Sunday, 1 January 2017

Fine To Be Honest

First of all I would like to wish everyone a happy new year and may 2017 be a year where we could regain our pride being citizens of this country.

While a new year would certainly brings hope and aspiration to most of us, we may not be able to change our surroundings if we do not remediate the root causes of the problems which we face as a country.

To me, it is all about the failure of us, as individuals, as families, as a society and as a country to demand and appreciate honesty. Given our natural tendency to be susceptible to our own selfishness and self-interests, we tend to overlook and compromise on abuse of powers and corruption as long as our lives are not badly affected. Worse, if we are also part of the those crimes and are benefitting from them!

So, my aim for 2017 is to convince as many hearts as possible to appreciate honesty and integrity. It would also be nice if we could re-shape our society to only accord positions and power to individuals who are capable, smart, honest and act with utmost integrity. This could be just a wish but if we do not try and promote these values how are we going to tell our grandchildren about our roles in making this country great again.

I trust all of us would be doing something to change the ways we look at success. I believe being a society which uphold values such as honesty and integrity would make this country a more resilient one in facing many challenges which are anticipated in 2017. So, please, demand honesty and integrity.


Saturday, 24 December 2016

2016 Solo Photos To Recap The Year


I left the Audit Oversight Board and the Securities Commission into the next phase of my life which some people told be to be portfolio career. While I managed to take things easy for a while, the appointment to a number of boards got me to be busy again.

The photos in this video are the solo photos of mine, arranged in sequence of the relevant events. They do not cover my whole activities for the year but provide a fair recap of the year when my career path changed again.

One Morning At Mount Bromo

This was my second time in Surabaya, a city located at the east of Jawa Island in Indonesia. The first time I was in this city was many years ago on an official duty for the Malaysian accountancy profession, hence I did not have much time to spend to explore Surabaya. This time around I was on holiday.

Surabaya got its name from the combination of two animals' names, Suro, which appears more like a shark to me and Boyo, simply crocodile. The two creatures are also embodied as the monument of the city.

The highlight of this trip for my visit to Mount Bromo, an active volcano which is located around 80 kilometres from the city. In order to catch sunrise, we left out hotel at midnight. Although the distance was not that far, it took as nearly four hours to reach our destination by car. 

There were many heavy vehicles which were travelling at slow paces but remained on the right lane which was meant for faster vehicles. Later I figured out that the left lane was not consistent in terms of width and sometimes there were branches of trees hanging above. Hence, it was more convenient for the heavy vehicles to stick to the right hand side and vehicles which were overtaking them had to do it from the left lane. Something different from many other places which adopt the right hand drive system.

We had to take a four-wheel drive vehicle, known locally as high-top, to go up to the peak. It was cold in the early hours of the day and thick clothing was the appropriate attire although the locals were portraying the temperature was much cooler so that we would buy stuffs like gloves and scarfs from them.

The view from the sunrise lookout was magnificent. We had a 360 degrees views of the surrounding mountains and valleys. The mists and clouds intermittently shielded our view but as the sun was raising we could see sights with different colours and tones.


Given the number of visitors to the mountain, we could only spend around half and hour before going down to the valley, made of larva and dusts from the last eruption. This was to make way for other visitors who came later in the morning.

The peak of Mount Bromo was a far distance from where the vehicles carrying visitors were allowed to park. Visitors have two choice to reach the peak, walking or riding horses which were managed by the locals. We took the second option and that was my first horse ride in my life. The horse can only go towards the bottom of the peak and we had to climb stairs with few hundred step and was fairly steep.

It was amazing to watch smokes coming out from the peak of Mount Bromo and one has to stand the smell of sulphur to be up there. It was worse when the wind changed it direction towards you. I saw some elderly visitors who had some breathing difficulties. Although I had visited other live volcanos before, this was the first time where I could watch smoke coming out from the crater with my own eyes. As far as I am concern, visiting Mount Bromo was the best experience that I had when it comes to such tourist attractions.


