Alphabet A:

Accounting:

•       The recording, classifying, and summarizing of economic events in a logical manner for the purpose of providing financial information for decision making.

 Absense of causal connection:

•       An auditor’s legal defense under which the auditor contends that the damages claimed by the client were not brought about by any act of the auditor.

 Acceptable audit risk:

•       A measure of how willing the auditor is to accept that the financial statements may be materially misstated after the audit is completed and an unqualified opinion has been issued.

 Acceptable risk of assessing control risk too low (ARACR)

•      The risk that the auditor is willing to take of accepting a control as effective or a rate of monetary misstatements as tolerable when the true population exception rate is greater than the tolerable exception rate.

 Acceptable risk of incorrect acceptance (ARIA):

•      The risk that the auditor is willing to take of accepting a balance as correct when the true misstatement in the balance is equal to or greater than tolerable misstatement.

Acceptable risk of incorrect rejection (ARIR):

•      The risk that the auditor is willing to take of rejecting a balance as incorrect when it is not misstated by a material amount.

 Accounts receivable related balance-related audit objectives:

•       One of the major specific audit objectives used by the auditor to decide the appropriate audit evidence for accounts receivable.

Aged trial balance:

•       A listing of the balances in the accounts receivable master file at the balance sheet date broken down according to the amount of time passed between the date of sale and the balance sheet date.

 Accounts payable master file:

•       A computer file for maintaining a record for each vendor of individual acquisitions, cash disbursements, acquisition returns and allowances, and vendor balances.

 Accounts payable trial balance:

•       A listing of the amount owed to each vendor at a point in time; prepared directly from the accounts payable master file.

 Acquisition and payment cycle:

•      The transaction cycle that includes the acquisition of and payment for goods and services from suppliers outside the organization.

 Accrued liabilities:

•      Estimated unpaid obligations for services or benefits that have been received prior to the balance sheet date; common accrued liabilities include accrued commissions, accrued income taxes, accrued payroll and accrued rent.

 Allocation of the preliminary judgement about materiality:

•      The process of assigning to each balance sheet account the misstatement amount to be considered material for that account based on the auditor’s preliminary judgement.

 Adverse opinion:

•       A report issued when the auditor is of the opinion that the financial statement are so materially misstated or misleading as a whole that they do not present fairly the entity’s financial position or the results of its operations and cash flow in conformity with approved accounting standards

 Analytical procedures:

•      Use of comparisons and relationships to assess whether account balances or other data appear reasonable.

 Application controls:

•       Controls related to a specific use of IT, such as inputting, processing and outputting of sales or cash receipts.

 Application service providers (ASPs):

•       A third-party entity that managers and supplies software applications or software-related services to customers through the internet.

 Appropriateness of evidence:

•      The degree to which evidence can be considered believable or worthy of trust; evidence is appropriate when it is obtained  (1) from a relevant source (2) from an independent provider (3) from a client with effective internal controls (4) from the auditor’s direct knowledge (5) from qualified providers such as law firms and banks (6) from objective sources and (7) in a timely manner.

 Attribute:

• The characteristic being tested for in the population

 Attributes sampling:

•       A statistical, probabilistic method of sample evaluation that results in an estimate of the proportion of items in a population containing a characteristic or attribute of interest.

 Assessment of control risk:

•       A measure of the auditor’s expectation that internal controls will neither prevent material misstatements from occurring nor detect and correct them if they have occurred; control risk is assessed for each transaction-related audit objective in a cycle or class of transaction.

 Assessment inquiry:

• Inquiry to corroborate or contradict prior information obtained.

 Assurance services:

•       Independent professional services that improve the quality of information for decision makers.

 Attestation  service:

•       A type of assurance service in which the Chartered Accountant firm issues a report about the reliability of an assertion that is the responsibility of another party.

 Auditing around the computer:

•       Auditing without relying on and testing controls embedded in computer application programs, which is acceptable when the auditor has access to source documents in a readable form that can be reconciled to detailed listings of output or when sufficient non-automated controls exist.

