Noble Group

[Shiyi]

Singapore wraps up Noble probe with $12.6 million civil penalty
https://www.theedgesingapore.com/news/co...il-penalty

Unlike Hyflux or Eagle Hospitality, no directors nor senior management of Noble Group was under arrest. And none of them was fined for manipulating account books. A few of them in fact left the company with tens of millions of dollars in the compensation package.

Noble accounts should have been audited and signed off. So, E&Y auditors should be accountable as they allowed the inflated revenue/earnings from 2012 to 2016.

"Based on the investigations, Noble had applied an incorrect accounting treatment to these marketing agreements by classifying them as financial instruments instead of service contracts, and by recognising future fees from these agreements before rendering the services.


As a result, this inflated the reported earnings and net assets of both Noble and NRI, the subsidiary."

Ever heard of "garbage in, garbage out“ when it comes to auditing?

[cmeng_chan]

Singapore wraps up Noble probe with $12.6 million civil penalty
https://www.theedgesingapore.com/news/co...il-penalty

Unlike Hyflux or Eagle Hospitality, no directors nor senior management of Noble Group was under arrest. And none of them was fined for manipulating account books. A few of them in fact left the company with tens of millions of dollars in the compensation package.

Noble accounts should have been audited and signed off. So, E&Y auditors should be accountable as they allowed the inflated revenue/earnings from 2012 to 2016.

"Based on the investigations, Noble had applied an incorrect accounting treatment to these marketing agreements by classifying them as financial instruments instead of service contracts, and by recognising future fees from these agreements before rendering the services.


As a result, this inflated the reported earnings and net assets of both Noble and NRI, the subsidiary."

Ever heard of "garbage in, garbage out“ when it comes to auditing?

Agreed. Directors are not blameless. They have incentive to show good reported results as they are compensated by those performance metrics. But for auditors to allow 4 years of incorrect audit, that is very unprofessional. 

There is no charges of fraudulent intent here that result in jail term. It sounded like the directors and auditors are not even footing the $12m penalty too. Investors like us depend on the financial statements to make investments.  Anyway, I made substantial loss on Noble, even though it was one of the STI stock, which are usually consider blue chips quality.

[CY09]

Hi Cmeng,

I feel for you. Historically, it seems auditors here are able to "get away" from stuff. But it is difficult to pin down if it is fraudulent or just being unable/negligent in determining the value of a balance sheet line item.

I too had lost a six figure investment on another SGX listed company because i trusted the audited number then. However, in the next year, the company did an impairment in its PPE which wiped out the entire reported equity and the company became insolvent.

Take it as a lesson and to treat that the audited numbers done by Singapore auditors are of a low level.

[weijian]

Some time back, I learnt from d.o.g that audited accounts are nothing but snapshots of a business 4 times a year. Heck, for SGX listed companies, the vast majority are just 2x a year now (But I am not complaining).

As fundamental investors, there is a dependence on the numbers. But yet at the same time, battle scars draw caution to this dependence. Eventually, OPMIs have to learn and calibrate the usefulness of these audited accounts to their own decision making process.

I am not sure if there is anything meaningful with this term "blue chip quality". Any color can fail, any color can earn money. For disclosure sake, I earned big in blue and lost big in blue too.

I also think it is abeit unfair to treat "audited numbers done by Singapore auditors are of a low level". It seems to paint all Singapore auditors with the same brush. Auditors are selected, hired and paid by the very personnel they are supposed to audit. And most of them (auditors) mainly have overworked junior staff who are provided with numbers provided by vastly experienced CFOs/FCs (auditees). As shiyi has asutely pointed out, garbage in garbage out. This experiences, obviously are not only limited to Singapore. For disclosure sake, I too have lost big in companies that had its accounts questioned later on.

In summary, whenever I did my post mortem of my investing records, the reasons for my gains/losses were never color dependent nor blaming some part of the chain of work for been low quality/level. It is always about me - what was done right (and should be further scaled up in future) and what was done wrong (naivety? greed? laziness? denial?)

[Shiyi]

Some time back, I learnt from d.o.g that audited accounts are nothing but snapshots of a business 4 times a year. Heck, for SGX listed companies, the vast majority are just 2x a year now (But I am not complaining).

As fundamental investors, there is a dependence on the numbers. But yet at the same time, battle scars draw caution to this dependence. Eventually, OPMIs have to learn and calibrate the usefulness of these audited accounts to their own decision making process.

I am not sure if there is anything meaningful with this term "blue chip quality". Any color can fail, any color can earn money. For disclosure sake, I earned big in blue and lost big in blue too.

I also think it is abeit unfair to treat "audited numbers done by Singapore auditors are of a low level". It seems to paint all Singapore auditors with the same brush. Auditors are selected, hired and paid by the very personnel they are supposed to audit. And most of them (auditors) mainly have overworked junior staff who are provided with numbers provided by vastly experienced CFOs/FCs (auditees). As shiyi has asutely pointed out, garbage in garbage out. This experiences, obviously are not only limited to Singapore. For disclosure sake, I too have lost big in companies that had its accounts questioned later on.

In summary, whenever I did my post mortem of my investing records, the reasons for my gains/losses were never color dependent nor blaming some part of the chain of work for been low quality/level. It is always about me - what was done right (and should be further scaled up in future) and what was done wrong (naivety? greed? laziness? denial?)

Not only directors and auditors, none of the analysts in their research reports flagged the issue, even after the short-seller reports. That says a lot of our market.

[weijian]

Not only directors and auditors, none of the analysts in their research reports flagged the issue, even after the short-seller reports. That says a lot of our market.

This means this market is sufficiently inefficient.

Whether the glass is half empty or half full to the above observation, it depends on our perspective.

[cmeng_chan]

https://www.straitstimes.com/business/co...roups-case

The most pertinent question is whether such a quantum of fines would be enough to deter wrongdoing. After all, deterrence is the reason why civil penalties form an essential part of the regulatory framework.

Civil penalties in the Securities and Futures Act 2001 (SFA) Section 232 allows payment of a sum not exceeding three times the profit a person gained as a result of the contravention, or the amount of loss avoided, or $2 million.

The rather small amount of penalty imposed on Noble means the evidence of wrongdoing was not enough to show how much profit the company or its directors made from the breaches of law or how much loss they avoided.

Had that been the case, regulators might have sought tougher punishment for the perpetrators. The SFA allows imprisonment for a maximum term of seven years under section 204 (1).

[CY09]

The courts have to prove that the Directors profited from doing it. I dont think they were able to do so.

Another way of civil penalty is that for any Director caught with negligence, maybe they should be required to pay double the amount of salary/directorship they drew during the company's tenure. In this way, the stick will be tough enough that the thief will bite on the carrot recklessly