When Saudi Cable said last month it was delaying the release of its 2014 earnings statement because it was still compiling information required by an external auditor, it was a sign of growing regulatory pressure on companies in the kingdom.
Regulators are signalling they want companies to tighten governance and strengthen internal controls as the $500 billion Saudi stock market prepares to open to direct foreign investment in the next few months.
The process has become more urgent since an accounting scandal at the telecoms company Mobily, which in February revised its 2014 earnings to a loss of $243 million from the $58.6m profit previously claimed.
The Mobily affair, and the investigation into it by the kingdom’s Capital Market Authority (CMA), have prompted many company managements, board members and even major shareholders to become more conscious of risk, executives and analysts say.
“What happened has set the alarm bells ringing and pushed board members to revise their roles, made investors carefully check financial statements, and caused company managements to review their accounts carefully,” said Turki Fadaak, head of research and advisory services at AlBilad Capital in Riyadh. “It has made analysts, keen on meeting company managements more often, and caused us to look more carefully at everything said and everything that managements announce.”
One sign of the new mood is that the fees charged by some auditors are rising as demand for their services grows.
“The risks associated with what happened to the listed companies have caused companies to raise their fees,” said a partner at a regional auditing firm, speaking on condition of anonymity because of commercial sensitivities. He said his own firm’s business had grown fast in the past few months as customers began to find fees charged by the big international auditors too steep.
Another sign of the regulatory pressure is a rise in fines levied by the CMA on listed companies for violations such as inadequate disclosure. Fines rose 46 per cent from a year earlier to 1.83 million riyals (Dh1.79m) in the first quarter of this year – not a huge burden for the companies involved, but a signal of the regulator’s intentions.
The CMA is acting to ensure a successful stock market opening, which is an important part of the government’s strategy to and diversify the economy beyond oil, said a Gulf executive who operates in Saudi Arabia.
“They have no choice but to step in, otherwise Saudi as a market will lose credibility and people won’t invest. Companies are preparing themselves to become more disciplined and regulated because they realise they will be questioned more,” the executive said.
Saudi Arabia has a good reputation for corporate governance in the Arab world, and the Mobily debacle – which the firm attributed to excessive booking of revenue from wholesale broadband leases and promotional campaigns – does not necessarily indicate more scandals waiting to explode. The CMA is viewed by fund managers as one of the strictest stock market regulators in the region.
But the Mobily shock came as regulators were already grappling with another thorny case, that of construction company Mohammad Al Mojil Group (MMG). The company ran into financial trouble several years ago and has had its shares suspended since July 2012 because of its losses.
Last November, the CMA advised companies to stop engaging the accountancy firm Deloitte & Touche for audits from June 1 this year, according to a circular seen by Reuters.
The CMA said its decision was owing to a case involving a company which it did not identify. Deloitte also declined to identify the firm, but said it believed its audit of the client met applicable standards. Industry sources said the company was MMG.
Authorities increased the pressure on both MMG and Mobily last month by raising the prospect of prosecuting individuals.
The CMA said it was investigating the possibility of insider trading of Mobily shares.
Meanwhile, the Saudi ministry of commerce said it had referred some MMG board members to the bureau of investigation and public prosecution over possible violations of the companies law. The decision “comes as part of a plan by the ministry to tighten oversight of violating companies,” the ministry said.
One reform that may emerge, some analysts believe, is clarification of who is responsible for supervising auditors. At present the ministry of commerce supervises accountants while the Saudi Organisation for Certified Public Accountants, a private body, reviews auditing standards. Some analysts believe such authority should be consolidated under the CMA to avoid confusion.
“Some entity like the PCAOP [Public Company Accounting Oversight Board] in the United States should be established in Saudi to monitor auditors, and it should be under the umbrella of the CMA,” said Mazen Al Sudairi, the head of research at Al Istithmar Capital in Riyadh.
John Sfakianakis, Riyadh- based Middle East director of the Ashmore Group, an investment firm, said the furore over irregularities at major Saudi companies would in the long term be a blessing in disguise. “Both investors and companies will now look at the things they need to avoid,” he said.
business@thenational.ae
Follow The National's Business section on Twitter
Coming soon
Torno Subito by Massimo Bottura
When the W Dubai – The Palm hotel opens at the end of this year, one of the highlights will be Massimo Bottura’s new restaurant, Torno Subito, which promises “to take guests on a journey back to 1960s Italy”. It is the three Michelinstarred chef’s first venture in Dubai and should be every bit as ambitious as you would expect from the man whose restaurant in Italy, Osteria Francescana, was crowned number one in this year’s list of the World’s 50 Best Restaurants.
