COMPANIES MUST SET UP SYSTEM TO ENHANCE ABILITY TO DETECT FRAUD

KUALA LUMPUR, Jan 11 (Bernama) -- Companies must set up the necessary systems and processes to enhance their ability to pre-empt and detect frauds, said Securities Commission Malaysia (SC) chairman Zarinah Anwar.

Zarinah said laws and regulations alone would not completely insulate
investors against poor governance practices or fraud, but it was important that
these were kept updated and that regulatory and enforcement agencies had the
requisite powers to institute action to protect innocent investors from
unscrupulous conduct.

She said although there was a cost involved, it paled in comparison with the
damage brought about by the fraud and the cost of investigating these
infractions.

"There are enough examples at home and abroad to show that fraud can quickly
destroy the reputation of even the best of companies.

"In many cases, fraud has brought about the demise of big and previously
reputable companies," she said in a keynote address at the launch of KPMG Fraud
Survey Report 2009 here Monday.


Zarinah said the crucial role of principal officers and auditors in
detecting fraud was reflected in the growing number of whistle-blowers that had
provided information to the SC under Section 320 of the Capital Market and
Services Act.

"The Act imposes a mandatory duty upon auditors and specific employees of
listed corporations to report breaches of securities law and the rules of the
stock exchange to the authority," she said.

She said since the introduction of the whistle-blowing provisions several
years ago, the SC has received 40 Section 320 reports mainly from external
auditors of listed companies.

Zarinah said some of these reports had led to enforcement action being
taken against the perpetrators -- often the directors and senior management of
the company.

"While we would like to see more come forward, it is encouraging to note an
emergent culture of public accountability and integrity," she said.

-- BERNAMA