The defense also established that extra care had been taken to ensure that the Advance Rental License Agreement was in compliance with Financial Reporting Standards.
The redemption of the Xtron bonds through the Advance Rental License Agreement took centre stage in this afternoon’s cross-examination of Sim Guan Seng by Kannan Ramesh, senior counsel for CHC’s finance manager Sharon Tan.
In addressing the prosecution’s case that this agreement was a sham, Ramesh took the court through emails and audit working papers showing that the ARLA was entered into after Baker Tilly auditors were informed that it would result in the redemption of the bonds. The auditors appeared to have had taken into consideration Xtron’s seemingly “high-risk” status.
Ramesh produced a chart that mapped out the timeline of both the CHC and the Xtron audits. From the chart, he could show that there was an overlap in the audit periods for both CHC (FY 2008 and 2009) and Xtron (FY 2007 and 2008). While the engagement partner had changed from Joseph Toh to Tiang Yii and then to Sim, Foong Ai Fang had been maintained as the audit manager on both accounts to ensure continuity. As such, it was unlikely that any key information uncovered on one end would get lost or overlooked in the course of auditing the accounts on the other end.
It also surfaced that through a meeting between Sim and several CHC audit committee members, including John Lam and two board members, Sim was made aware of the ARLA before the agreement was entered into. He understood that the ARLA would result in the redemption of the Xtron bonds.
The court then saw that a Baker Tilly audit plan memorandum signed off by Sim had reflected a high level of concern to ensure “proper accounting treatment” for the redemption of Xtron bonds through the ARLA—it had to be in compliance with the Financial Reporting Standards.
Subsequent evidence in the form of an audit working paper by Baker Tilly then showed detailed analysis of the corresponding accounting treatment.
Referring to Sim’s evidence under examination-in-chief yesterday, during which he testified of his concerns about the ARLA because CHC was parking a huge amount of money with Xtron, a third party which was not in good financial health, Kannan showed the court that through CHC’s correspondence with then-managing partner of the audit firm Foong Daw Ching, the concerns were allayed after Foong was made aware that there would be third party support to ensure Xtron’s ability to redeem its bonds.
Sim, however, said that Foong did not speak to him about any form of document detailing such financial support; he agreed with Kannan that it was “unusual” for Foong to not have communicated that piece of information to him.
Court will resume at 9:30am tomorrow.