Structural flaws in the accounting system must be addressed, an accounting professor said yesterday at a seminar in Taipei. He also urged accountants to exercise professional self-discipline to reduce frauds and strengthen corporate governance.
Although accountants are hired by companies to verify financial statements, these professionals should manifest their independence and competence to hold their clients accountable to the companies' current and future shareholders, said Ko Chen-en (
Ko said the defective accounting system can become an accomplice to corporate financial irregularities when company leaders intend to cover up wrongdoing. Ko is also director-general of the Corporate Governance Association Taiwan (中華公司治理協會).
"Because the party that pays money [to accountants] and the party that [the accountants] should be responsible to are different, these professionals face difficulty in maintaining their supervision quality when they're sometimes under pressure from higher-ups," he said.
Speaking at a crowded seminar held by Standard & Poor's Ratings Services, Ko said a better way would be for companies' auditing committees, composed of independent board members, to directly communicate with accountants.
Ko spoke to review the aftermath of Procomp Informatics Ltd's (
Nearly 10,000 of Procomp's more than 38,000 investors had been affected by the default, Vice Minister of Finance Gordon Chen (
Several Procomp investors demanded the government compensate them for their losses yesterday at a press conference organized by Democratic Progressive Party legislators Charles Chiang (江昭儀) and Chen Mao-nan (陳茂男).
Liang Hsi-tsung (
"We bought Procomp's corporate bond because we believed that the Securities and Futures Bureau conducted a detailed examination before allowing Procomp to raise more capital," Liang said.
Therefore, Liang and other affected investors said they would also demand compensation from the Securities and Futures Bureau and from the Taiwan Stock Exchange Corp for alleged negligence.
Yeh was detained on June 27, and four accountants were punished last week by the Financial Supervisory Commission for their negligence in certifying Procomp's financial documents.
"All these problems boil down to morality," Ko said.
To nip such fraud in the bud, Ko said, corporate governance should be stressed and become a reference indicator for the government to manage financial institutions and listed companies.
"The Procomp fraud is only a beginning, not an independent case," said Tony Tsai (
"I believe this case has sent shockwaves through and served as a warning for the investment trust sector," Tsai said. He said the sector requires further risk controls or it will risk rejection by investors.
(With additional reporting by Debby Wu)
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