THE Securities Commission Malaysia’s Audit Oversight Board (AOB) has prohibited Charles Lee King Long and Gan Kim Guan who are partners of accounting and audit firm Kreston John & Gan from accepting and auditing any public interest entities (PIEs) or schedule funds for 12 months effective Aug 3 this year.
In addition to the prohibition, the AOB has also imposed fines of RM35,000 on Lee and RM17,500 on Gan.
The AOB’s findings of breaches and sanctions on Lee and Gan for their failure to comply with the relevant International Standards on Auditing (ISA) when auditing a PIE were made after the due process accorded to them including the opportunity for them to appeal against the SC’s decision.
As an engagement partner for an unnamed PIE client, Lee had wrongfully assessed the PIE’s reversion from Malaysian Financial Reporting Standards (MFRS) accounting framework to Financial Reporting Standards (FRS) for the financial year ended Dec 31, 2016.
“The reversion was found to be inappropriate and inconsistent with the implementation of MFRS by the Malaysian Accounting Standards Board (MASB),” AOB pointed out in a statement.
“Lee had also failed to perform audit procedures on various elements of accounting estimates relating to property development costs and also failed to obtain appropriate audit evidence to support the conclusions reached.”
In many instances, AOB said documentation in support of the conclusions reached by Lee were found to be either incomplete or inadequate.
AOB further contended that Gan who was the engagement quality control reviewer (EQCR) had also failed to sufficiently review the selected audit documentation relating to significant judgements and significant risk areas of the engagement and basis of the conclusions reached.
“This was apparent in the application of accounting framework, property development costs, trade receivables, revenue and going concern,” noted AOB.
“The AOB views this seriously and reiterates the crucial role of EQCR in safeguarding the integrity of audit quality and control process.”
In an unrelated development, the SC has reprimanded and imposed a fine amounting to RM2 mil against former unit trust consultant Harani Kamarudin for deceiving an investor between November 2012 and November 2019, causing the victim to lose RM1.32 mil.
“As part of his deception and towards enticing the victim to invest with him, Harani had, among others, made false representations as to the nature and characteristics of the investments as well as guaranteed certain investment results and returns to the victim which did not materialise,” the market regulator said in a separate statement.
Arising from his conduct and actions, the SC said Harani had contravened Section 354(1)(b)(iii) of the Capital Markets and Services Act 2007 (CMSA) read together with provisions of the Federation of Investment Managers Malaysia’s Code of Ethics and Rules of Professional Conduct (Unit Trust Funds).
“The SC’s finding of breaches and sanctions on Harani was made after according due process to him including opportunity for him to respond to SC on the aforesaid breaches and SC’s decision,” added the SC. – Sept 7, 2022
