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Deloitte defends role in Transmile(Business Times (Malaysia) Via Thomson Dialog NewsEdge) DELOITTE & Touche, one of the world's top four accounting firms, has defended its role in the handling of air cargo company Transmile Group Bhd's accounting scandal that has rocked the market recently. In its first media interview since the scandal broke in May this year, its chief executive officer for Asia-Pacific, Chaly Mah Chee Kheong, dismissed suggestions that the company had failed to detect and report Transmile's accounting irregularities. "I don't believe we have done a bad job as far as Transmile is concerned. At the end of the day, it was our stringent audit processes that led us to discover the accounting irregularities. If our quality of work were really that bad, we probably would not have discovered them," he told Business Times in Kuala Lumpur yesterday. Mah said Deloitte & Touche continues to hold office as Transmile's external auditor until the next annual general meeting is held. "We have been serving them for a number of years, even before their initial public offering. "We believe that Transmile has a good business model and a good company. It is unfortunate that we had to be caught in the situation that there were all these accounting fraud," he added. Transmile first notified Bursa Malaysia that its auditors had trouble verifying its accounts for the year ended 31 December 2006 on May 7, due to the absence of some documents. A special audit carried out by Moores Rowland Risk Management later found that it had severely overstated revenue and assets going back to 2004 through du-bious invoicing. Mah said in the course of an audit, the external auditors rely on the company's management and board of directors, who are tasked with the governance and overall responsibility of the company. "In instances where there is collusion between employees in an organisation, worse still with vendors who are outside the organisation, it becomes extremely difficult for both internal and external auditors to detect," he told Business Times in Kuala Lumpur yesterday. Mah said people have a misconception that audits represent a 100 per cent check of a company's financial well-being. "It is not. We only check based on samples randomly picked, generally a bias towards large items which are material, because there are so many transactions. It is almost impossible for auditors to check on every single transaction. We also rely on the segregation of duties," he said. He said in developed markets such as the US and Europe, much responsibility is placed on the directors and management to ensure that there are proper controls in a company to detect fraud. The US Sarbanes-Oxley Act, for example, focuses on making the management responsible for ensuring that there are proper inter-nal controls set up within an organisation. "Countries like Malaysia are putting much responsibility on the external auditors when, in fact, the primary responsibility of ensuring proper internal control systems and accurate accounting records lies with the directors and management of a company," said Mah. Deloitte's reputation has not only taken a beating from the Transmile scandal, but also from those of Mesdaq-listed NasionCom Holdings Bhd and Ocean Capital Bhd, of which it was the auditor. Both companies were reprimanded by the Securities Commission for submitting inflated revenue figures in their financial statements. Mah said that despite a string of accounting scandals to hit Deloitte & Touche's clients in the past year, its professionalism remains intact. "We (Deloitte Touche Tohmatsu) are totally committed to our Malaysian firm (Deloitte KassimChan and Deloitte & Touche). We will continue to stand by them. We have a good firm here. "If you look around the world, all the top four auditing firms have their own share of these types of problem cases," he said. Copyright 2007 The New Straits Times Press (Malaysia) Bhd, Source: The Financial Times Limited |