 Audit assurance:

•       A complement to acceptable audit risk; an acceptable audit risk of 1% is the same as audit assurance of 99%; also called overall assurance and level of assurance

 Audit Committee:

•       Required to be established by listing rules for every listed company. The function is to implement and support the oversight function of the Board of directors. One of its many functions is to assist auditors to remain independent of management.The listing requirements also set out the minimum functions of the audit committee.

 Audit documentation:

•       The principal record of auditing procedure applied, evidence obtained, and conclusions reached by the auditor in the engagement.

 Audit failure:

•       A situation in which the auditor issues an erroneous audit opinion as the result of an underlying failure to comply with the requirements of auditing standards.

 Audit procedure:

• Detailed instruction for the collection of a type of audit evidence.

 Audit program:

•       List of audit procedures for an audit area or an entire audit; the audit program always includes audit procedures and may also include sample sizes, items to select and timing of the tests.

Audit risk:

•      The risk that the auditor will conclude that the financial statements are fairly stated and an unqualified opinion can therefore be issued when, in fact they are materially misstated.

Audit risk model:

•       A formal model reflecting the relationships between acceptable audit risk (AAR), inherent risk(IR), control risk (CR), and planned detection risk (PDR); PDR=AAR/(IR X CR)

  Audit sampling:

•       Testing less than 100% of a population for the purpose of making inferences about that population

  Audit of historical financial statements:

•       A form of attestation service in which the auditor issues a written report stating whether the financial statements are in material conformity with approved accounting standards

  Audit report:

• The communication of audit findings to users

  Auditing:

• The accumulation and evaluation of evidence about information to determine and report on the degree of correspondence between the information and established criteria

Asia Pacific Breweries (8/10/2007) announced in a statement that two of the four banks namely Mizuho Corporate Bank and Sumitomo Mitsui Banking Corporation have withdraw their claims pertaining to the commercial fraud case of its ex-finance manager Mr Chia Teck Leng. There is no discussion or settlement reached with the two banks.

APBS is confident that the Company has a good defence and has instructed its lawyers, Drew & Napier LLC, to continue to vigorously defend the claims by the remaining two banks which are Skandinaviska Enskilda Banken AB (”SEB“) and Bayersiche Hypo-und Vereinsbank Aktiengesellschaft ( “HVB”).

For those who are unfamiliar with this case, append below some details:

About the Company

• Asia Pacific Breweries is a public listed company in Singapore. It is a joint venture between Fraser & Neave group and Heineken. APB produces the Singapore’s popular Tiger Beer.

About the fraud

• Chia Teck Leng, a former finance manager at the brewery, conned the banks into giving him credit facilities by using forged signatures in the name of the brewery, and used the money to gamble at casinos.
• (a) Chia used forged certified extracts of board resolutions to cheat several banks over a period of four years, between February 1999 to March 2003 With the forgery, he managed to extend for himself credit and loan facilities in the name of APB, with him as the sole signatory.
• (b) Chia also forged signatures of top APB executives, like its chief executive Koh Poh Tiong, and then-Fraser and Neave’s managing director, Tan Yam Pin. Fraser and Neave owns 37.9 % of APB.

About the Accused

• Chia was an accountancy graduate who began his career at the, now-defunct accounting and consultancy firm, Arthur Andersen. He moved on, attaining several top positions in various companies including the post of assistant vice-president at the United Overseas Bank, a mergers-and-acquisitions manager at Jack Chia-MPH and a financial controller at Swire Pacific Offshore Services.

• He joined Asia Pacific Breweries (APB) on 20 January 1999 as its finance manager. APB is considered one of the region’s largest breweries with sales of $372.7 million and an after-tax profit of $38.6 million in 2001. The job required him to travel and paid him a tidy salary of between $200,000 and $300,000 a year.
• Chia(aged 44) lived with his wife, a teacher, and their two teenage sons in a St Francis Lodge condominium, off Serangoon Road.
• Chia had been a habitual gambler since 1994. By the time he joined APB in 1999, he was heavily indebted.
   