Akira Back Dubai
Another exciting opening at the W Dubai – The Palm hotel is South Korean chef Akira Back’s new restaurant, which will continue to showcase some of the finest Asian food in the world. Back, whose Seoul restaurant, Dosa, won a Michelin star last year, describes his menu as, “an innovative Japanese cuisine prepared with a Korean accent”.
Dinner by Heston Blumenthal
The highly experimental chef, whose dishes are as much about spectacle as taste, opens his first restaurant in Dubai next year. Housed at The Royal Atlantis Resort & Residences, Dinner by Heston Blumenthal will feature contemporary twists on recipes that date back to the 1300s, including goats’ milk cheesecake. Always remember with a Blumenthal dish: nothing is quite as it seems.
Global state-owned investor ranking by size
1.
|
United States
|
2.
|
China
|
3.
|
UAE
|
4.
|
Japan
|
5
|
Norway
|
6.
|
Canada
|
7.
|
Singapore
|
8.
|
Australia
|
9.
|
Saudi Arabia
|
10.
|
South Korea
|
The five pillars of Islam
What can victims do?
Always use only regulated platforms
Stop all transactions and communication on suspicion
Save all evidence (screenshots, chat logs, transaction IDs)
Report to local authorities
Warn others to prevent further harm
Courtesy: Crystal Intelligence
Benefits of first-time home buyers' scheme
- Priority access to new homes from participating developers
- Discounts on sales price of off-plan units
- Flexible payment plans from developers
- Mortgages with better interest rates, faster approval times and reduced fees
- DLD registration fee can be paid through banks or credit cards at zero interest rates
Greatest Royal Rumble match listing
50-man Royal Rumble - names entered so far include Braun Strowman, Daniel Bryan, Kurt Angle, Big Show, Kane, Chris Jericho, The New Day and Elias
Universal Championship Brock Lesnar (champion) v Roman Reigns in a steel cage match
WWE World Heavyweight ChampionshipAJ Styles (champion) v Shinsuke Nakamura
Intercontinental Championship Seth Rollins (champion) v The Miz v Finn Balor v Samoa Joe
United States Championship Jeff Hardy (champion) v Jinder Mahal
SmackDown Tag Team Championship The Bludgeon Brothers (champions) v The Usos
Raw Tag Team Championship (currently vacant) Cesaro and Sheamus v Matt Hardy and Bray Wyatt
Casket match The Undertaker v Rusev
Singles match John Cena v Triple H
Cruiserweight Championship Cedric Alexander v Kalisto
Why are you, you?
Why are you, you?
From this question, a new beginning.
From this question, a new destiny.
For you are a world, and a meeting of worlds.
Our dream is to unite that which has been
separated by history.
To return the many to the one.
A great story unites us all,
beyond colour and creed and gender.
The lightning flash of art
And the music of the heart.
We reflect all cultures, all ways.
We are a twenty first century wonder.
Universal ideals, visions of art and truth.
Now is the turning point of cultures and hopes.
Come with questions, leave with visions.
We are the link between the past and the future.
Here, through art, new possibilities are born. And
new answers are given wings.
Why are you, you?
Because we are mirrors of each other.
Because together we create new worlds.
Together we are more powerful than we know.
We connect, we inspire, we multiply illuminations
with the unique light of art.
