Reference no: EM132582439
Two former executive directors of Polo Incorporation Bhd received jail sentences for furnishing false statements to Bursa Malaysia Securities Berhad (Bursa). The Sessions Court sentenced Chong Loon Sing, 56, and Sivaraja Maniam, 48 after a guilty plea from each defendant. They admitted to furnishing false information to the Bursa in relation to Polo's revenue of RM91.13 million, of which RM51.5 million was false, for the fourth quarter ended 31 March 2018. The defendants also faced four other charges for the same offence in relation to Polo' consolidated income statement for all four quarters in the 2017 financial year. It was discovered that the company did not have an internal whistle-blower policy and their outsourced internal auditors were from the same firm that provided external audit services to the company, albeit from a different team. The external auditor firm also provided tax consultancy services to the company. The company's Audit Committee and external auditor have failed to scrutinise the company accounts and thus, they were unaware of the fraud. The crime was finally uncovered when one of the employees decided to report to the SC on the discrepancies of the accounts. Judge Nuriman Ahmad took these facts into consideration in sentencing the two defendants.
Chong received a 7-month imprisonment and fined RM200,000. Meanwhile, the Judge meted out a 12-month imprisonment to Sivaraja. Both defendants were former substantial shareholders of the company. The sentences were meted out following the two men's applications for a plea bargain, said the SC.
The trial against Chong and Sivaraja started in 2018. Hearing will continue against two other individuals, Mohd Reza and Tee Poon Huat, who were jointly tried with Chong and Sivaraja for the same offences.
REQUIRED:
Question a) Apart from Audit Committee and external auditor, identify two other parties that could have played vital roles in upholding the integrity of financial reporting at Polo Incorporation Berhad? Justify your answer.
Question b) Recommend steps that the Audit Committee can take to improve the integrity of financial reporting at Polo Incorporation Berhad.