant Thornton at an estimated cost of $500,000, in its effort to work with Deloitte.
• Mr Chong said he couldn’t understand why ACRA is not agreeable to the extension request. While I may understand that ACRA or any other governmental/business entities may take the position that it is not obliged to give you a reason for rejecting your application, we should however ask whether such position is good for the maturity of Singapore’s corporate scene.

Mr Mak, a recognised authority, in the field of corporate governance, came forward with the following views:-

• On the Xpress’ issue with its auditors, the shareholders should direct questions at the audit committee, who has the primary responsibility on audit matters. The committee should state its views on the matters raised by the auditors, and share any plans to do to address the concerns.
• On a more a macro level, he suggests that “shareholders carefully study the independence, expertise and activities of the audit committee of companies they invest in and ask more questions about it at AGMs. Companies should consider following higher standards on matters such as the independence, expertise and frequency of meetings of the audit committee…”

Well Jan 15, 2007 is the AGM for Xpress. Perhaps we will have more daylight on the issue after “the day after tomorrow”.

Till then, cheers.

Reference
– Jan 9, 2007, “Why Xpress changed auditors”, Business Times, Letter to the Editor.
– Jan 10, 2007, “Ask the Xpress audit committee”, Business Times, Letter to the Editor.

Deloitte & Touche, Xpress Holdings’ auditors, has refused to sign off on its FY2006 accounts. The company subsequently decided to sack the auditors.

The latest development is that ACRA has refused to grant it an extension of time – to get its accounts audited and hold its annual general meeting.

Why the refusal to sign off the accounts? Two main issues.
1. Precise Media Group (PMG)
Deloitte had doubts about certain revenue items recorded in the statements of PMG, and the cost of Xpress’s investment in PMG and the goodwill from the purchase, recorded in Xpress’s books. (Xpress had raised its stake in PMG in June, from 60 per cent to 100 per cent, in a $27.5 million deal.)

2. PMG’s internal control

What is Xpress’ position?
Xpress said they have tried to address Deloitte’s concerns.

Xpress then hired Foo Kon Tan Grant Thornton for a 2nd opinion on its financial results. Foo Kon concluded that ‘Deloitte’s observations are mostly correct’ but added that alternative evidence could be obtained to address those concerns. It was obtained.

Foo Kon ‘indicated its willingness to act as Xpress’s auditors’. Xpress proceeded to ask Deloitte to resign and moved to hire Foo Kon.

The AGM is slated for Jan 15, 2007.

As shareholders of Xpress, would you not be interested in asking Deloitte what have caused the “divorce”? Shareholders should also ask the new “bride to be”, why she would be willing to marry Xpress?

P/S – Edgar has got no shares in Xpress.