The Securities Commission released its Malaysian Code on Corporate Governance in March this year. It was signed off by the erstwhile Chairman of the SC, just before the mantle of responsibility was passed on to other shoulders.
Malaysia’s Corporate Governance Journey
1. Malaysia recognises the value of good governance and it is for this reason that we are committed to promoting and sustaining a strong culture of corporate governance. Investor confidence in Malaysia was severely affected during the 1997/98 Asian Financial Crisis. Policy makers learnt valuable lessons and focused their attention, amongst others, on the need to raise corporate governance standards. We undertook numerous initiatives including the issuance of the Malaysian Code on Corporate Governance (Code) in the year 2000 to strengthen our corporate governance framework.
2.....The Audit Oversight Board was established to provide independent oversight over external auditors of companies.....
Recommendation 5.2
The Audit Committee should have policies and procedures to assess the suitability and independence of external auditors.
Commentary
The Audit Committee should review and monitor the suitability and independence of external auditors. The independence of external auditors can be impaired by the provision of non-audit services to the company. The Audit Committee should therefore establish policies governing the circumstances under which contracts for the provision of non-audit services can be entered into and procedures that must be followed by the external auditors. To provide support for an assessment on independence, the Audit Committee should obtain written assurance from the external auditors confirming that they are, and have been, independent throughout the conduct of the audit engagement in accordance with the terms of all relevant professional and regulatory requirements.
~ MALAYSIAN CODE ON CORPORATE GOVERNANCE 2012
The Code seems to have been born from noble intentions, but can this Code, or any other Code for that matter, take us on the road to an acceptable standard of Corporate Governance if all we have is more of the same as days go by?
Have we truly learned our lessons from the Financial Crisis of 1997/98? Have the regulatory bodies become true regulators, or are they still toothless tigers when they face the task of regulating the global behemoths, like the Big Four?
The Financial Crisis Inquiry Commission of the United States of America blamed widespread failure of financial regulators, breakdowns in corporate governance, excessive borrowing and risk by both households and financial firms along with "systemic breaches in accountability and ethics" at all levels for the crisis. ~ The Financial Crisis Inquiry Commission (FCIC) is a ten-member commission appointed by the United States government with the goal of investigating the causes of the financial crisis of 2007–2010.
Time and again governments across the world point their collective fingers at the respective Regulators and the failure of Corporate Governance as among the chief causes for whatever financial crisis is the flavour of the year/decade. But if we look at the commentary on Point 5.2 above, the SC still chooses to leave the method of ensuring the independence of the external auditors, to a written note from the same external auditors.
If the external auditors are little more than a bunch of crooks and scoundrels, can a simple handwritten assurance stop them from being true to their nature? Have we not seen enough evidence that auditors, no matter how prestigious the name they carry, are capable of being as nefarious as any two bit crime syndicate?
Changing the people heading the various regulators, and firms implicated in thievery, will not change much. What we need is clear evidence that the regulators will start upholding the standards they claim to espouse without fear or favour, and go after the transgressors to the full extent of the law.
Of course, after that, we will also need evidence that the Courts of Law themselves are also truly capable of upholding the laws of the land.
Malaysia’s Corporate Governance Journey
1. Malaysia recognises the value of good governance and it is for this reason that we are committed to promoting and sustaining a strong culture of corporate governance. Investor confidence in Malaysia was severely affected during the 1997/98 Asian Financial Crisis. Policy makers learnt valuable lessons and focused their attention, amongst others, on the need to raise corporate governance standards. We undertook numerous initiatives including the issuance of the Malaysian Code on Corporate Governance (Code) in the year 2000 to strengthen our corporate governance framework.
2.....The Audit Oversight Board was established to provide independent oversight over external auditors of companies.....
Recommendation 5.2
The Audit Committee should have policies and procedures to assess the suitability and independence of external auditors.
Commentary
The Audit Committee should review and monitor the suitability and independence of external auditors. The independence of external auditors can be impaired by the provision of non-audit services to the company. The Audit Committee should therefore establish policies governing the circumstances under which contracts for the provision of non-audit services can be entered into and procedures that must be followed by the external auditors. To provide support for an assessment on independence, the Audit Committee should obtain written assurance from the external auditors confirming that they are, and have been, independent throughout the conduct of the audit engagement in accordance with the terms of all relevant professional and regulatory requirements.
~ MALAYSIAN CODE ON CORPORATE GOVERNANCE 2012
The Code seems to have been born from noble intentions, but can this Code, or any other Code for that matter, take us on the road to an acceptable standard of Corporate Governance if all we have is more of the same as days go by?
Have we truly learned our lessons from the Financial Crisis of 1997/98? Have the regulatory bodies become true regulators, or are they still toothless tigers when they face the task of regulating the global behemoths, like the Big Four?
The Financial Crisis Inquiry Commission of the United States of America blamed widespread failure of financial regulators, breakdowns in corporate governance, excessive borrowing and risk by both households and financial firms along with "systemic breaches in accountability and ethics" at all levels for the crisis. ~ The Financial Crisis Inquiry Commission (FCIC) is a ten-member commission appointed by the United States government with the goal of investigating the causes of the financial crisis of 2007–2010.
Time and again governments across the world point their collective fingers at the respective Regulators and the failure of Corporate Governance as among the chief causes for whatever financial crisis is the flavour of the year/decade. But if we look at the commentary on Point 5.2 above, the SC still chooses to leave the method of ensuring the independence of the external auditors, to a written note from the same external auditors.
If the external auditors are little more than a bunch of crooks and scoundrels, can a simple handwritten assurance stop them from being true to their nature? Have we not seen enough evidence that auditors, no matter how prestigious the name they carry, are capable of being as nefarious as any two bit crime syndicate?
Changing the people heading the various regulators, and firms implicated in thievery, will not change much. What we need is clear evidence that the regulators will start upholding the standards they claim to espouse without fear or favour, and go after the transgressors to the full extent of the law.
Of course, after that, we will also need evidence that the Courts of Law themselves are also truly capable of upholding the laws of the land.
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