On our way back down the mountains, we could appreciate the beauty of the mountainous scenery including the spots where the locals grew their vegetables and other plants for living. Of course we cannot resist from stopping as a famous Nasi Rawon shop which was used to be patronised by the President of Indonesia himself.

Sunday, 18 December 2016

Principles of Regulation - My Journey So Far

When I made the promise to write about the principles of regulation, I thought of going straight into the topic and share my views about them. However, on second thought, I feel it is worth sharing about my journey is dealing with rules and regulation from a number of roles and positions which I had in the past. That would provide readers with the context of where I am coming from and hopefully would lead towards better understanding of my views and perspectives.

While I was regulated as a public accounting practitioner, my exposure about regulation expanded when I joined the Council of the Malaysian Institute of Accountants (MIA). I was given the responsibility to chair the Public Practice Committee which deals with issues facing public accountants in Malaysia. That lead me to be involved in negotiations in trade in services at the World Trade Organisation, ASEAN and some bilateral trade agreements.

Due to my involvement in this area, I represented MIA on the board of the Professional Services Development Corporation, a company setup by the government to promote the services of our professional overseas. I was also appointed to the National Professional Services Export Council, a body which advises Matrade in the same area.

During this period I was also appointed to the Public Practice Committee of CPA Australia. This was an international committee with members from Australia and key countries where CPA Australia had significant presence such as Malaysia and Hong Kong. This exposure was interesting as I was able to observe the issues of practising accountants in other countries as well including how regulation influence their strategies and operations.

When I was the Vice-President and later, President of MIA, I was involved in dealings at global and regional platforms on issues around the accounting profession. In ASEAN for example, I was involved in the negotiations at the Coordinating Committee on Services which was part of the process in negotiating services liberalisation under the ASEAN Framework Agreement on Services.

During my tenure at MIA, I was also involved in dealing with disciplinary lapses of MIA members through the Investigation Committee and later the Disciplinary Committee. These functions are very important for MIA as it was set up via an act of Parliament meaning MIA  has to protect the rakyat from MIA members who failed in performing their professional work and not the other way around of protecting members when they fail to behave professionally.

When I was invited to set up the Audit Oversight Board (AOB) as it's founding Executive Chairman, my life changed from being regulated into a regulator. As the AOB is a body under an act of Parliament (Securities Commission Act), the ways we achieved our mission and vision had to be in line with the expectations of Parliament, which represent all the rakyat of Malaysia.

The AOB had to interact with other stakeholders including the International Forum of Independent Audit Regulators (IFIAR) and the ASEAN Audit Regulators Group (AARG). The issues involved were not limited to audit inspections matters only but also covered areas such as investigations and enforcement.

Towards the end of my career as a capital market regulator I was given additional responsibilities as the Executive Director in-charge of Markets and Corporate Supervision. I was responsible over the regulation of our capital, bond and derivative markets including market institutions such as Bursa Malaysia. My work also required me to ensure market transgressions were detected, dealt with and when necessary recommending for enforcement actions.

I was also the pioneer member of the Operation Review Panel of the Malaysian Anti-Corruption Commission (MACC). The role of the panel was to ensure MACC performed their investigations professionally and not to let off suspects due to reasons other than based on the facts obtained through investigations. We certainly challenged some of the findings which in some cases resulted in prosecution. At the same time, the panel acted as the representative of the rakyat in guiding and encouraging MACC to operate without fear or favour.

Now I am on board of a number of financial institutions which are regulated and also on a self-regulatory organisation which regulates the distribution of collective investment schemes. Somehow I could not run away from regulation, as a regulator or being a regulatee.

I suppose the above should provide you with my background on my understanding and enforcing regulation.

My next posting would be on the Discipline of Regulation as adopted at the World Trade Organisation.

Saturday, 17 December 2016

Will New Auditor KAM Deliver Promises?

