|Letter from the General Counsel of Maxis, Mr Stephen Mead. Received from a Maxis insider.|
"People rely extensively on the advice of experts. Often, these experts face conflicts of interest between their own self-interest and their professional obligation to provide good advice. Conflicts of interest played a central role in the corporate scandals that shook America at the turn of the twenty-first century.
And auditors charged with independently reviewing a firm's financial report have often been found to be complicit with firm management in this effort (Levitt & Dwyer,2002). Accounting firms have incentives to avoid providing negative audit opinions to the managers who hire them and pay their auditing fees."Conflicts of Interest and the Case of Auditor Independence - Moral Seduction and Strategic Issue Recycling by Don a. Moore, Philip E Tetlock, Lloyd Tanlu and Max H. Bazerman
|To what extent can investors accept that auditor independence has not been compromised in a case like this, with Axiata paying more to PricewaterhouseCoopers for non-audit serves (NAS) than for the audit itself?|
"76% of the auditors, all of the loan officers and 91% of the senior
managers of public listed companies agreed with the statement that the provision of
NAS (non-audit services) to audit clients by audit engagement staff would threaten auditor independence".
If only 24% of the auditors, absolutely none of the loan officers, and a mere 9% of the senior managers of PLC's believe that auditor independence is not compromised by the provision of non-audit services to clients, on what basis is a 'laissez-faire" attitude still adopted by the regulators and the watchdogs in this country towards the question of NAS and auditor independence?
|Bursa Malaysia's Chief Regulatory Officer, Ms Selvarany Rasiah; Ms Rita Benoy Bushon, CEO of the Minority Shareholder Watchdog Group (MSWG), and Dato' Johan Raslan, the Executive Chairman of PwC Malaysia in a group photo.|
Why hasn't Bursa Malaysia or the MSWG questioned PwC Malaysia on its non-audit services to its audit clients, especially when the fees earned for the non-audit work far exceeds the audit fees?
The study by UPM also found that the disclosure of NAS will prompt shareholders to asses the amount of money paid to the auditor and ask questions if they were not comfortable with it:
"A partner of a medium size audit firm noted:
It will create awareness among the public, shareholders and stakeholders.
It also triggers them to ask question in the AGM, like ‘Who is the auditor
and consultant, and how will the management ensure there is a split of
independency(sic) between the two?’ If we don’t have such disclosure, it is not
fair to the public, who have a lack of knowledge on the operation side."
It is not fair to the public! Can there be a simpler statement that should induce regulators and the watchdogs, especially those that are there to protect the small investor, to take appropriate action?
When our neighbours, and even economy's that are far larger and more complex than our own, are able to ensure that the question of auditor independence is addressed in the clearest manner possible, why must Malaysians be forced to accept a 'tidak-apa' attitude towards the questions that have been raised by the International Federation of Accountants itself towards auditor independence and non-audit fees?
Who is there to ensure that the following threats listed by the International Federation of Accountants do not affect auditor independence in Malaysia?
1. Self interest threat?
2. Self review threat?
3. Advocacy threat?
4. Familiarity threat?
5. Intimidation threat?
But for us in Malaysia, we have to add one more threat to the list.
6. Commit blatant fraud and get away with it threat?
|Chin Kwai Fatt, MD of PwC Malaysia. Till today he has not denied the fraud involving PricewaterhouseCoopers Consulting Sdn Bhd (464379-U)|
and the bogus firm and directors of PwC Consulting Sdn Bhd (289801-A)