Opinions that matter

 What it means when auditors qualify opions?

THERE was some concern recently when the auditors of at least five listed companies issued qualified audit opinions on these companies' latest financial statements, while the auditors of another listed company drew attention to the fact that the company's ability to go on operating was hanging in balance.

All this came out on April 30, the last day for companies with a Dec 31 year-end to submit their 2009 audited accounts to Bursa Malaysia. Under the exchange's listing rules, a listed company is obliged to immediately announce any qualification in an auditors' report.

The five companies that failed to get clean audit opinions are Nam Fatt Corp Bhd, Patimas Computers Bhd, Mangotone Group Bhd, Wawasan TKH Holdings Bhd, and KBB Resources Bhd.

Essentially, a qualified opinion means that the auditors had incomplete information in doing their work, or they may disagree with the company's management on certain assumptions.

In the case of Luster Industries Bhd, its auditors, Grant Thornton, did not qualify its opinion on Luster's financial statements, but pointed out to shareholders that the company's fate rests on whether it can stage a turnaround.

Ng Mi Li says in certain circumstances, an auditor's report may be modified by adding an 'emphasis of matter' paragraph to highlight a matter affecting the financial statements.

 

Financially distressed Luster submitted its proposed regularisation plans to the authorities in September last year. Bursa Malaysia rejected the proposals in February and Luster is awaiting the outcome of its appeal.

Expressing the right opinion

PricewaterhouseCoopers (PwC) Malaysia partner Ng Mi Li says a qualified opinion should be expressed when the auditors conclude that they cannot issue a clean opinion, but that the effect of any disagreement with management or any limitation on the scope of work is not so material and pervasive as to require an adverse opinion or a disclaimer of opinion.

An unqualified opinion should be expressed when the auditor concludes that the financial statements give a true and fair view or are presented fairly, in all material respects, in accordance with the applicable financial reporting framework.

In certain circumstances, an auditor's report may be modified by adding an “emphasis of matter” paragraph (not tantamount to a qualification) to highlight a matter affecting the financial statements.

The emphasis of matter is used, for instance, in the case of a material matter regarding a company's status as a going concern, when there is a significant uncertainty. The Luster audit opinion is an example.

“An uncertainty is a matter whose outcome depends on future actions or events not under the direct control of the entity but that may affect the financial statements,” says Ng.

Another instance is when there is a need to report on matters other than those affecting the financial statements.

“For example, if an amendment to other information in a document containing the audited financial statements is necessary and the entity refuses to make the amendment, the auditor would consider including in the auditor's report an emphasis of matter paragraph describing the material inconsistency,” she says.

Basis of qualification

According to Wong Liu & Partners, the auditors of vermicelli maker KBB Resources, the counting of the finished goods (amounting to RM27.48mil as at Dec 31, 2009) held at different warehouses of a subsidiary was carried out without the auditors' presence and the management did not arrange for their observation.

The auditors also could not ascertain the quantities of raw materials amounting to RM10.89mil. These led to the qualified audit opinion. A source familiar with the situation says KKB Resources have taken steps to resolve the issue.

The Patimas audit qualification was due to the amount owed to the company by former subsidiary Tsun Macro Sdn Bhd, amounting to RM6.4mil.

The problem is Tsun Macro is in liquidation and the auditors say they are unable to obtain sufficient audit evidence to ascertain the recoverability of the amount outstanding. However, the Patimas management says the servicing of the debt is covered by an August 2005 agreement.

“Despite the fact that the court granted a petition order in 2007 to wind up Tsun Macro, Patimas has been receiving repayment in accordance with the terms of the financial assistance settlement agreement,” says Patimas managing director Law Siew Ngoh.

“In relation to the auditors' report, we would encourage readers not to misinterpret the qualification as an 'adverse opinion' qualification. In our case, it was due to the limited audit evidence for this particular matter that gave rise to the qualification.

“Notwithstanding the matter highlighted, the financial statements of Patimas have been properly drawn up to show a true and fair view of the company's financial position.

“As for the outstanding amount of RM6.4mil, the sum would be repaid in full within the next two years. It is important to note that the outstanding is secured by personal guarantees and this mitigates the risk posed by Tsun Macro's liquidation,” says Law.

Wawasan TKH's auditors say they qualified their opinion on the company's 2009 accounts because they could not determine the effect of impairment adjustments, if any, on the carrying amounts of the property, plant and equipment of the disposable food-wares unit and goodwill of Wawasan TKH.

