ACCOUNTING FRAUD UPDATE: MEMS TECHNOLOGY BHD (MEMS)
It is quite shocking to hear that MEMS Technology Bhd, despite being publicly reprimanded and fined heavily for the breach of Listing Rule (see below paragraph) in October 2008 has still not complied with the requirements of the SC. The Securities Commission (SC) has for the second time this year instructed microelectronics maker MEMS Technology Bhd (MEMS) to comply with the applicable financial reporting standards by adjusting its reissued financial statements dated October 7 2009.
Now, SC is giving the ACE Market-listed company 14 days to do so.
What is this all about:
- The statements to be ADJUSTED are MEMS’ financial years ended July 31 2007 and July 31 2008 as well as the quarterly report for the six months ended January 31 2009.
- MEMS is also required to announce to Bursa Malaysia the adjustments made, reasons for the adjustments and their detailed effects on the company’s financial statements.
- The decision came after MEMS’ admission in its reissued financial statements that they were not in compliance with the financial reporting standards, FRS118 “Revenue”. The SC viewed MEMS’ non-compliance with the FRS118 “Revenue” “very seriously”.
- On August 4 2009, the SC directed MEMS to rectify and reissue its accounts for the financial years ended 2007 and 2008. MEMS was also to rectify and announce to Bursa Malaysia its unaudited condensed consolidated income statements for the six months ended January 31 2009.MEMS was to rectify the financial statements by excluding RM49.183 million from its revenue for all the three financial statements.
Accounting fraud:
Rational for the adjustments instructed by the SC:
- Investigations by the SC revealed that the group’s revenue of RM53.699 million reported in the 2007 financial statement contained bogus sales of RM13.007 million, while the revenue of RM71.994 million reported in 2008 contained RM24.161 million sales which did not take place.
- For the six months ended January 31 2009, MEMS reported revenue of RM37.366 million, of which RM12.015 million sales had not been transacted.
- These sales were recorded in the financial statements of MEMS’ wholly-owned subsidiary, Senzpak (M) Sdn Bhd.
Earlier news about MEM Technology Bhd (ACE –ex Mesdaq company):-
Extracted from the Bursa Saham’s website dated 6/10/08, MEM Technology Bhd (Mesdaq) has been publicly reprimanded for the breach of Rules 9.22(1), 9.23(1), 9.24 and 9.16(1)(a) of the MMLR and were imposed fines on the following directors of MEMS in respect of the Company’s breaches of Rules 9.22(1), 9.24 and 9.16(1)(a) of the MMLR aforesaid :-
| No. | Director | Penalty Imposed |
| 1 | Dato’ Ahmad Kabeer bin Mohamed Nagoor Non-Independent and Non-Executive Chairman |
Public Reprimand and Fine of RM89,000 |
| 2 | Kathirgamasundaram Sooriakumar Chief Executive Officer |
Public Reprimand and Fine of RM197,500 |
| 3 | Tan Yeow Teck Executive Director / Chief Financial Officer |
Public Reprimand and Fine of RM197,500 |
| 4 | Bryan Keith Patmon Executive Director |
Public Reprimand and Fine of RM89,000 |
| 5 | Ooi Boon Leong Non-Independent and Non-Executive Director Audit Committee Member |
Public Reprimand and Fine of RM89,000 |
| 6 | Lim Eng Thong Non-Independent and Non-Executive Director (Alternate Director to Ooi Boon Leong) |
Public Reprimand and Fine of RM89,000 |
- Besides the public reprimand, Bursa Securities also insists that MEMS is required to carry out a limited review on the Company’s quarterly report submission. The limited review must be performed by the Company’s external auditors for four quarters commencing from the quarter subsequent to the date hereof. The quarterly report announcements must state that it has been reviewed by the Company’s external auditors.
1.0 According to SC, MEMS had breached the following:
- Rule 9.24 of the MMLR for failure to submit Company’s annual audited accounts and annual report for the financial year ended 31 July 2007 (“AAA 2007” and “AR 2007”)) on or before 30 November 2007 and 31 January 2008 respectively. The AAA 2007 and AR 2007 were only submitted on 23 April 2008 and 2 May 2008 respectively. Further, the external auditors, KPMG had expressed a disclaimer opinion in the AAA 2007 (“the Disclaimer”) and MEMS was classified as a Guidance Note No. 3/2006 company on 28 April 2008 based on the Disclaimer;
- Rule 9.22(1) of the MMLR for failure to submit Company’s quarterly report for the financial period ended 31 October 2007 (“QR 1/2008”) and 31 January 2008 (“QR 2/2008”) on or before 31 December 2007 and 31 March 2008 respectively. The QR 1/2008 and QR 2/2008 were only submitted on 28 April 2008;
- Rule 9.23(1) of the MMLR for failure to submit Company’s research report for the financial period ended 31 January 2008 (“RR 31/1/08”) on or before 31 March 2008. The RR 31/1/08 was only submitted on 27 June 2008; and
- Rule 9.16(1)(a) of the MMLR in respect of the Company’s announcement dated 27 September 2007 on the fourth quarterly report for the financial year ended 31 December 2007 (“QR 4/2007”) which failed to take into account the adjustments as stated in the Company’s announcement dated 28 April 2008.
MEMS had reported an unaudited profit after taxation of RM21.473 million in the QR 4/2007 (“Unaudited Results”) which was announced on 27 September 2007. However, the Company had on 23 April 2008 reported an audited profit after taxation of RM13.110 million in the AAA 2007 (“Audited Results”). The decrease in the profit after taxation between the Unaudited Results and the Audited Results for the financial year ended 31 July 2007 of RM8.363 million represents a deviation of approximately 38.95% (“the Deviation”).The Deviation was mainly due to the reversal of RM19.72 million revenue arising from the Board of Directors’ decision not to recognize the revenue after KPMG has expressed its concerns as announced on 27 November 2007.
2. All Of the aforesaid directors were found to be in breach of Rule 16.11(b) of the MMLR for permitting either knowingly or where they had reasonable means of obtaining such knowledge the Company to commit the breaches of Rules 9.24, 9.22(1) and 9.16(1)(a) of the MMLR aforesaid.
3. Bursa Securities views the above contraventions seriously and hereby cautions MEMS and its Board of Directors on their responsibility to maintain appropriate standards of corporate responsibility and accountability in order to achieve greater disclosure and transparency to its shareholders and the investing public.
- MEMS TECHNOLOGY being directed by SC To Rectify Its Financial Statements
- Bursa fines and publicly reprimanded MEMS TECHNOLOGY
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October 27, 2009
Tags: ACCOUNTING FRAUD IN MALAYSIA
Posted in: Malaysia & Asia Pacific
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