vis-a-vis corporate collapses?
By Azhar Razak
A senior Partner at Price Waterhouse
Coopers (PWC), Sri Lanka, confesses that, their
reputation has been tarnished and the Audit
profession put into question, after the Satyam saga.
PWC, India, who were the Auditors of Satyam
Computers, headed by its Chairman Ramalinga Raju,
failed to spot the Accounting irregularities.
“Being one of the Big Four, we have had a number of
calls from our Sri Lankan clients, wanting to know
what happened with Satyam, and it is embarrassing
and sad, that we have been involved in this,” a
senior Technical Partner at PWC, Shamura Hadgie
Of late, the role of Auditors has come under the
scanner, after a series of accusations of
manipulation of Accounts and debacles in some of the
largest conglomerates around the world. The Industry
is now under scrutiny, following a string of
corporate collapses, and has seen a wake up call for
extra checks to be made, before an Audit Report is
The good thing is, Sri Lanka has not yet experienced
a collapse of a listed company, unlike India, whose
Satyam is under investigation for malpractice.
However, there is still a sense of nervousness that
prevails within the Sri Lankan Audit Industry.
“Auditors, typically, will look at a wide range of
data, and then analyse it for items that look out of
place. If everything appears to look like a genuine
transaction, then, I guess, it will be hard to spot
it, even at an Accounting level. For example, if
your baseline for normal is corrupt in the first
place, it’s obviously hard to spot those events that
are out of the ordinary,” another Partner of the
‘Big Four’, who wished to remain anonymous,
He said that, an Audit also places a certain amount
of trust in the information furnished by a client
under normal circumstances, which differentiates it
from an investigation.
There are three ways of Auditing: Verification,
Confirmation and Certification (declaration by the
company being audited), depending on the extent of
Audit and the information to be verified.
Users of Audited Financial Statements
A number of separate groups, generally called
Stakeholders, have an interest in a company’s
Accounts: Management, Shareholders, Lenders,
Stakeholders and, where relevant, Regulators. While
all of them have a genuine interest in understanding
the Business and its prospects, the motivation may
not be the same in every case. Management has an
incentive to paint a positive picture to the other
groups, while Shareholders and Creditors need an
objective view. Therefore, it is the moral
responsibility of the Auditors, to ensure
transparency in Financial reporting, and to ensure
that, Financial Statements, in fact, represent a
‘true and fair view’.
“Audit Reports are prepared in convergence with a
set of Accounting Standards However, certain crooks
within the Management hierarchy, cramming to boost
profit margins, sometimes try to find loopholes in
Accounting Standards. Therefore, rules governing
certain Accounting Standards have to be updated on a
going concern,” Reyaz Mihular, a Partner at KPMG
When asked whether the loopholes used to window
dress Accounts have all been closed, he said that,
the rules are increasingly becoming more and more
stringent, so that, people wont be able to play
“It is very hard to have a perfect set of Standards.
Only a crook would know the tricks of his trade
well, and therefore, it’s not easy for the Standard
setting up committee members to find all these
tricks and close them. That is why Standards are
reviewed frequently,” Mihular said.
However, the application of Standards such as the
usage of Fair Values/Market Values in Accounting can
be distorted, owing to the amounts being only
“There is a practical problem in ascertaining these
values, since we do not have a readily available
Capital Market, so, sometimes, certain figures may
be subjective,” Shamura Hadgie retorts.
Rating agencies, among many others, are one of the
most significant and important users of Audited
Statements. The Ratings assigned on companies, by
these agencies, are very much dependent on the
reliability of the Audited Reports.
“Ratings are always dependent on the role of
Auditors, especially, for structured Finance
instruments, although, we make our own checks.
However, the integrity of the Auditors and their
transparency would, to a certain extent, also
represent a part of our view,’ says Country Head-
Fitch Ratings Lanka Ltd, Chanaka Wickramasuriya.
