PUTRAJAYA (Sept 15): The Securities Commission (SC) told the Court of Appeal that the High Court had erred in equating its Audit Oversight Board (AOB) inquiry to an oral hearing.
The SC represented by counsel Lambert Rasa Ratnam also informed the three-member appellate bench that the High Court was also wrong in granting the judicial review application by audit firm Afrizan Tarmili Khairul Azhar (AFTAAS) in August last year.
Lambert said prior to the suspension order in 2019, the AOB also found faults in AFTAAS in 2011, and it had to take the action in 2019, following a second probe by the AOB.
“The suspension for a 12 months period is justified, as the AOB found the firm had failed to comply with the auditing standards. We say that eight years prior to that, the AOB found several deficiencies and there could be arguments (as to) why they were treated lightly (initially) and should be treated severely (the second time around).
“The SC and AOB say the suspension is justified and the respondents (AFTAAS and its partners) had failed to argue out of a case against them under the rubric of legality and proportionality,” he said.
Lambert said it is considered outrageous that the High Court accepted the respondent’s argument and granted the relief sought, as it is wrong for them to consider an inquiry to an oral hearing.
He said the AOB inquiry need not be in the form of a face-to-face session with the regulatory authority.
He added that an inquiry is part and parcel of the AOB’s investigative process and hence, a judicial review cannot be made against an investigation.
Lambert further said that in the AOB probe, it found that the firm is using an outdated audit program and discovered it completely lacked auditing equipment.
On Aug10, High Court Justice Datuk Seri Mariana Yahya (now Court of Appeal judge) granted AFTAAS judicial review application, where it set aside the 12-month sanction imposed by the SC’s AOB for alleged non-compliance with auditing standards beginning Nov 2019.
Following the sanctions having been lifted by the court, AFTAAS had in June this year also filed a claim of RM35 million in damages against the SC, as the regulatory body had prohibited it from taking in new clients and completing its audit for other existing clients.
Meanwhile, AFTAAS counsel Datuk K Kirubakaran in his reply said that in accordance with proper procedure, the inspection should be performed first, before the draft inspection report (DIR) is prepared and sent to the auditor for comments.
He said the auditor commented on 35 pages, and the inspection officer ought to consider the comments first before coming up with the final inspection report (FIR) and then holding the inquiry as required under Section 31 W of the Capital Market Services Act.
“We say the comments by the auditor are not taken into consideration, and hence, we submit that this violated our client’s right to natural justice and the right to be heard,” he added.
Kirubakaran pointed out the other case of another audit firm, whereby the SC and AOB had followed the rightful procedure and questioned as to why this was not done on their client’s firm.
The counsel said the word “siasatan” which means investigation in the Act, also meant that they are required to hear the other side first before arriving at a decision.
For these reasons, Kirubakaran who appeared with Sukhwinder Singh said the High Court was right in setting aside the sanctions imposed by the SC AOB.
Justice Datuk Mohamad Zabidin Md Diah, who led the bench along with Justices Datuk Azizah Nawawi and Datuk S Nantha Balan, said they need time to deliberate the matter before arriving at a decision on a date to be fixed.
“We have to go through the cause papers before arriving at a decision,” Justice Zabidin said.
A case management date for this has been fixed on Oct 12 before Court of Appeal deputy registrar Radzilawatee Abdul Rahman.