Accused Of

• Chia was arrested on 2 September 2003 by the Commercial Affairs Department.
• He was first charged in court on 4 September, on two counts, one of cheating and one of forgery involving S$3 million.He was first accused of cheating a Scandinavian bank, Skandinaviska Enskilda Banken (SEB) in February 1999 of giving him $3 million in credit. As investigations continued, more charges were levelled against him.By 11 September 2003, he faced eight new charges. He was accused of cheating four banks into giving him a total credit of about S$113 million; one Scandinavian bank, two Japanese banks, and one German bank. On 17 September 2003, 18 more charges were added on. These included new charges of money withdrawals from banks, such as US$25 million from SEB, and US$10 million from Sakura Bank. On 24 September, he was charged with four more counts of forgery. This time of opening a schedule of fixed deposit with Citibank, and transferring legitimate funds from APB’s OCBC bank account to the fictitious Citibank account.Chia faced 32 charges by the end of September.On 5 December 2003, 14 new charges were added to the existing 32, bringing the total number of charges against Chia to 46.
• In summary the 46 charges comprised 14 charges of forgery and 18 of cheating four foreign banks of about S$117 million, four charges of criminal breach of trust of S$53 million, two of money-laundering, and eight of abetting his girlfriend, Li Jin, to use a forged passport.

With these 46 charges facing Chia, he was ordered to stand trial in the High Court on 26 March 2004 in what is considered the biggest case of financial fraud in the history of Singapore.

Judgement

• On 2 April 2004, Chia was convicted by the High Court after pleading guilty to six charges of forgery and eight charges of cheating. Another 32 charges were considered during sentencing. High Court Judge Tay Yong Kwang sentenced him to 42 years in jail, the longest jail term ever given out for a commercial crime.
• In all, Chia had swindled the banks of more than S$117 million, losing S$62 million in casinos around the world. Only S$34.8 million has so far been recovered.
• In this sentence, Judge Tay( who have also presided in the other commercial fraud case by SIA’s employee, Teo Cheng Kiat) emphasised that bankers are eager to forge business relationships, and not be the unwitting victims of forgery.

(PS: previously, the worst commercial fraud case was held by Singapore Airlines’ employee Teo Cheng Kiat, who embezzled S$35 million from the airline for over 13 years. He was convicted in 2000 and jailed for 24 years for the crime.)

The Minority Shareholders Watchdog Group (MSWG) had stakes in 232 public-listed companies at the end of August, giving the body with the locus standi to attend shareholders’ meeting to protect minority interest.

MSWG chief executive officer Abdul Wahab Jaafar Sidek said:-

·       the group had taken proactive action by buying shares in certain listed companies so that it could attend the shareholders’ meetings as corporate representatives and participate actively as shareholders.

·       The criteria for the purchase of shares in selected listed companies included firms with issues raised by minority shareholders, companies subject to action by the regulatory authorities as well as those having a wide impact on stakeholders.

·        MSWG would also continue to attend shareholders’ meetings by way of proxies from minority shareholders.

·       The Shareholding Survey 2007, conducted in collaboration with Nottingham University Business School, was due for completion by the end of October. This survey covers all companies listed on Bursa Malaysia on June 30, 1997 and June 30, 2006, with the objective of identifying and comparing the demographic of shareholding, shareholding structures and value of the listed companies before and after the 1997 financial crisis.

·       As for the Company’s Meeting Survey 2007, it was expected to be completed by end-November. The survey, covering top 100 listed companies, is a collaborative effort between MSWG and Universiti Teknologi MARA. 

Megan Media Holdings Bhd, which had been hit by accounting scandals, reported an unaudited net loss of RM67.19 million for the first quarter ended July 31, 2007 compared with a net profit of RM13.45 million in the previous corresponding quarter. Announcing its results on Sept 28, it said ·        Revenue plunged to RM11.5 million from RM230.3 million a year ago.