He added that, the Audit process should be done on
an ongoing basis, rather than a once-a-year issue,
so that, Audit firms would have a good grasp of a
“Normally, the remuneration given to Audit staff is
often criticised to be less than average, and not
what they should get, based on their qualifications
and experience. So, you can’t expect these Auditors
to dig into every extraordinary transaction, when
their own motivation levels are low,” he claimed.
The scandals that have been uncovered in the past
few months, have also reminded the Auditors of their
responsibilities and obligations, to keep up with
the spirit of professional skepticism, Shamura
Hadgie further explains.
“It is the responsibility of the Auditors to
overcome some natural tendencies, such as over
reliance on client representations and biases, and
to approach the Audit with a skeptical attitude and
questioning mind. It is also essential that, the
Auditor must set aside past relationships and not
assume that all clients are honest,” she said.
Auditors utilise sampling techniques, to test
certain transactions, during the performance of an
Audit or Review, since it would be nearly impossible
and too expensive to test every single transaction.
The sampling may be aimed at the largest items or
the items on the Financial Statements that pose the
most risk of misstatement. If material errors in the
Financial Statements are discovered, the Auditors
will direct Management to correct them.
“In our experience, the Auditors, sometimes, do not
highlight some exceptions in their Audit Reports
and, as a result, some of the qualitative aspects of
a Firm cannot be ascertained,” says Financial
Analyst- RAM Ratings Lanka, Prakash Jerome.
He said that Auditors have sometimes failed to take
an independent approach and were not sufficiently
bold in standing up to their views.
“They should be able to call a spade a spade. The
main focus should be on Corporate governance,” he
He also welcomed a rotational policy approach to be
undertaken by companies, when appointing Auditors,
which would enhance transparency.
However, errors are much more likely to be
discovered during an Audit, than are fraud.
“Fraud schemes are crafted to purposely exploit
Accounting System and Controls, and therefore, it is
more difficult for an Auditor to find them. Since
Auditors are not all-knowing beings, the assurance
that the Financial Statements are correct, could
only be a “reasonable” assurance, not total
assurance,” concludes Reyaz Mihular.
Nokia to empower
customers with affordable connectivity
Will bridge digital divide in Sri
Lanka through wide portfolio and enabled devices- GM
was appointed General Manager of Nokia for Emerging Asia in
April 2006. In this role, he is responsible for Nokia operations
in Bangladesh, Sri Lanka, Nepal, Bhutan and the Maldives. He is
also responsible for the development and execution of Nokia’s
strategies in these emerging markets.
A Chartered Accountant by profession, Prem obtained his tertiary
qualifications from Otago University, Dunedin, New Zealand and
his MBA from Australian Graduate School of Business in Sydney.
He was founding Chairman and President of Finland Australia
Chamber of Commerce.
Following are excerpts of his interview with The Nation
By Indika Sakalasooriya
This week Prem Prakash Chand, General Manager, Nokia, for Emerging Asian
markets, currently based in Dhaka, Bangladesh, shares his views on
Nokia’s strategy for the Sri Lankan mobile market, and other emerging
markets in Asia, with The Nation Economist.
Q: As an emerging market, how important is the Sri Lankan mobile
market to Nokia?
A: Sri Lanka presents a huge opportunity and potential for Nokia
with regard to our growth strategy in Emerging Asian markets.
Considering the growing need for communication and access to
information, our aim is to bring affordable connectivity to the people
of Sri Lanka. The recent growth in tele-density in Sri Lanka has been
markedly urban-centric. We see future growth opportunities for Nokia, as
more and more semi-urban and rural areas will come under the
We are also looking forward to bringing the benefits of internet and
email to a wider Sri Lankan population. The current internet penetration
rate is around 1.4%, and for majority of Sri Lankan, as in other
emerging markets, their first internet experience would be through their
mobile devices. We, at Nokia, look forward to bridging the digital
divide in Sri Lanka through our wide portfolio of internet and email
enabled devices, at all price points.
