Ethical failures

Singapore has earned  squeaky-clean reputation. You don’t have to worry – this is Singapore.

  • Singapore’s squeaky-clean reputation can be a bane sometimes.
    • Makes people complacent (towards compliance)
    • Scandals won’t happen here (blind faith)
    • No need to invest in required compliance costs (overconfident)
    • It is not easy to cheat and escape here
    • Controls are in place –regular audit by Public accountants
  • People in companies have drifted into rationalizations and legalism.
  • They are driven by numbers they want and need at almost any cost.
  • This drifts into ‘’everybody does this’’ and ‘’It’s not a question of ‘Should you do it?’                  it’s ‘Can you do it legally?’ ‘’

They do meet with legal requirement; but do not realize long term implication of technicalities.

They try to take advantage of loopholes.

Look at these signs of lapses

  1. Conflicts of interest
  2. Fear and silence (why should I?)
  3. Goodness in some areas atoning for evil in others
  4. Innovation like no other – too good to believe
  5. Pressure to maintain announed numbers (financial results)
  6. Weak board (not active directors)

The process designed and implemented by senior managers who are charged by the shareholders with effectively managing the organization on their behalf.

In undertaking these responsibilities, managers need to ensure strong corporate governance exist, for obtaining reasonable assurance that the company is performing with agreed strategy – the purpose the business

Therefore, controls are designed to minimize the risk that company is exposed to those risks that could prevent the company from meeting those strategic objectives.

  • 5 basic components (IAS 315)
    1. Control environment – attitude, awareness and actions of the board, management, owners & employees
    2. Risk assessment process – identified and confront the risk rather than ignore it
    3. Information system – including related business processes and communications (detailed understanding of the procedures that govern both computerized & manual system of records, process & report business transactions in the financial statement)
    4. Control activities – Updated policies and procedures that help ensure management’s directives are carried out correctly
    5. Monitoring of controls – establishment of Internal Audit to monitor and initiate remedial action when controls breakdown
  • Lack or lapse of controls happens when you fail to see what’s right and what’s wrong.
  • Bankers become sales person for selling more loans (famous prime lending problem)
  • Culture of the company plays a vital role – no one wants to hear the bad news. The list is too long – Enron, Arthur Anderson,, Nortel, Fannie Mae, Citiraya, NKF

Suresh Shah, Pathfinders Enterprise


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