Look out for ethical dilemma creating a culture of compliance, and fixing lax internal controls tax transfer pricing perspectives on China.
Sub-prime crisis affects Asian IPOs
The US sub-prime crisis and subsequent global credit crunch is undoubtedly having an impact on Asian initial public offerings (IPOs), especially those in Hong Kong and Singapore, according to businessweek.com.
This time last year it was not uncommon for shares to enjoy triple-digit gains on their first day of trading. The area was flush with liquidity. Share traders were confident the trend would continue, and unbridled optimism reigned.
Yet this year conditions have definitely changed. To late March Hong Kong had just one listing, New Media Group Holdings, and the IPO had raised only US$13.1 million.
By mid-February in 2007, however, Hong Kong companies had already raised US$512m from four issues. The situation is similar in Singapore. In the first two months of the year US$23.6m was raised from three issues, compared to US$283m from four issues over the same period of time last year.
In general, Asian IPOs have pulled in US$8.44 billion, a 20 per cent year-over-year drop. What these figures dont reveal is that, scared by the poor results, other companies have pulled out from deals worth billions of dollars.
In China, retail company Maoye International Holdings withdrew its massive deal at the last hour, as did Solargiga Energy Holdings, a Chinese solar-wafer manufacturer. The good news is that even though emerging markets are typically the first to be affected during a global liquidity crunch (because investors withdraw money from the riskiest bourses first), the impact in Asia is less pronounced than it was during the equity meltdown of 2001-02.
Dual reporting system launched
A breach reporting system for dual-regulated institutions has been launched by the Australian Prudential Regulation Authority (APRA) and the Australian Securities and Investments Commission (ASIC).
The new system allows institutions regulated by both APRA and ASIC to report breach notifications that need to be lodged with both regulators via a single electronic report to APRA.
The launch follows the passage through parliament in late 2007 of the Financial Sector Legislation Amendment (Simplifying Regulation and Review) Act 2007, which introduced a consistent definition of reportable breaches across all institutions in APRA-regulated industries, and all ASIC-regulated Australian financial services licensees.
Auditors of SMSFs must get with the program
A set of competency requirements for auditors of self-managed superannuation funds (SMSFs) has been developed by CPA Australia, the Institute of Chartered Accountants in Australia and the National Institute of Accountants. The requirements will be mandatory for members of those professional accounting bodies who audit SMSFs for financial years commencing on or after 1 July 2008. Members are encouraged to adopt these requirements earlier.
The popularity of SMSFs continues to grow, with accountants playing an increasingly important role to ensure SMSF trustees comply with superannuation law. SMSF trustees are responsible for ensuring their fund meets a number of legislative requirements in order to receive generous tax concessions. Each year they must have independent financial and compliance audits conducted on their fund to check they are meeting these requirements.
In the current regulatory environment, it is necessary for accountants to have the appropriate level of knowledge and experience to perform these complex audits, in particular the compliance audit.
Members undertaking SMSF audits will also need to hold a practising certificate issued by one of the three bodies and have relevant professional indemnity insurance.
A new wave of massive public company frauds could be triggered by the global sub-prime market crisis, warns a US accounting expert.
Professor Ira Solomon from the University of Illinois told the audience at the 2008 Ratcliffe memorial lecture at the Australian School of Business that unless auditing concepts and practices are strengthened through a fundamental redesign, huge corporate collapses along the lines of Enron and WorldCom are a real possibility. He argued that a vast overhaul of auditing is needed, including changes to fundamental concepts. Solomon said while auditing technology needs to change, the definitions and importance of verification and evidence in auditing must also be rethought.
For further information about the latest developments in audit and assurance, financial reporting, ethics and professional standards, corporate social responsibility and corporate governance visit the Financial Reporting section of the CPA Australia website.