Q: Are there any special characteristics that Nokia has identified in
the Lankan mobile market when compared to other emerging markets?
A: The high literacy rate in Sri Lanka compared to other countries
in the region, is an advantage as we transform ourselves to an internet
services company. Consumer mindset and readiness towards internet
services and convergence is a unique characteristic of the Sri Lankan
market. Sri Lanka is also the only market under the Emerging Asia sales
unit, offering 3G at this point. Nokia offers a wide portfolio of 3G
devices ensuring superior experience for Sri Lankan consumers.
In Sri Lanka, the biggest challenge for us would be consumer’s
affordability in the face of rising prices of food and other essentials.
High incidence of customs duty and taxes also add to the cost burden on
consumers and all as such pose a challenge to us.
Q: If I’m not mistaken, the first Nokia Store was opened in Sri Lanka
last month. What took it such a long time to open this single store?
What is the purpose it would serve?
A: The first Nokia Store in Colombo was launched in January, at
230/1, Galle Road, Colombo. We started authorised distribution in Sri
Lanka in 2006, and have been continuously looking into ways to better
serve the Sri Lankan market. Our initial focus was to extend our
distribution reach, and establish a Care network in Sri Lanka. The next
phase of ensuring a ‘True Nokia Experience’ begins with the launch of
Sri Lanka’s first Nokia Store.
Nokia Stores are designed to provide consumers with a unique
three-dimensional experience with the Nokia brand. We do this with great
care and great attention to detail. We always strive to raise the bar
and look at ways to delight the consumers, and provide them with
exceptional Nokia experience. The newly launched Nokia Store is another
initiative to deliver on these promises, and will herald a new era in
shopping experience for consumers in Sri Lanka. It will offer a
world-class retail environment, and a wider range of Nokia devices and
accessories with expert advice and the assurance of authenticity.
Q: The grey market is a huge problem when we talk about the mobile
telephone industry in Sri Lanka. Has Nokia done any research on this?
How do you plan to tackle this situation?
A: Certainly, illegal or unauthorised devices coming into the Sri
Lankan market have a negative impact on consumer experience, besides
depriving the government of much needed tax revenue. We always encourage
our consumers to buy original Nokia handsets and genuine accessories, so
that they can enjoy the true Nokia experience.
With the support of our authorised distributor Softlogic, we are
currently reaching consumers through a wide network of retail outlets.
We will continue to focus on building a stronger distribution network to
make our devices more accessible across Sri Lanka.
To control the growing grey market, firstly we need to work closely with
regulators to lower the incidence of duty and taxes. Secondly, we need
to make our devices readily available through a strong distribution
network. Raising consumer awareness on the benefits of buying original
Nokia handsets, and ensuring the best in providing high class customer
service through Nokia Care, are some of the other strategies we need to
Q: How successful has been the localisation of Nokia handsets. For
example: using native language of a country, in Sri Lanka? Have you
achieved the target market segment?
A: Consumers are at the forefront of everything we do at Nokia.
Localisation of our devices e.g. offering user interface in native
language, is a key component of our strategy to make our devices more
accessible and user friendly to our local consumers. Our user interface
in native language has received very positive response from consumers,
and is also a key differentiator from competitive offers. We believe in
connecting people and localisation is always a priority for us to offer
our consumers an opportunity to express and communicate in their own
Q: Why does Nokia no longer want to identify itself as a mobile
device manufacturer? Why does it want to be known as an internet
consumer services company instead?