·        Loss per share was 33.08 sen.

·        Compared with the fourth quarter ended April 30, 2007, the loss before taxation was reduced from RM1.38 billion to RM67.2 million largely due to the fact that significant write-off was made in the fourth quarter arising from the financial irregularities uncovered by the investigative audit.

·        Among the irregularities were fictitious trading creditors and debtors created by its subsidiary Memory Tech Sdn Bhd to overstate purchase and sales, and its financing of payments to fictitious trading creditors through bank debts.

·        On the prospects, the viability of the company and the group as a going concern depended “on the completion of a successful implementation of debt restructuring and regularisation plans”. Incidentally, the company has eight months, since June 19, 2007 to submit a regularisation plan to the relevant authorities. In a separate statement, it said that under Bursa Malaysia Securities’ listing requirements, it had to provide its audited financial statements for the financial year ended April 30, 2007 for public release within four months, which was on or before Aug 30, 2007. Failing to do so could result in its suspension.Meanwhile, the auditors of the company and its subsidiaries were still finalising the audit of the financial statements of the group for the financial year ended April 30, 2007. Upon completion of the audit, the company will release the audited accounts for the financial year ended April 30, 2007. [On Sept 21, Megan Media’s unit Memory Tech Sdn Bhd (MTSB) has been served a winding-up petition by Mayban Trustees Bhd in respect of a default on a total of RM472.83 million Bai Bithamin Ajil Islamic debts securities. The securities issued by MTSB were RM320 million primary bonds, RM112.27 million non-detachable secondary bonds and Hibah promissory notes of RM40.56 million. Following MTSB’s inability to honour maturing banking facilities, Mayban Trustees had issued a declaration of event of default on May 30, followed by a demand for payment of RM436.11 million on June 5, 2007.]

The Kroll Survey report(conducted by risk consulting company, Krol Inc) draws on a survey by the Economist Intelligence Unit of 900 senior executives worldwide, and examines the problem of corporate fraud, both for business in general and within particular industries. In the report, it revealed that:·        35% of the respondents in Asia believed that fraud was more prevalent.Four out of five companies have suffered from corporate fraud in the past three years, and particularly widespread is the theft of physical assets or stock, 

·   The widespread and more prevalent fraud is due to the more reliant on information technology, increased globalisation and greater interconnectedness. Earlies such information theft, various information technology (IT) crimes, and false reporting by asset managers were rarely seen 25 years ago;

·         Employee fraud remained a key concern in Singapore, as evident in the cases involving Asia Pacific Brewery’s finance manager Chia Teck Leng, and Singapore Airlines’ Teo Cheng Kiat.

·         Concern over fraud was highest in emerging markets, of which 49% of respondents saw fraud as having increased in India and 42% in China.

·         The average cost due to fraud to large global companies with annual revenues of more than US$5 billion (RM17.5 billion) was more than US$20 million, with about one in 10 losing more than US$100 million.

·         11% of Asia correspondents had lost US$100,000 in fraud, while 8% had lost more than a US$1 million.

·         Regional variations with intellectual property theft and counterfeiting were closely linked to countries rather than regions.

·         Among firms operating in China, 38% of respondents have experienced such fraud in the past three years. This figure for Singapore and Malaysia is only 15% and 9% respectively, well below the global average of 19%,;

·        More than 30% of global respondents believed that IT complexity had increased their exposure to fraud.

·        High staff turnover was rated the most frequent cause of increased exposure to fraud, followed by complex IT arrangements, entry into new markets and increased collaboration between companies.

·         In Asia, 40% of respondents said staff turnover had increased their company’s exposure to fraud and 25% cited weak internal controls,

·        The proportion of companies that had recently suffered from fraud in the Middle East and Africa was by far the highest.

·        60% of respondents in India and China saw themselves as vulnerable to bribery and corruption.

·        Emerging markets showed the lowest adoption of counter measures, with Latin America respondents showing the lowest level of adoption of due diligence on partners, clients and vendors.