"KPMG Consulting has paid an undisclosed sum to SembCorp Logistics (SembLog) following its failure to detect fraudulently overstated profits at the company's India unit.
KPMG was the internal auditor of SembCorp Logistics (India) (SembLog India) for four years from 1999 to 2002. During that period, SembLog India's profit was fraudulently overstated by $18 million in the accounts, the company had disclosed last year.
SembLog said yesterday that a review of the accounting records of SembLog India and of KPMG's reports and working papers had shown that KPMG did not detect the creation of fictitious revenues, expenses, documents and invoices.
SembLog and KPMG have reached a settlement on the matter with KPMG paying a sum of money to SembLog on the basis that KPMG makes no admission as to liability.
SembLog is also taking legal action against accountancy firm PriceWaterhouse & Co (India) (PwC India). It has dismissed PwC India, which was SembLog India's external auditor, and is not retaining the unit's internal auditor - KPMG - in Singapore.
SembLog is also planning legal action against six SembLog India staff it had sacked. It is believed that they had reaped higher pay because of the subsidiary's 'better' financial results."
Back to the topic of wage reform, linking performance to variable wage bonus can have its disadvantageous as seen in the above article, how SembLog India staff tried to inflate earnings in order to boost their pay.