The Danger of These Accounting Woes

Posted on Reuters, Malaysian accounting woes could hurt market surge - Reuters

KUALA LUMPUR, June 4 (Reuters) - Malaysia leads the pack in a rally of Southeast Asian stock markets, but concern over a rash of accounting irregularities at some listed firms could hurt sentiment and thwart further gains, investors say.

• "Transmile was a highly credible company with a credible board and credible shareholders that was doing very well and all of a sudden, this happens," said Abdul Wahab Jaafar Sidek, chief of Malaysia's Minority Shareholder Watchdog Group (MSWG)
  
  "This affects not just the credibility of the company and its directors but also Malaysia's capital markets."
  
• State-controlled Bumiputra-Commerce Holdings Bhd (BUCM.KL: Quote, Profile , Research), Malaysia's second-largest lender, was in the spotlight after it commissioned a review of the 2005 financial statements of its newly-bought Southern Bank Bhd unit.
  
  The review showed up inappropriate accounting treatment that resulted in an overstatement of Southern's net assets by some 160 million ringgit.
  
  Last week, Bumi said the offending statements had been corrected by June 30, 2006, and no more amendments were needed.
  
• Small technology firm Wimems Corp Bhd (WIME.KL: Quote, Profile , Research) recently said its external auditors had quit, it wanted more time to submit its 2006 accounts and that its financial sponsors, CIMB Bhd (BUCM.KL: Quote, Profile , Research), had resigned.
  
  As in the case of Transmile, shares of Bumiputra and Wimems took a beating. But unlike Bumiputra, shares of Wimems haven't staged a fight back: mired at 12 sen a share, the firm is worth just a fifth of the value of its October high.
  

What I would really like to know is the issue intent!

Was there an attempt to deceive the minority shareholders?

If so.. logically speaking, who wants to invest in companies one cannot trust?

I do hope that those who were found guilty of wrong doing to be prosecuted!