Thursday, September 29, 2011

European Commission plan to curb Big 4 Oligoply

It is reported that European Commission is expected to release a law, which could shake up the Big 4 audit firm's oligoply situation. Big 4 audit firms include: KPMG, Deloitte & Touche, Pricewaterhouse Coopers and Ernst & Young

It's propsing that auditors be banned from providing consulting services to firms that they audit, to avoid the conflict of interest issue. From Accounting & Auditing blog's point of view, it is mandatory to maintain independence.

The said proposed plan also includes a requirement for the companies to change auditors every 9 years. In most of the european area, change of auditors rarely occur.

It's likely that the proposed plan will open up the competition within the auditing industry.

Wednesday, September 28, 2011

Working hours of Big 4 Auditors in ASEAN Countries

This post intends to give everyone a general idea of the working hours of Big 4 auditors in ASEAN.

Based on our talks and discussion with auditors in ASEAN.

During peak season, generally it falls on January- February of every year in ASEAN countries, auditors would stay up till at least 10.00p.m. till beyond midnight to complete the engagement. They are quite a number of Big 4 auditors have the experience of working overnight in office during peak season.

During off-peak season, auditors may leave the office earlier, generally at approximately 8.00pm till 10.00p.m.

However, the hours mentioned above is based on the average hours of the Big 4 auditors we have surveyed. We, genuinely believe that the working hours largely depends on the engagement been allocated.

If you have any ideas / comments on the working hours or you would like to share with us of your working hours as an auditor, kindly leave a comment and / or drop us an email at

Monday, September 26, 2011

UBS CEO has resigned after unauthorized trading incident

UBS CEO Oswald Grübel has resigned on 24 September 2011, after the recent unauthorized trading scandal, which has caused the bank to suffer from US$2.3billion losses arising from unauthorized transactions. Sergio Ermotti, a veteran Merrill Lynch executive, has been named as the interim CEO to lead the company.

Despite achieving impressive turn-around and strengthened UBS’ fundamentals during his tenure, Oswald Grübel stepped down after the unauthorized trading done by the rogue trader, 31-year-old Kweke Adoboli.

The board and the management of this Swiss bank are in the midst of investigating this scandal.

This entire incident re-emphasized the importance of having a strong internal controls system in place. CEO might not be the individual designate the internal controls in-place. However, a CEO needs to ensure that strong internal controls are in place to prevent/ identify unauthorized transactions. Hence, it appears to the public that Oswald Grübel has stepped down as he assumed the responsibility of unauthorized trading occurred.

There are five key elements in an internal control system, namely:
a. control environment,
b. risk assessment,
c. control procedures,
d. information & communication, and
e. monitoring

It’s evident that CEO need to be heavily involved in “information & communication” and “monitoring” components. To illustrate, there must be proper channel for all necessary information to be heard / listened by senior management,. It’s also crucial to ensure that appropriate level of monitoring activities been carried out.

#106- Stock-take for entities with incident / experiene of fraud

Management of certain companies may encounter incidents of stocks losses due to misappropriation of assets by its employees, i.e. their employees stole the company’s stocks for personal benefit (i.e. personal usage/ personal profits after selling it out).

Let us discuss together on What Could Go Wrongs (“WCGW”) in the internal control system that may result in the entity exposure to the risk of fraud:

- stock take is not conducted on a regular basis (i.e. stock take on a half-yearly basis)
- quantities and movement of provision stocks / obsolete stocks are not kept tracked (note: these stocks usually carry scrap value, and might be misappropriated if there’s no proper record)
- physical stocks are not stored in safety area
- CCTVs not installed in warehouse
- ineffective procedure in updating inwards/outwards of stocks into stocks record

The list above is not exhaustive and it is for reference only

From management perspective, there are a few areas / procedures need to be carried out when they had experienced / encountered fraud with regard to their physical stocks:

- improve accountability of the employees by assigning different area of stocks of different employees
- impose penalty on all warehouse employees while there’s material stock differences ( e.g. penalty on warehouse employees if stock-take difference is greater than 0.5% of total stocks)
- employ strict security access to the warehouse
- install CCTV in the warehouse and perform random check on certain time slots
- security guard to perform check on employee’s bags before allowing the employees to leave the premises
- ensure that stock-take is conducted on a regular basis and any stock-take difference is investigated

Please feel free to email us Kauditor at if you have any comments or you would like to find out more. Kauditor at Accounting & Auditing Blog is an experienced subject matter expert.