Moore Stephens AC, the auditors of Mangotone, cited a long list of factors as to why it expressed a disclaimer opinion on the company's latest annual financial statements, starting with the “substantial doubts” that the company can continue to be a going concern.

A disclaimer

Ng of PwC says: “A disclaimer of opinion should be expressed when the possible effect of a limitation on scope is so material and pervasive that the auditor has not been able to obtain sufficient appropriate audit evidence and accordingly is unable to express an opinion on the financial statements.”

She says that the addition of a paragraph emphasising a going concern problem or significant uncertainty is ordinarily adequate to meet the auditor's reporting responsibilities regarding such matters.

“However, in extreme cases, such as situations involving multiple uncertainties that are significant to the financial statements, the auditor may express a disclaimer of opinion instead of adding an emphasis of matter paragraph,” she says.

“A disclaimer of opinion is expressed when the auditor is unable to render an opinion as to whether the financial statements show a true and fair view.”

By TEE LIN SAY
linsay@thestar.com.my

Ideas that help you get ideas of your own

AUTHOR and speaker Fredrik Haren was recently in Kuala Lumpur to give a series of talks on creativity and to launch his book The Idea Book, which has been translated into various languages.
Haren, a Swede, was Speaker of the Year in 2007 and was selected as one of “Sweden’s 100 most inspiring persons” by the magazine “Leva” in 2008. CHOO LI-HSIAN caught up with him during his trip here.

Author and speaker Fredrik Haren was in Kuala Lumpur recently to launch The Idea Book

 

BizBooks: What motivated you to write The Idea Book?

Haren: We started interesting.org to inspire people to be more creative. I wrote The Idea Book because I had read a lot of creativity books (hundreds of them!) and yet most of them did not inspire me to be more creative. I basically wrote the creativity book that I myself wanted to read.

Many of us have had a good idea at some time or another. However, creativity is more than just creating. It is about taking a good idea and transforming it into a successful and sustainable concept. I don’t just write about creativity but I apply my own creativity techniques.

The success of The Idea Book is a good example of how you can use innovative ways to create, produce, promote, market and sell an idea. I share this experience with people at my talks.

How did you go about writing the book?

I have written seven books. It takes me about one year to write a book. About 99% of that time is usually spent collecting stories, examples and other material that I can use. Just in the last six months, I have been to more than 14 countries and have interviewed people from all kinds of fields about creativity. The actual writing is something I do in a two- to three-week stretch at a beach somewhere, where I write from 7am to 11pm.

What is the main message that you want to convey through the book?

That everyone can and should get more creative. The book will inspire the really creative to try harder and help the less creative to start becoming more creative.

What is so different about the book?

First of all, the book is 50% book and 50% notebook – 150 pages about ideas and 150 pages for your own ideas. It is a creativity book that is creatively done.

The book pages contain insights, case studies and anecdotes on creativity, innovation and inspiration from various fields.

Leonardo Da Vinci and Thomas Edison understood the importance of writing down their ideas and observations in notebooks. Da Vinci produced a large number of sketches, notes and scribbling. After Edison’s death in 1931, an amazing 3,500 notebooks were found in his home.

So, the idea with the 150 white pages is to inspire you to start developing your own ideas and personalising your own copies with these ideas and thoughts, making each copy unique. This makes the book something interactive – a dialogue, not a monologue.

It is a book about ideas that help you get ideas of your own.

Who has bought the book? Where has the book been sold around the world?

Usually you are not supposed to answer that your product is for “everyone” because that means it is for “no one”; but The Idea Book has really been bought by everyone! From 10-year olds to 78-year olds. From really, really creative people to people who did not think they were creative.

Hundreds of organisations have also bought The Idea Book including HP (which bought 400 copies as corporate gifts to clients), Hyper Island (the top multimedia school in Sweden bought it as training material for their students) and Deutsche Bank in Germany (which bought 600 copies for internal creativity training). I have also sold 700 copies to the Singapore government.

It has been sold to more than 40 countries and has been translated into 14 languages (including Mandarin and Japanese).

Aside from the book, what else do you do to promote creativity?

I do keynote speeches, talks, seminars, training sessions and workshops. I have done more than 1,000 such speaking events on creativity and idea generation in over 30 countries.

Who have you worked with? Who do you normally work with?

