FACTS OF THE CASE

- Trive - an investment holding firm that provides management services to its

subsidiary companies.
- Founded by Dato’ Dennis Chuah, Lee Kah Kheng and Manson Bin Padin
- Started as ETI Tech (M) then became wholly owned subsidiary of ETICB
which became Trive
- Three co-founders formed the Executive Committee that assisted the
managing director with day-today operations and executing operational plans
- Aug 3, 2012 - Trive’s internal auditor, Finfield, resigned
- Trive assigned one of its internal accountants to handle the internal audit
function
- A breach of paragraph 15.27 of Main LR - a listed issuer must establish an internal audit
function which is independent of thee activities it audits.
FACTS OF THE CASE
- January 2013 - The internal accountant resigned
- April 29, 2013 - Preston was appointed as internal auditor
- July 9, 2014 - Kloo Point was appointed as internal auditor
- October 29, 2015 - public reprimand by Bursa Malaysia revealed weak
monitoring in Trive in relation to its internal audit function, AC, board of
directors as well as external auditor
- For the 18 month period ended in February 28, 2013 and the following
financial year, there was no evidence of internal audit because the internal
accountant and Preston did not meet the requirement paragraph 15.27(1) of
the Main LR
- 2013 annual report
- made misleading statements when they stated that internal audit has been outsourced.
- Stated that AC shall evaluate the quality of audit conducted by internal and external auditors
but Bursa Malaysia highlighted that these statements were not supported
- AC failed to carry out its duties with due diligence.
FACTS OF THE CASE
- All AC members who were implicated resigned between April 2013 and July
2014
- 2015 - Bursa Malaysia issue a public reprimand and some fines to 10 former
directors because they have responsibility in having an internal audit
- Five directors were found to have approved misinterpretations and misleading
statements in the Statement of Risk Management & internal control and AC
statement
- Trive also failed to have the statement of internal control be reviewed by its
external auditor
- Nov 30, 2012 and Feb 28, 2013, Trive defaulted on the credit facilities but
only announced on Jan 9, 2013 and Mar 25, 2013.
- June 26, 2013 - Bursa Malaysia reprimanded the company for failing to make
an immediate announcement.
- The public reprimand was issued even though the directors had not instigated or approved the breach, it is
their duty to uphold appropriate standards of responsibility and accountability in ensuring compliance
Facts of the Case
- Trive failed to issue its annual report within the time frame
- Within 4 months of their financial year end which is Feb 28, 2013, they issued at July 8, 2013
- Several changes in external auditors
- UHY - FY2013 and resigned in July 4, 2014
- Baker Tilly - resigned on October 23, 2015
- Siew Boon Yeong & Associates took over and the current auditor
- All external auditors expressed lack of adequate information provided to them
by the management or lack of evidence for them to be able to confirm the
balances in the accounts
- Feb 25, 2010 - Mansor retired
- Two remaining co-founder began selling stakes during “closed” time frame of
a month before quarterly results release which coincided in falling of its stock
price from RM 0.215 to RM 0.09
Facts of the Case
- June 18, 2013 - Dato Chuah resigned
- September 23, 2013 - Managing Director Lee resigned
- All founders left the company after it posted the worst loss of RM55 million in
FY2013 which also coincided with the period of the default in credit facilites
and litigation
- June 9, 2016 - Trive entered joint venture with Fortunate Solar technology
- Jan 26, 2017 - acquired local housing developer Pakadiri Sdn Bhd
- Oct 5, 2017 - acquired Daima Fujing New Energy Technology
- There were also multiple changes in the board
- Dec 4, 2017 - five directors were fined RM 2.55M and a reprimand due to
perform an impairment assessment of development expenditure and
furnished false or misleading statements
- Directives were issued to Trive in relation to its financial function
- Appointment of an external auditor with Audit Oversight Board to assess the adequacy of Trive’s fiancial and
Facts of the Case
- Assessment of the external auditor’s findings and recommendations by the
AC to the board
- Highlight in its subsequent audited financial statements to Bursa Malaysia the
action taken by Trive and its AC addressing directives.
- Shares fell 9.09% next morning
QUESTION #1:

