Based on the Transmile case, the external auditor have fail to meet the timely basis when they communicate to the Board of Directors. Directors of the company declined to meet with the media after the AGM. For example, selecting 60 samples from 10, samples will have less chance selecting the fictitious invoice and selecting samples from 10, will have more chance an auditor came to detect the fictitious invoice. Key-value item consists of item above the material level and non key-value item consist of item below the material level of the company. The external auditor should inform the board in a timely basis. The duo appealed against the decision but on Thursday, the Kuala Lumpur High Court upheld the conviction and sentence.
For tests of controls normally auditor will makes an assessment of the expected rate of deviation based on the auditors understanding of the relevant controls or on the examination of a small number of items from a population.
Uh-oh, someone has been very naughty here. The external auditor are able to identify the overstatement which will adversely affect the financial position of Transmile, however a written report was not submitted to the Securities Commission. Therefore, determining the materiality of a company during the planning of audit is very important. We will questioning why there are no have further action from the external auditor during the two and the half months period. The analysts should take the responsibility and think one step ahead of the effects that will cause if they publish their report.
The auditor shall select items for the sample in a way that each sampling unit inside the population have the chance to be choose. Usually when auditors have good faith in their clients due to long term relationship, they will tend to reduce the multiplier and risk of material misstatement. NICE, which manufactures and sells gold jewellery and ornaments, is also required to make a detailed announcement to Bursa to explain the reasons and effects, financial or otherwise, of the rectification. This is a departure from the FRS , the accounting standard that covers the recognition and measurement of financial instruments.
The issue was not immediately highlighted to the BOD. In the case of Transmile, since year , the internal controlof the company have been outsourced to Moores Rowland Risk Management Sdn Bhd. The Sept 4 announcement to Bursa says the SC sanctions against NICE include a reprimand, and a directive to rectify and reissue the audited financial statement and all quarterly results that came out subsequent to the issuance of the original audited accounts.
However, from the explanation of the ChalyMah Chee Kheong CEO Deloitte , we believe that external audit still performing inadequate of audit work in this case. If the risk of material misstatement RMM and multiplier of samples being reduce to relatively low, number of samples selected to be tested will be little too. In such circumstances, theauditor shall determine the materiality levels to be applied to those particular classes oftransactions, account balances or disclosures. Referring to the Section , there should be rotation of the partner and also the audit team in Deloitte to serve the Transmile Group Berhad. Rotation of the key audit partner and audit team beside to maintain the 28 independence and integrity, it is also for the purpose of maintaining the quality of audit work done.
Referring to the ISA , the effectiveness of the internal control will affected the level of sample risk of the audit procedure. During sampling test, it is divided into 2 parts which is key-value item and non key value item.
Meanwhile, investors were supposed to seek financial advice regarding the appropriateness of investing in the share assessed by the research house in its report. That will be the possible reason why Deloitte unable to discover the overstatement in year and year ISA Para.
However, from the explanation of the ChalyMah Chee Kheong CEO Deloitte , we believe that external audit still performing inadequate of audit work in this case. The following are the mistakes done by the analysts. This long-standing relationship could however to a certain extent pose the familiarity threats. But he has been very reticent on what has been described as the biggest accounting and corporate scandal in recent times in Malaysia, even likened to the accounting fiasco of Enron and Woldcom , although Ling is the Chairman of Transmile Group Bhd — the company which had overstated its revenue by RM million.
The potential factors should be solved as soon as possible so that the interest of the shareholders of the company can be protected.