A: Asia has been the mobile communications leader since the industry
took off in the 1990s. Today there are more than one billion people
around the world using a Nokia device. Our global reach into some 150
countries, and our extensive consumer research, gives us more insight
into people’s use of technology than any other company. With this
insight, and with a vision of an industry that will be transformed by
bringing complete mobility to the internet, Nokia created a Services
Unit at the beginning of 2008. Soon after this, we identified and
decided to focus on five key areas that we believe have the greatest
consumer demand and business potential: Maps, Music, Messaging, Games
Mobile is the fastest growing communication device in the world, with a
global subscriber base of approximately 4 billion. Mobile devices are
more affordable and accessible compared to PCs. Hence access to internet
for the next billion people, and the ICT revolution, will be through
The convergence of the internet and mobile is slowly but surely,
changing the way people communicate, share, search and consume. This
change is an important driver in Nokia’s services strategy. Today,
Nokia’s vision is not just to offer consumers leading devices, but
complete solutions that enhance consumers’ experiences. Our broader
services strategy, truly differentiates Nokia’s offering from competing
solutions out in the market.
Q: What would be Nokia’s strategy for the emerging markets in the
next three-four years?
A: Emerging Asian markets namely, Bangladesh, Sri Lanka, Nepal,
Maldives and Bhutan offer exciting opportunities for growth in
telecommunication. Nokia is exceptionally well placed to satisfy the
different needs of people throughout emerging markets, with an
unrivalled portfolio. We will continue to focus on ease-of-use, high
quality, functionality, right features, design and local relevancy in
our devices and services.
We plan to work in partnership with the regulators to look at how we can
reduce the ‘cost of ownership’ to the consumers, by lowering the
incidence of customs duty and tax. In coming days, we need to work in
partnership with telecom operators and regulators, to make technology
affordable and cost effective.
When it comes to internet access, emerging markets have one of the
biggest challenges of them all - lack of infrastructure. For many,
accessing the internet through their mobiles is the only connection they
can have with the outside world. Mobiles are more accessible than PCs,
and now the PC is no longer necessary to access the internet. The next
billion internet users of the world will be very different from the
first billion. We are well set to offer internet access to the next
billion users in emerging markets through our devices.
We believe in ‘Progressing together’. Our aim is to empower customers in
Emerging Asia by providing affordable connectivity and hence the
opportunity for consumers to create, consume and share information and
content on the go and progress in their lives.
NSB former head gets Lifetime
The Governor of the
Central Bank of Sri Lanka has awarded S.H. Piyasiri, the former
head of National Savings Bank (NSB) the Lifetime Bankers’ Award
for the year 2008. The presentation of life time awards in
banking is an annual event organised by the Colombo centre of
the Chartered Institute of Bankers London presently known as IFS
School of Finance.
S.H. Piyasiri is presently the Deputy Chairman of the Aspic
He joined the NSB as a Management Trainee in 1974, and was
elevated from time to time to the posts of Assistant General
Manager, Deputy General Manager, Senior Deputy General Manager
and Additional General Manager in the NSB. In 2006, he was
appointed as the General Manager/ Chief Executive Officer of the
National Savings Bank. While serving in the NSB, he had held
various positions in other subsidiary companies of NSB and other
institutions as well. He had been the Director of NSB Fund
Management Company, Director of Institute of Bankers, Sri Lanka,
Director of Financial Ombudsman of Sri Lanka and a Director of
Education Employees’ Co-operative Thrift and Credit Society
Ltd., Trustee of NEHA Trust and a Trustee of Employees’
Provident Fund, NSB.
Prior to joining the NSB, Piyasiri had served as an Assistant
Lecturer in Economics at Peradeniya University. After serving
for 2 years, he joined the University of Colombo at the same
capacity and concluded his academic carrier in 2004 and joined
the Banking sector.
Piyasiri is an Honors graduate of Economics with second class
upper division (Banking & Currency) obtained from the University
of Ceylon, Peradeniya. He obtained his postgraduate degree, MBA
from the Irish Business School in London. He became an Associate
of the Chartered Institute of Bankers in September 1995. Within
a very short period of 4 years he was then recognised as a
fellow of the Chartered Institute of Bankers, London, which is
now known as IFS School of Finance.
He has also obtained the Post Graduate qualification in
Consultancy Skills from the Post Graduate Institute of
Management of Sri Jayewardenepura University. Piyasiri had been
the President of the Colombo Centre of the Chartered Institute
of Bankers London for two consecutive years as well.