Corporate auditors would be required to look more closely at insider business deals, like those used in many Chinese company frauds, under a rule the US audit regulator has proposed

May 9, 2013 Leave a comment

Thursday May 9, 2013

US audit watchdog wants more scrutiny

WASHINGTON: Corporate auditors would be required to look more closely at insider business deals, like those used in many Chinese company frauds, under a rule the US audit regulator has proposed.

The Public Company Accounting Oversight Board’s (PCAOB) rule takes aim at socalled “related party transactions,” or deals between a company and corporate insiders. These kinds of transactions have played a role in many accounting frauds.Over the past two years, investors have suffered massive losses after US-listed companies based in China funneled company assets to insiders in improper business deals.

In February, China-based petrochemical company Keyuan Petrochemicals Inc agreed to pay US$1mil to settle securities fraud charges involving related-party transaction.

Greater auditor scrutiny “can help to avert the corporate failures and job losses we read about all too often once it’s too late,” PCAOB chairman James Doty said at a PCAOB meeting.

The board is seeking comments from the public on the proposed rule through July 8. It could take effect as early as next year, a PCAOB staff member said at the meeting.

Auditors are allowed too much latitude in how they deal with relatedparty transactions under current rules, PCAOB chief auditor Martin Baumann said at the Washington meeting. – Reuters

Filed under Investing Process, Macro Trends

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Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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