Ben Okri,
Panipat
Director Ashutosh Gowariker
Produced Ashutosh Gowariker, Rohit Shelatkar, Reliance Entertainment
Cast Arjun Kapoor, Sanjay Dutt, Kriti Sanon, Mohnish Behl, Padmini Kolhapure, Zeenat Aman
Rating 3 /5 stars
ELIO
Starring: Yonas Kibreab, Zoe Saldana, Brad Garrett
Directors: Madeline Sharafian, Domee Shi, Adrian Molina
Rating: 4/5
The biog
Marital status: Separated with two young daughters
Education: Master's degree from American Univeristy of Cairo
Favourite book: That Is How They Defeat Despair by Salwa Aladian
Favourite Motto: Their happiness is your happiness
Goal: For Nefsy to become his legacy long after he is gon
The specs
Engine: Turbocharged four-cylinder 2.7-litre
Power: 325hp
Torque: 500Nm
Transmission: 10-speed automatic
Price: From Dh189,700
On sale: now
Women & Power: A Manifesto
Mary Beard
Profile Books and London Review of Books
UAE currency: the story behind the money in your pockets
UAE currency: the story behind the money in your pockets
Killing of Qassem Suleimani
Killing of Qassem Suleimani
Key facilities
- Olympic-size swimming pool with a split bulkhead for multi-use configurations, including water polo and 50m/25m training lanes
- Premier League-standard football pitch
- 400m Olympic running track
- NBA-spec basketball court with auditorium
- 600-seat auditorium
- Spaces for historical and cultural exploration
- An elevated football field that doubles as a helipad
- Specialist robotics and science laboratories
- AR and VR-enabled learning centres
- Disruption Lab and Research Centre for developing entrepreneurial skills
Other must-tries
Tomato and walnut salad
A lesson in simple, seasonal eating. Wedges of tomato, chunks of cucumber, thinly sliced red onion, coriander or parsley leaves, and perhaps some fresh dill are drizzled with a crushed walnut and garlic dressing. Do consider yourself warned: if you eat this salad in Georgia during the summer months, the tomatoes will be so ripe and flavourful that every tomato you eat from that day forth will taste lacklustre in comparison.
Badrijani nigvzit
A delicious vegetarian snack or starter. It consists of thinly sliced, fried then cooled aubergine smothered with a thick and creamy walnut sauce and folded or rolled. Take note, even though it seems like you should be able to pick these morsels up with your hands, they’re not as durable as they look. A knife and fork is the way to go.
Pkhali
This healthy little dish (a nice antidote to the khachapuri) is usually made with steamed then chopped cabbage, spinach, beetroot or green beans, combined with walnuts, garlic and herbs to make a vegetable pâté or paste. The mix is then often formed into rounds, chilled in the fridge and topped with pomegranate seeds before being served.
All%20The%20Light%20We%20Cannot%20See%20
%3Cp%3E%3Cstrong%3ECreator%3A%20%3C%2Fstrong%3ESteven%20Knight%3C%2Fp%3E%0A%3Cp%3E%3Cstrong%3EStars%3A%C2%A0%3C%2Fstrong%3EMark%20Ruffalo%2C%20Hugh%20Laurie%2C%20Aria%20Mia%20Loberti%3C%2Fp%3E%0A%3Cp%3E%3Cstrong%3ERating%3A%20%3C%2Fstrong%3E1%2F5%C2%A0%3C%2Fp%3E%0A
Sole survivors
- Cecelia Crocker was on board Northwest Airlines Flight 255 in 1987 when it crashed in Detroit, killing 154 people, including her parents and brother. The plane had hit a light pole on take off
- George Lamson Jr, from Minnesota, was on a Galaxy Airlines flight that crashed in Reno in 1985, killing 68 people. His entire seat was launched out of the plane
- Bahia Bakari, then 12, survived when a Yemenia Airways flight crashed near the Comoros in 2009, killing 152. She was found clinging to wreckage after floating in the ocean for 13 hours.
- Jim Polehinke was the co-pilot and sole survivor of a 2006 Comair flight that crashed in Lexington, Kentucky, killing 49.
Tightening the screw on rogue recruiters
The UAE overhauled the procedure to recruit housemaids and domestic workers with a law in 2017 to protect low-income labour from being exploited.
Only recruitment companies authorised by the government are permitted as part of Tadbeer, a network of labour ministry-regulated centres.
A contract must be drawn up for domestic workers, the wages and job offer clearly stating the nature of work.
The contract stating the wages, work entailed and accommodation must be sent to the employee in their home country before they depart for the UAE.
The contract will be signed by the employer and employee when the domestic worker arrives in the UAE.
Only recruitment agencies registered with the ministry can undertake recruitment and employment applications for domestic workers.
Penalties for illegal recruitment in the UAE include fines of up to Dh100,000 and imprisonment
But agents not authorised by the government sidestep the law by illegally getting women into the country on visit visas.
Madrid Open schedule
Men's semi-finals
Novak Djokovic (1) v Dominic Thiem (5) from 6pm
Stefanos Tsitsipas (8) v Rafael Nadal (2) from 11pm
Women's final
Simona Halep (3) v Kiki Bertens (7) from 8.30pm
The specs
Engine: 4-litre twin-turbo V8
Transmission: eight-speed PDK
Power: 630bhp
Torque: 820Nm
Price: Dh683,200
On sale: now