Recent Corporate Scandals in Malaysia Essay

Air-freight firm Transmile Group Berhad hit the business news advertize for the wrong reason in 2007. The share price suffered turbulence when it was revealed that auditors of Deloitte & Touche were ineffectual to substantiate the accounts of year 2006. The fraud was discovered after a supernumerary audit conducted by Moores Rowland Risk Management Sdn. Bhd. , stating that the conjunction has been overstating its revenue among the periods of 2005-2007 to reduce the dinero loss shown in its monetary literary arguments and total magnification being RM 530 million.Transmile had recorded revenues which were actually companies that were set up by its former(prenominal) chief operating officer Gan Boon Aun. Share price plummeted from its RM14. 40 high to meet RM0. 37 as of 2nd of September, wiping out RM 1. 2 one million million million gains of the cash in ones chips both years in its market capitalisation. The company is now separate as a PN-17 status company, given to comp anies that are under financial distress. The current board of directors has now filed a writ of summons and statement of claim in the Kuala Lumpur High Court against its former CEO. Next to the Transmile debacle is the government funded regional industrial park called Port Klang Free regularise (PKFZ).Initially, the project was to be modelled after the successful Dubai-based Jebel Ali Free Zone (Jafza) which offered large manufacturing and distribution facilities. The scandal began when the project had cost overruns of up to RM3. 5 billion and the land where the PKFZ is built on was bought over from another private company owned by a politician at an exorbitant amount. Jafza was trustworthy to manage PKFZ pulled out, citing strategic purposes as a reason, but following after, a local daily newspaper soon uncovered that Jafza pulled out overdue to red tape, political interference and many other reasons.The Malaysian politics then engaged the services of PriceWaterhouseCoopers t o conduct an independent audit on PKFZ and its findings led to the arrest of Datin Paduka O. C. Phang, former Port Klang Authority general coach-and-four and several other politicians by the Malaysian Anti-Corruption Commission. As seen in two cases above, corporate scandals have managed to delude its way around many heads-up eyes, mainly due to existence of agency conflict whereby insufficient actions were interpreted to ensure transparent reporting.In Transmiles scandal it is obvious that on that point is manipulation of relate party transactions by former CEO Gan Boon Aun and clearly involved conflict of interest intended to be concealed by falsifying records. Related party transactions list to the expropriation of the companys assets by controlling shareholders or insiders resulting in electrical shock on corporate arrangement and minority shareholders, whereby the company receives less net benefit from a related party transaction than could have been obtained from a tran saction with an unrelated similitude.On the other hand, PKFZ similarly involved related party transactions and asset shifting, conduct to personal gains and political pressure. Jafzas initial transactions and then pulling out was a series of actions evidently pertain the existence of motives against the interest of the company. The poor financial perplexity by directors vitally contributed to the leeway for fraud, as management should strongly strengthen company regulations on reporting transparency. Distinctive wish of corporate cheek resulted in these occurrence of fraud.Due to the absence of such, there are lack of rules and processes or laws by which the company should have abided as to assure ripe operation, regulation and control of business. Weak corporate governance allowed unmonitored transactions leading to personal gains at the expense of the companys interest, along with unenforced proper disclosure of conflict of interest. The absence of good corporate governance allows the tolerance of corporate abuses hence possibility of fraud to occur should be effaced by imposition of laws and regulations to enforce corporate governance.