Auditors need to be more sceptical of financial statements provided by companies to prevent improper valuations that could lead to future financial crises, says the head of an international audit inspection group.
"The role of an auditor is always to be critical when there is evidence provided by a client and to challenge that evidence," said Steven Maijoor, the chairman of the International Forum of Independent Audit Regulators (IFIAR).
"There have been cases in the Netherlands where auditors really should have gone further when auditing financial assets. They should have been more sceptical."
Mr Maijoor, also the managing director of the Netherlands Authority for the Financial Markets, spoke as regulators from more than 30 countries and top representatives of the "big six" auditing companies attended an IFIAR meeting at the Yas Hotel in Abu Dhabi.
Auditors have recently been in the spotlight after several incidents where they failed to uncover frauds at companies.
Ernst & Young, for instance, was singled out in the Lehman Brothers case. The firm is accused of hiding US$50 billion (Dh183.65bn) of troubled assets to make its debt levels appear lower.
In Dubai, the Dubai Financial Services Authority (DFSA) also required Damas International to replace Ernst & Young as its external auditor as part of corporate governance changes it imposed after executives were found to have made unauthorised transactions.
In both cases, Ernst & Young stood by their audits.
The DFSA has been increasing its oversight of auditors, said Amanda Line, the Middle East director of the Institute of Chartered Accountants in England and Wales.
"Their role is expanding," Ms Line said. "They have been doing it in the DIFC [Dubai International Financial Centre] for some time, but now they are getting involved with [Emirates Securities and Commodities Authority]."
Ms Line said the practice of inspecting the quality of audits of financial statements had become established in developed markets since the collapse of companies such as Enron and WorldCom almost 10 years ago. Investigations into those companies revealed systemic problems with the way they reported their financial situations.
While audit inspections are relatively new to the region, they are expanding rapidly, Ms Line said.
"This is now a very core function of capital markets," she said. "I'm absolutely sure that in two, five, 10 years, it will be across the board and part of the whole audit framework of the Middle East."
Mr Maijoor said the discussions at the IFIAR meeting this week highlighted three critical issues in the world of financial reporting: the need for more scepticism by auditors, better oversight of branch offices of larger audit groups and stronger protocols within audit companies to approve audits.
Pointing back to the Netherlands, where the regulator put out its first report recently about deficiencies in auditing standards, Mr Maijoor said that the financial crisis of the past two years had revealed new weaknesses in the system of reporting financial information.
He gave the example of his inspectors in the Netherlands finding that valuations of complex structured financial products were inaccurate.
"What we have seen in the Netherlands is the client said they were valued on market prices, but they were actually valued on models," Mr Maijoor said.
"Analysts need auditors to challenge companies on these issues."
@Email:bhope@thenational.ae
Kanguva
Director: Siva
Stars: Suriya, Bobby Deol, Disha Patani, Yogi Babu, Redin Kingsley
Company%20Profile
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A cryptocurrency primer for beginners
Cryptocurrency Investing for Dummies – by Kiana Danial
There are several primers for investing in cryptocurrencies available online, including e-books written by people whose credentials fall apart on the second page of your preferred search engine.
Ms Danial is a finance coach and former currency analyst who writes for Nasdaq. Her broad-strokes primer (2019) breaks down investing in cryptocurrency into baby steps, while explaining the terms and technologies involved.
Although cryptocurrencies are a fast evolving world, this book offers a good insight into the game as well as providing some basic tips, strategies and warning signs.
Begin your cryptocurrency journey here.
Available at Magrudy’s , Dh104
Business Insights
- As per the document, there are six filing options, including choosing to report on a realisation basis and transitional rules for pre-tax period gains or losses.
- SMEs with revenue below Dh3 million per annum can opt for transitional relief until 2026, treating them as having no taxable income.
- Larger entities have specific provisions for asset and liability movements, business restructuring, and handling foreign permanent establishments.
Wicked
Director: Jon M Chu
Stars: Cynthia Erivo, Ariana Grande, Jonathan Bailey
FULL%20RESULTS
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The specs
Engine: 2-litre 4-cylinder and 3.6-litre 6-cylinder
Power: 220 and 280 horsepower
Torque: 350 and 360Nm
Transmission: eight-speed automatic
Price: from Dh136,521 VAT and Dh166,464 VAT
On sale: now
Brahmastra%3A%20Part%20One%20-%20Shiva
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If you go
Where to stay: Courtyard by Marriott Titusville Kennedy Space Centre has unparalleled views of the Indian River. Alligators can be spotted from hotel room balconies, as can several rocket launch sites. The hotel also boasts cool space-themed decor.
When to go: Florida is best experienced during the winter months, from November to May, before the humidity kicks in.
How to get there: Emirates currently flies from Dubai to Orlando five times a week.
Batti Gul Meter Chalu
Producers: KRTI Productions, T-Series
Director: Sree Narayan Singh
Cast: Shahid Kapoor, Shraddha Kapoor, Divyenndu Sharma, Yami Gautam
Rating: 2/5
Electoral College Victory
Trump has so far secured 295 Electoral College votes, according to the Associated Press, exceeding the 270 needed to win. Only Nevada and Arizona remain to be called, and both swing states are leaning Republican. Trump swept all five remaining swing states, North Carolina, Georgia, Pennsylvania, Michigan and Wisconsin, sealing his path to victory and giving him a strong mandate.
Popular Vote Tally
The count is ongoing, but Trump currently leads with nearly 51 per cent of the popular vote to Harris’s 47.6 per cent. Trump has over 72.2 million votes, while Harris trails with approximately 67.4 million.
COMPANY PROFILE
Name: HyperSpace
Started: 2020
Founders: Alexander Heller, Rama Allen and Desi Gonzalez
Based: Dubai, UAE
Sector: Entertainment
Number of staff: 210
Investment raised: $75 million from investors including Galaxy Interactive, Riyadh Season, Sega Ventures and Apis Venture Partners
Company%20Profile
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The specs
Engine: 1.5-litre 4-cylinder petrol
Power: 154bhp
Torque: 250Nm
Transmission: 7-speed automatic with 8-speed sports option
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From Zero
Artist: Linkin Park
Label: Warner Records
Number of tracks: 11
Rating: 4/5
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