Saturday, 28 June 2014

Living the spirit of Ramadhan

Let us be honest with ourselves. When the month of Ramadan is mentioned, what do we picture in our minds?

While many would be thinking about refraining from food and other undesired behaviours, many others would be looking forward to the verity of food and desserts, sold at Ramadan bazaars as well as at hotels and restaurants which offer special fast-breaking deals.

While many would expect to eat less as Ramadan is about submission to Allah and appreciating the sufferings of those who are not that fortunate, surprisingly it is also a period where many Muslims would be consuming more food than other months. What could happen is the timing for breakfast, lunch and dinner are re-arranged? On top of that, people are naturally attracted to buy more than what they need when preparing for the fast-breaking.

To Muslims, Ramadan is a month full with blessings. The fast performed during the days will rewarded with blessings, forgiveness and salvation from the hellfire, if the fasting is performed honestly with the sole purpose of attaining the pleasure of the Creator of the Heavens and Earth. During night time, special prayers are offered and other specific deeds would earn multiple rewards compared to normal months. This is the reason why extended fast-breaking events may deter Muslims from exploiting opportunities available during Ramadan.

As what happen to other major activities in our society, slowly simple and meaningful events are turned into commercial opportunities. Once corporates start to turn Ramadan into a commercial exploitation opportunity, its meaning and values are slowly eroded. That is why to some of us, Ramadan is more about having more food rather that the opposite!

Things will be more commercialised towards the end of Ramadan when Muslims are starting their preparation to welcome Aidil Fitri. Ironically, the last ten nights of Ramadan is when Lailatul Qadar will occur. This is a night where any deed is rewarded as if it is performed over 1,000 months. Given the commercial attractions, many may not be able to concentrate of their prayers but busy shopping for cloths and other necessities for the forthcoming festivities. A miss opportunity?

At the end of the day, how we approach Ramadan is dependent on our honesty to seek the pleasure of Allah and using all the opportunities during Ramadan to be closer to Him and obtain his forgiveness. Once this is lost, Ramadan is all about hungry, food and shopping. The choice is with you and me.

Saturday, 31 May 2014

Who Got Talent?

Ask any leader of organisations on matters which concern them and the chances are talent would be high on their list. It is amazing that in the world where information is readily available and educational institutions are mushrooming, recruiting and retaining talent appears to be one of the key challenges faced by organisations. This is not a phenomena faced by Malaysia alone, many countries around this region are having the same challenge, notwithstanding the strength of their currencies.

Where have all the talents gone?

Maybe I can start by considering talents at the entry point, the graduates. Despite the differences in approaches taken by organisations in assessing talents, the top scorers would certainly be preferred. However, this group would be only around 20% of graduates entering the job market. Most of the time, the kind of employers who are able to recruit these top talents would be large organisations which have allocations to train and nurture the talents that they recruited.

What will happen to the rest? For those who are at the bottom 20%, regretfully, they would find it difficult to be employed. Those who are stuck at the middle, on the other hand, may ended up with less resourceful employers which may not have comprehensive programmes for talent development.

We could see from the above the kind of "mis-match" between skills and competencies and further talent development. Those who are good will be further nurtured which those who displayed moderate results may not be provided with the same opportunities. Perhaps this is none of the reason organisations which employ graduates from the middle segment would be complaining about the "quality" of graduates without admitting that they themselves may have not made adequate investment in their own people. Organisations at the end of the scale would only be able to employ the remnants of students, based on their inferior grades. I am sure you would be able to anticipate the outcome of such situation.

We may have also heard about the issue relating the quality of graduates. Depending where you are on the supply chain, this issue could be viewed in many perspectives.

Employers would always demand for the best, which to my mind is rightfully so given that through their organisations, economic activities are created, which eventually contributing to our economic growth and providing employment opportunities. On the other hand, those at the institutions of higher learning may not necessarily share the view that graduates that they produce should serve the need of industries. They would argue that our education policy is a holistic one which attempts to equip graduates with knowledge and humanistic values, not necessarily serving the need of employers. 