Comment on the lack of separation of the board, management and shareholders

in Trive. Discuss how this can impact the company’s corporate governance.
-lack of separation of the board, management & shareholders in Trive
-3 co-founders (Dato’ Chuah, Lee & Mansor) formed the executive committee
-Executive committee assisted the managing director with day-to-day operations
& executing operational plans
-Dato’ Chuah & Lee were the 2 largest shareholders of the company
-corporation law: legal model of power sharing between the Board and
shareholders
-Board as centerpiece
-senior managers are hired by & are responsible to the Board
-Board accountable to the shareholder body at its general mtg
-managerial & Board accountability to the shareholder body is the best way to
ensure the efficiency, competitiveness & accountability of the corporation
-duties & responsibilities of boards & management are distinctly different
-board makes the decisions
-management implements them
-boards are taking a stronger interest in day-to-day management activities bec of
the ensuing impact of its fiduciary responsibilities
-board needs to be informed of how the org is being managed to protect its legal
responsibilities
-board role shld not cross over into performing
management duties
-boards need to focus on higher-level, future-oriented issues
-but there are times thay they need to get more intrinsically involved
-boards that routinely infringe upon Mx duties & responsibilities risk upsetting a
structure that is intended to help both of them
-relationship bet boards & Mx was strategically developed for high-efficiency
organizational success
-Boards address the broader, misión-focused activities, leaving the daily
managerial activities to the CEO & other managers
-improved corporate governance when each entity directs its attention towards its
own duties & responsibilities
Question #2:
Explain the role of an internal audit function and Audit Committee. Discuss the
significance of an internal audit function in the risk management of a company.
 Responsibilities of Audit Committee
-oversees financial reporting
-reviews conflict of interest situations & related
party transactions
-assesses the internal control environment
-evaluates the internal audit process
-evaluates the external audit process
-communication on audit, risk management & control
-must prepare an audit committee report which contains the following info:
composition of the audit committee
no. of audit committee mtgs
summary of the work of the AC
summary of the work of the internal audit function
-required to provide a statement about the state of risk Mx & internal control
-responsibility of the AC to decide on the remit of the internal audit function
including its objectives & activities
RESPONSIBILITIES OF INTERNAL AUDIT FUNCTION:
-make an objective evaluation of the governance, risk & control environment of the
company
-make a systematic analysis of business processes to identify the associated
controls in place
-make an assessment of how info on fraud & irregularities is reported including
providing feedback on adherence to the company’s code of conduct and/or code
of ethics
-ad-hoc reviews of other areas where there is a concern that affects financial
reporting or a threat on the safeguarding of the company’s assets
-reviews of the compliance framework & specific compliance issues
-Follow-up visits to determine the status of Mx implementation of plans to address
observations reported in preceding internal audit visits
-make value-added recommendations for more effective & efficient use of
resources within the company
INTERNAL AUDIT FUNCTION
-helps a company to accomplish its goals by bringing an objective & disciplined
approach to evaluate & improve the effectiveness of risk Mx, internal control &
governance processes
-”eyes & ears” of the AC
-serving as sounding board on deficiencies & providing advice on the remedial
measures to be meted out by the company
-internal controls are designed to address & manage risks identified
INTERNAL AUDIT FUNCTION
-stronger internal controls assigned to areas of high risk
-controls are moderated for processes that have a lower risk profile
-internal auditors are deploying enhanced methodologies such as predictive risk
analysis & advice on risk mitigation in the planning stages of a business initiative
-expected to deliver more value rather than noting what Mx could have done
differently after the initiative has been launched or completed
-must prepare an audit committee report which contains the following info:
composition of the audit committee
no. of audit committee mtgs
summary of the work of the AC
summary of the work of the internal audit function
-required to provide a statement about the state of risk Mx & internal control
-responsibility of the AC to decide on the remit of the internal audit function
including its objectives & activities
Trive had another compliance issue when they failed to submit their financial
statement on time, which again caused them to fall financially when trading for
their stocks was suspended. This is another weakness in the second line of
defense.
Question #3
Using the four lines of defence, assess the defences (or rather, their
failure) in Trive with reference to the three events that have occurred.
Trive Property Group Bernard was reprimanded and fined by Bursa Malaysia and
its directors for breaching its listing rules

Breaches on:

- Internal audit deficiencies

- Untimely announcements relating to credit defaults
- Delayed announcements of Financial statements
- Furnishing of false and misleading statements due to failure to perform
an impairment assessment’
Internal accountant assigned to do internal audit is a weakness in the third line of
defence (objective and independent assurance, e.g. internal audit, providing
reasonable assurance of the overall effectiveness of governance, risk
management and controls.)

An auditor should not come from the ranks of the company since there is a
chance that a person who is directly involved in the activities the company might
not be able to obtain an objective, independent assurance of the over all
effectiveness of governance, risk management and controls . As stated by Bursa
Malaysia, the Internal auditor must be independent of the activities it audits
Inability to perform an audit is again another weakness in the the third line of
defence, as well as a weakness in the second line of defense.

They were negligent with this responsibility and instead of making the appropriate
corrective measures, they actually even tried to cover up for their errors. This is
another demonstration of weakness in the second line of defence.
The company committed another non compliance by failing to announce credit
default with several banks. This is again a weakness in the second line of defense

The second line of defence consists of activities covered by several components

of internal governance (compliance, risk management, quality, IT and other control
departments). This line of defence monitors and facilitates the implementation of
effective risk management practices by operational management and assists the
risk owners in reporting adequate riskrelated information up and down the
organisation.
Supervision by Bursa Malaysia constitutes the fourth line of defense. Because
they are detached from the company, they can give an independent assessment
and ensure that the company conforms with existing guidelines. In addition , the
Securities Exchange Malaysia has stepped in, with additional sanctions for the
breaches committed by Trive as well as the appointment of an External Auditor
with the Audit Oversight Board.
Question #5
Comment on the multiple resignations of the external auditors, internal auditors,
and directors. What does this reveal about the corporate governance of the
company.
Question #6
Bursa Malaysia

● Frontline regulator of Malaysian capital market

● Duty to maintain a fair and orderly market in the securities and derivatives
● Efficient clearing and settlement arrangements
● Comprehensive and effective regulatory and supervisory framework
● Actively supervises the listed issuers and brokers
● Surveillance of trading activities
● Investor protection, transparency, high standards of conduct and governance,
market integrity and that all relevant persons can participate in our market
with confidence.
Securities Commission of Malaysia

● Regulatory body to develop and regulate th eMayasian capital market

● Rule-making
● Authorisation
● Supervision
● Enforcement aspect of the capital market
● Penalties imposed on Trive
○ Adequate to dissuade other companies from non-compliance
● Fair Actions against Trive and its directors
○ Applicable disciplinary proceedings
○ Options to settle or negotiate
● (www.bursamalaysia.com/misc/system/assets/5665/rules_of_bm_securities_chapter_15_281116.pdf