Multico Corporate Scandals

Multi-Code Electronic Industries (M) Berhad

Background of the company

Multi-Code Electronic Industries (M) Berhad is an investment holding company in charge in the manufacturing and supply of remote control auto alarms, central locks, power windows, reverse sensors, switches, stop lamps and key sets for motor vehicles. Their supplies the Original Equipment Manufacturers’ (OEM) product to the local and overseas automobile manufacturers.

Summary of the audit scandal.

In the year 2008, the current chairman Datuk Mohd Nazir Mahmud had lodged a police report against the Gordon Toh Chun Toh, former managing director because the misappropriate account amount of RM 37 million to the board and the company’s auditor of the company’s funds had been properly invested in foreign financial institutions. The external auditors, Ernst & young fail to detect the misstatement in the Multico account and unable to provide the sufficient evidences regarding the misappropriation of RM 37 million.

There are some issue trigger the conflict of interest because Goh was appointed by Gordon Toh Chun Toh, a Singaporean at the same date that Goh resigned from Multi-Code Electronic Industries (M) Berhad. Additionally, Ace Prelude Sdn Bhd brought a larger of shares amount of RM 1.1 million from Multi-Code Electronic Industries (M) Bhd that representing a stake of 24.9 percent at RM 1.60 per share. On the other hand, the amount of RM 37 million was triggered from the several transactions which are RM 28.6 million was deposited in a foreign financial institution, foreign investment fund of RM 3.5 million, registration of foreign company of RM 4.2 million and accrued interest income of RM 960,000.

There are more than one International Standard on Auditing, ISA can related to this Multico’s scandal such as ISA 315 (identifying and assessing the risks of material misstatement through understanding the entity and its environment) and ISA 240 (the auditor’s responsibilities relating to...