I do not see any problem with the two views. The only question that I may want to ask is why those who are nurtured to have both education and values could not adjust quick enough when they are employed? In fact, many employers would be complaining about the graduates' thinking' and problem solving skills. I am not sure whether thinking and problem solving are not part of the holistic policy? Or, could it be that the standard set is pitched towards the standard of thinking and problem solving of their educators?

As a taxpayer, I would certainly like to see that money that I contributed towards nation building is well spent. Since many of our institutions of higher learning are funded by public funds, they should not ignore the expectations of people who are funding them, the Rakyat!

Employers should also play their role in nurturing talents and cannot expect all graduates posses knowledge, skills and values which fit exactly with their requirements. For the accountancy profession for example, many accountancy firms will require their staff to complete professional accountancy qualifications, to ensure the baseline standards for accountants are achieved. This is not cheap as it requires investments in terms of money, time and efforts in the form of guidance and mentoring. However, the outcome of such investment would certainly make them more effective and competitive.

Graduates should not expect employment as something which does not require them to further work on their competencies. At the early stages of employment, the focus would be on skills and competency development. At the later stages, their management and leadership skills will determine how far they can grow in the organisations.

I suppose the talent issue will remain with us for a long time. However, this should not deter organisations to review the processes which they deploy to develop talents. Graduates should also not expect everything would be given on silver platters, they need to work harder to fit into the organisations which employ them.

Tuesday, 13 May 2014

AOB Annual Report 2013: Oversight focus on internal monitoring systems

Audit firms are reminded to perform the necessary audit procedures to evaluate whether the overall presentation of the financial statements is in accordance with the applicable financial reporting framework, according to the Audit Oversight Board (AOB) in releasing its fourth annual report.
The report highlighted that while the presentation and disclosure of financial statements is the management’s responsibility, there are specific ISA requirements that need to be adhered to by auditors.
The AOB Annual Report 2013 has captured its oversight focus in the past year on activities that reinforced the quality control system of audit firms in Malaysia and encouraged best practices which enhance the quality of their audit work.
The oversight board’s inspections activities stressed on key elements including the tone set by leadership of audit firms, consistency of performance of partners within an audit network and the effectiveness of their internal quality monitoring systems.
Audit firms’ internal monitoring processes were given added focus during inspections to allow AOB to have a better picture of their scope, implementation and effectiveness. In his Chairman’s statement, Nik Mohd Hasyudeen Yusoff, Executive Chairman of the AOB said, “Based on our findings, we believe audit firms need to enhance this component of their quality control procedures to ensure better effectiveness.”
AOB’s 2013 Annual Report also lists down potential root causes to audit deficiencies for major firms.
Lack of resources due to continuous high attrition rate, amount of involvement and insufficient supervision and direction by engagement partners, failure of the firms’ monitoring control mechanism to surface relevant issues and lack of application of professional scepticism in evaluating audit evidence continue to be top potential issues.
Meanwhile, the potential major root causes in other audit firms were weak messages on audit quality by their leadership, lack of understanding of the business of audit clients, inadequate technical competencies in both accounting and auditing, insufficient technical support to safeguard audit quality which includes consultation process and internal monitoring reviews, lack of application of professional scepticism in evaluating audit evidence; insufficient involvement, supervision and direction by engagement partners and ineffective Engagement Quality Control Reviewer (EQCR).
“More honest and holistic approaches in identifying root causes and devising appropriate remediation plans to address the actual drivers of the deficiencies would strengthened audit firms’
system of quality control, and position audit firms in better footings.,” Nik said.
In enforcing auditing standards the AOB took enforcement actions against 6 auditors in 2013, mainly for their failing to comply with the requirements of auditing standards in the performance of their audit.
“While the AOB has always been focusing on working with audit firms to enhance their performance, we would not hesitate to take enforcement actions against serious deficiencies and breach of ethical conducts which will affect confidence on the audited financial statements in Malaysia,” Nik said.
The report also found that audit fees charged by top 10 audit firms had increased by 6% and 9% in 2011 and 2013 to compensate for the increase in salary cost which rose 18% and 13%, respectively, in both years, and an increasing trend has been observed in audit fees since 2010.
The AOB was set up by the Securities Commission in 2010 to oversee the auditors of public-interest entities (PIEs), protect investors’ interest and promote confidence in the quality and reliability of audited financial statements of PIEs.
In 2013, the number of audit firms registered with the AOB went down to 53 in 2013 compared to 67 in 2012. However, the number of registered individual auditors has gone up from 293 compared to 302 in the previous year.
The AOB 2013 annual report can be downloaded here

