Auditors wanted related party transactions in CHC financial statements (Today, 20 Sept 2013)

SINGAPORE — Auditors had wanted City Harvest Church to report certain related party transactions in its 2007/08 financial statements, but there was no such disclosure in the end.

Defence lawyer Kannan Ramesh yesterday suggested to Baker Tilly auditor Foong Daw Ching — who was the firm’s managing partner at the time but not in charge of the church’s accounts — that this was done by someone with the capacity to “veto” the initial recommendation.

Baker Tilly had wanted the church to disclose its bond investment in Xtron Productions — which managed the music career of church co-founder Ho Yeow Sun — as a related party transaction in July 2008, when preparing the church’s financial statement for July 2007 to October 2008. As Xtron’s “main activity” was the production of Ms Ho’s music album, and Ms Ho is the wife of church co-founder and accused Kong Hee, the bond investment could potentially be “viewed as for personal gain”. This was according to an email with an attached spreadsheet sent by audit manager Foong Ai Fang to two of the accused who handled church accounts, Serina Wee Gek Yin and Sharon Tan Shao Yuen.
 
Baker Tilly — which audited both Xtron and City Harvest— also wanted the church to disclose payment of a management fee to fund manager AMAC Capital Partners, owned by member Chew Eng Han, one of the accused who has since left the church.

Mr Ramesh, who represents Sharon Tan, suggested that someone must have reversed the auditors’ earlier views by the time the accounts were signed off in March 2009.

Mr Foong replied that he could not comment.

Earlier in the day, Mr Ramesh tried to show that Baker Tilly did not raise a red flag on transactions despite being aware that the church was investing in Xtron, with the funds used for Ms Ho’s career, also known as the Crossover Project. Mr Foong agreed that the auditors would have been paying close attention to the organisations’ cash flow and bond transactions.

Neither did the auditors qualify their opinion — a qualified opinion would suggest an audit restricted in scope or uncertainties underlying assumptions in the financial statements.

Kong, Sharon Tan, Wee, Chew and two others are facing criminal charges of misappropriating S$24 million of church building funds in allegedly sham investments to fund Ms Ho’s career, then “round-tripping” another S$26.6 million to cover up the first amount.

Mr Foong, who has been on the witness stand for a week, began yesterday by telling Senior District Judge See Kee Oon “something from my heart”. He said he was hurt by the defence’s suggestions that he had tried to distance himself from advice given to City Harvest, one of Baker Tilly’s biggest church clients. He was also initially upset to find out that a meeting with accused Tan Ye Peng and John Lam Leng Hung last December — after they had been charged — was recorded, but understood “where they are coming from”. Tan Ye Peng’s lawyer, Mr N Sreenivasan, had revealed this in court on Wednesday when questioning Mr Foong.

The judge barred Mr Foong from continuing his account and directed him to resume giving evidence through the defence’s cross-examination, which continues today.