I have worked virtually in all fields with literally hundreds of different organisations, from the Supreme Court of Singapore to Oracle, the software company.

I have also worked with nurses, hotels like the Ritz Carlton, prime schools like Insead and Hyper Island as well as companies like IBM, Microsoft, Nokia, Ericsson, Sony Ericsson, China Mobile, HP, GE, IKEA, Volvo, Pfizer, Ogilvy, Saab, Absolut Vodka, the Swedish National Bank and the Finance Ministry of Singapore.

What are the most interesting projects and assignments that you have worked on?

There are just so many! Just last month, for example, I was invited to Iran (!) and did, among other things, a speech for 200 women at an all-women university where everyone was dressed the same. And the theme of my speech was “The value of doing things differently”.

I was also invited to speak to the Police Coast Guard of Singapore, which is working actively to become more creative. I talked to employees of the Swedish Ministry of Commerce – including the minister himself – about why Sweden has to become more innovative. A few weeks before that, I spoke to an audience in Norway that included the Prime Minister, the Prince of Norway and the richest man in Norway.

However, I find it just as interesting to be invited to be part of a programme at a school that is trying to change the way they teach.

Why is creativity important?

To improve our quality of life, we need to find more creative and innovative ways of doing existing things and then making those necessary changes happen. How we do things today is just not sustainable in the long run.

At interesting.org, we focus on getting people to understand that each and every one of us in a country, community or organisation needs to more creative, not just a choice few.

How can we each promote creativity?

Short answer, by buying The Idea Book for everyone you know! Longer answer, there is not just one thing that needs to be done; it is many things.

Like changing how we teach our children, how we approach things in our personal life to how we do our work and train our staff in companies. We should focus on teaching people how to think differently instead of just to absorb information.

Almost everyone I have ever interviewed – and I have interviewed thousands – say that they would like the people around them (e.g. their children, colleagues, staff) to be more creative or innovative.

We should not only talk about the value and importance of creativity but to also do something concrete to personally develop our own creativity, apply it in our own lives and in the communities or organisations we belong to.

·Haren is finalising his second book (and accompanying website) entitled The Developing World on why the developing world has an advantage over the west in the area of innovation and creativity.

For more information on The Developing World, go to www.theideabook.org/video/, where the last three videos deal with this book.
Haren and other experts talk about why creativity will become more important on BFM radio station’s current affairs programme, The Incident Room, on May 22.

Blogger Draws Crowd

Malaysian based in Japan meets manga enthusiasts on last day of vacation

KUALA LUMPUR: Popular Japan-based Malaysian blogger Danny Choo spent the last day of his vacation in the country to meet and greet fans who had gathered for a chance to get his autograph and pose for pictures.

He spent over four hours to meet the 100 over fans at the Lot 10 shopping complex yesterday evening.
Choo whose family is from Penang, was back in Malaysia for the first time in 10 years. He also exchanged name cards with them.

“It's the first time I've had har mien (prawn noodles) in over 10 years,” he said about his vacation in Malaysia.

Manga prince: Choo showing some of his collectibles after meeting his fans at Lot 10 shopping complex Sunday. - AZMAN GHANI / The Star

 

Born and raised in London, Choo made a name for himself writing about Japanese culture and anime/manga on his blog dannychoo.com, which has been featured by both the BBC and CNN.

CNN reported in 2008 that his blog received around 20 million visitors a month.
Despite the large turnout yesterday, Choo made an effort to talk with each of his fans personally.

“For me it's very important to meet every one. I like to bring people together, so that even when I'm not around, they can network with each other. I want my readers to have more opportunities in sharing subjects that we are all passionate about,” he said.

Several fans, whom Choo referred to as “comrades”, showed figurines and collectibles to Choo, who also blogs about his own collection of anime figurines.

Although he had not visited the country in a decade, Choo said Malaysia, Penang in particular, still felt very much like home.

“I only had a day trip to Penang yesterday, but I wanted to spend more time there. So, next summer, I'll be spending some more time in Penang to go to Gurney Drive, walk around Komtar and so on,” he added.

Choo, who is the son of internationally-renowned shoe designer Datuk Jimmy Choo, is also a motivational speaker, writer and chief executive officer of web development company Mirai Inc.

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http://www.jimmychoo.com/restofworld/page/home?notify=yes

By IAN YEE, ianyee@thestar.com.my