Saturday, 26 April 2014

A Close Encounter With the Power That Be

I was prepared for the worst based on the information that was related to me by friends. Long queue, being throughly scrutinised and even being denied entry. To my relief, none of that happened. Our flight was the first to arrive on that Saturday morning and I cleared immigration and custom within half and hour. I was then on the soil of the United States of America!

Given that my hotel room was not ready, I had around 5 hours to kill. This worked quite well as I had the time to explore Washington DC, one of the most powerful capitals of the world where many decisions were made that affected millions of lives elsewhere around the planet. The weather was very kind, the sun was shinning and it was right in the middle of cherry blossom, something which I did not appreciate until I saw the nice beautiful flowers around the Tidal Basin.

My first stop was the White House, the residence of the President of the United States of America. Incidentally on the plane, I watched the movie The Buttler, a recollection of experience of a black American who served a number of American Presidents even before blacks were treated equally in the United States. That certainly helped me to appreciate the 1600 Pennsylvania Avenue better. I picked up few souvenirs from the shop besides White House. That allowed me to take few photos as if I were the most person in the world.

The White House
Am I this powerful?
Next was the Smithsonian Complex where all the interesting museums are located. The Smithsonian's National Air and Space Museum was my choice as I have been interested in planes since I was a kid. It was a very interesting place to visit as we are able to see the development of aerospace industry since the Wright Brothers tried to fly for the first time.

The space capsule at the Smithsonian's National Air and Space Museum
The museum is not that far from Capitol Hill, the symbol of American democracy. While the building was certainly elegant, the politicians and lobbyists  who make this place their first home were not visible from afar. Nevertheless, buildings located around the park are not only historically significant but are still influencing the lives of people who may be living thousands of miles away. This is where power is concentrated!

The Capitol Hill
My visit was perfectly timed when the Cherry Blossom Festival was celebrated. The flowers around the Tidal Bay was certainly beautiful and the number of visitors who were there to experience the occasion was amazing. to a certain extend, it camouflage the atmosphere of power in Washington DC, very deceiving indeed.

In the next few days I met a number of individuals who had strong influence in DC and the rest of the world. One of the person who I met was Senator Sarbanes, the co-writer of the Sarbanes and Oxley Act which created the Public Companies Accounting Oversight Board, a structure which influences audit regulation until today.

I did not miss the opportunity to experience the american past time activity, enjoying a baseball game where the Washington Nations was playing. I could observe how sports and leisure intersected especially how much hotdogs and burgers were consumed during the game. Unfortunately we left the game venue at the seventh inning, when one of the players hit a grand slam at the very next!

Cheering the Nations
My stay was certainly a great opportunity to provide me with the insights of the American way of thinking, especially in a place where many major decisions were made and will continue to be made which affect us, a place well remote from Washington. There are also many universities and institutions in Washington, which reflect the amour of intellectual power as well. It is not a surprise to me that such existence may be necessary given the kind of community which Washington attracts.

In summary, my first encounter with the place where the power that be are operating was a very pleasant one.

