Internal audit works as an insurance against corporate failures

RECENT developments in the local market involving Sakae Holdings and ecoWise Holdings have illustrated just how important it is that companies have strong internal controls in place, as well as a robust internal audit function that can detect gaps and weaknesses which could compromise a company's financial position.

In addition to ensuring strong internal audit, companies serious about enhancing their governance should consider adding a relatively new function within their senior ranks - a chief integrity officer whose job would be to spearhead integrity programmes and ensure an ethical culture is institutionalised within the company.

In Sakae's case, external auditor Deloitte & Touche had said last year it could not obtain appropriate audit evidence and certain information related to the loss of control of a subsidiary. Deloitte also did not have enough evidence to verify the existence and recoverability of gross receivables amounting to S$5.4 million due from this subsidiary, and another $1.3 million due from a non-controlling shareholder of this subsidiary.