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).
Issues Arising:
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?