Saturday, 19 April 2014

IFIAR 2013 Global Survey on Inspection Findings

Washington, DC, April 10, 2014 – Audits of public companies around the world suffer from persistent deficiencies in critical audit areas, raising increasing concern among international audit regulators, the International Forum of Independent Audit Regulators (IFIAR) reported today.
“The high rate and severity of inspection deficiencies in critical aspects of the audit, and at some of the world’s largest and systemically important financial institutions, is a wake-up call to firms and regulators alike: More must be done to improve the reliability of audit work performed globally on behalf of investors,” said Lewis H. Ferguson, IFIAR Chair and Board member of the U.S. Public Company Accounting Oversight Board.

Report on Inspection Findings

IFIAR’s Report on 2013 Inspection Findings Survey summarizes key inspection results from audits of public companies, including systemically important financial institutions, submitted by 30 IFIAR members. These results came from inspection reports issued during the members’ most recent annual reporting periods that ended by July 2013.

  • The leading areas of deficiency in inspected audits of listed public interest entities, or public companies, relate to auditing fair value measurements; internal control testing; and procedures to assess the adequacy of financial statement presentation and disclosures.
  • The leading areas of deficiency in audits of systemically important financial institutions, including global systemically important banks, relate to auditing of allowance for loan losses and loan impairments; internal control testing; and auditing of the valuation of investments and securities.
  • Audit firms' own quality control systems had the highest number of inspection findings in the areas of engagement performance; human resources; and independence and ethics requirements.
“The survey makes clear that these important inspection findings are prevalent across many nations and firms,” said Chair Ferguson. “IFIAR has an important role to play in monitoring and promoting audit quality across borders.”

Inspection findings are deficiencies in audit procedures that indicate that the audit firm did not obtain sufficient appropriate audit evidence to support its opinion. Most of these findings are consistent with the results of IFIAR’s inaugural survey issued last year, although the survey does not provide an adequate basis for year-to-year comparison of the quality of audit performance.

The findings discussed in the survey are primarily from inspections of audit firms affiliated with the six largest international audit firm networks, which are BDO International Limited, Deloitte Touche Tohmatsu Limited, Ernst & Young Global Limited, Grant Thornton International Limited, KPMG International Cooperative, and PricewaterhouseCoopers International Limited. In many cases, a regulator’s response to an inspection finding is to require the audit firm to perform additional procedures necessary to complete the audit satisfactory.

Root-Cause Analysis Needed

Measures undertaken by IFIAR to improve global audit quality include meetings with global network firm leaders to discuss inspection results and actions the firms will take to show demonstrable improvement in audit performance; and using the survey results in members’ home countries to inform their respective inspection and standard-setting activities.

In its meetings with global audit firm leaders, IFIAR expects the firms to provide information about the results of root-cause analyses, the performance measures used to assess progress, and whether measurable improvements are being made. The global network firms with which IFIAR meets have agreed to provide such information.

“The firms should develop robust root-cause analysis to gain a clearer understanding of the factors that underlie inspection findings and to take appropriate remedial actions,” said Janine van Diggelen, IFIAR Vice Chair, and Head of the Audit & Reporting Quality Division at the Netherlands Authority for the Financial Markets.

“Only with a thorough understanding of the underlying factors that have led to findings can audit firms take appropriate measures. These measures should be aimed at improving their auditing techniques, as well as their oversight policies and procedures, but also consider the cultural and behavioral influences in the firms that were relevant to the deficiencies. Both audit firms and regulators must do more to improve audit quality,” added Vice Chair van Diggelen.

In monitoring the firms’ progress in these areas, IFIAR hopes to gain insight into whether the firms are successful in addressing firm-wide issues and, accordingly, promoting consistency in the execution of their audits.

A fact sheet on the 2013 survey also is available.
page2image22584 page2image22744

IFIAR is comprised of 50 independent audit regulators from jurisdictions in Africa, the Americas, Asia, Europe, the Middle East and Oceania. It was formed in 2006 to provide a forum for regulators to share knowledge of the audit market environment and the practical experience gained from their independent audit regulatory activity.
IFIAR publishes the results of its surveys to inform regulators, investors, the financial community, and the public about the current state of inspections of audits of public companies, including financial institutions, around the world. For further information about IFIAR and its activities, visit