There were deliberate attempts to falsify documents, create fictitious invoices (hence boosting revenues), use creative accounting entries to reduce expenses (hence inflating profits) and non-disclosure of related party transactions.
The main culprits which were named include Mr. Eric Tan (former Chairman), Mr. Eric Leow (Director) and Mr. Wee Teck Han (CFO).
Weak internal controls
Earnings management –manipulation of a series of accounting entries and/or adjustments; and use of false documents
Large volumes of related party transactions heightening the risk of fraud
Considerations by Auditors:
~ Did the auditors audit the related party transactions vigorously considering the significant amount and volume of related party transactions? Did they follow the requirements of SSA 550 Related Parties?
~ Did the auditors apply sufficient professional skepticism, especially when considering the risk of fraud, i.e SSA 240?
~ Did the auditors exercise Professional Competence and Due Care as required by Section 130 in the Code of Professional Conduct and Ethics?