With effect from Dec 15, 2016, reports issued by auditors on financial statements would not be the same again.
Not only the arrangements of the contents are changed, but auditors are also expected to share more about their audit, including Key Audit Matters (KAM), which would provide more insights regarding critical issues in their audit.
Matters relating to going concern would also be dealt differently as this subject is one of the fundamental assumptions in the preparation of financial statements.
The journey towards the operationalisation of the new standards had been long and challenging.

It started immediately after the global financial crisis, where again people were questioning, why companies collapsed after unqualified audit reports on their financial statements were issued. This resulted in the accounting profession and the International Auditing and Assurance Standards Board (IAASB) exploring the possibilities of audit reports to have more information regarding the audit instead of the simplified approach of the present pass or fail model.
The Financial Reporting Council (FRC) went ahead and issued its own version of auditing standards in the UK, perhaps as a quick measure in protecting London as the capital centre of the world.
Immediately, the form and shape of audit reports in the UK changed and more information, analysis and observation were shared although the pass or fail model is retained.
Perhaps, one of the more outstanding auditor report was issued by KPMG LLP on its audit of Rolls-Royce Holdings plc, which provided readers of the key risks around the business and how the auditors responded to those risks in their audit.
However, given that was the first set of audit reports under the new standards, the language used was very cautionary and sometimes require readers to refer to a dictionary for meanings. Nevertheless, this report was considered as the one which represents the breath of fresh air brought by the new auditor reporting standards.
On the other hand, across the Atlantic, the Public Companies Account ing Oversight Board (PCAOB), which has mandate to issue auditing standards for auditors auditing public companies in the US is still at the consultation stages. Given the nature of litigation there, sharing more about audit means both clients and auditors could face higher chances of court actions, something which is not intended when the auditor report is changed. With the changes in the US administration, this project could also be affected.
There are subtle differences between the FRC and the IAASB standards which may influence the effectiveness of the IAASB standards. While auditors in the UK are required to discuss how they have dealt with materiality, a threshold which is very important in any audit, there is no such requirement by IAASB.
Both standards require auditors to share about KAM, however, the FRC standards require auditors to report how they have responded to those issues whereas the IAASB standards require auditors to report on the procedures which they performed. It appears that FRC requires auditors to apply more judgement in deciding how much they need to share regarding their responses to KAM, while the IAASB has narrowed the scope to audit procedures only. Let’s see whether we would be able to have “Rolls-Royce” report when the new standards are implemented in Malaysia.
Auditors need to plan well ahead on how the requirements of these standards would be met, especially in drafting auditor reports. Since each firm would have to develop their own house-style, more partners and senior auditors are expected to be involved in this process. Many firms, by now, had shared with their clients how the new standards be applied to KAM of last year’s audit.
If you are on a board of a public-listed company and your auditors have not done so, you better get them to do so, the soonest to avoid any last minute surprises.
It is expected that KAM would be around judgements which the companies made in applying financial reporting standards such as those involving valuation and impairment of assets. However, if KAM reported by auditors start to cover issues around risks and effectiveness of controls, that could signal something which are more serious.
In anticipating the implementation of the new reporting standards, the listing requirements of Bursa Malaysia Securities Bhd had been amended requiring immediate announcement of KAM which relate to going concern issues.
Listed companies are also required to announce their responses to those KAM and the timelines during which those issues would be resolved. Quarterly reports would need to have updates of these matters. While not directly requiring KAM to be addressed in the report of audit committee, they are now required to address matters which would likely be raised as KAM.
Given the efforts and intention of getting audit reports to be more informative and help shareholders in making their investment decisions, auditors and the accountancy profession have the responsibilities to make this work. The tone set by regulators would also influence the effectiveness of implementation.
The first few reports issued under the new auditing standards would provide us some ideas of how much the landscape would change.
This article was also published in The Malaysian Reserve