Fiduciary fumbles speak volumes

WHAT was once seen as an occasional administrative oversight has now become an unsettling trend in Corporate Malaysia.

The persistently high number of errata issued by public-listed companies (PLCs) for their annual reports points to a deeper problem in the governance culture.

According to the Minority Shareholders Watch Group (MSWG), 23 errata were issued in May 2025 alone. It may be lower than the 31 in the same month last year, but it is not to be taken lightly.

Annual reports are not casual publications; they are instruments of corporate accountability and shareholder communication.

They guide capital allocation decisions, shape perceptions about governance standards and form the basis for long-term investment strategies.

When companies publish documents with material errors – ranging from misreported financial ratios to conflicting corporate structures – they aren’t just making a genuine error.

They are failing in their fiduciary duty to stakeholders.

It can be argued that some of the errata are relatively minor, such as the incorrect nationality of a director or omission of explanatory remarks to provide more clarity to shareholders, but there is more significant and possibly misleading information.

For instance, IHH Healthcare Bhd, often seen as the benchmark for good corporate governance, was also among those that had to revise its 2024 annual report.

The company reported inconsistent historical return on equity (ROE) and return on total assets figures for the financial year 2022 (FY22) and FY23.

Although the changes, such as lowering the ROE excluding exceptional items for FY23 from 5% to 4.6% may appear minor, the numbers are significant to analysts and institutional investors who rely on precision for financial modelling and benchmarking.

Lack of consistent data

When even well-established companies struggle to publish consistent data, it raises questions about the robustness of their internal checks and the scrutiny applied by external auditors.

Capital A Bhd, the parent of AirAsia, exemplifies a more severe situation.

Initially reporting a relatively manageable net profit margin of negative 0.5% and operating profit margin of negative 0.4% for 2024, the company later revised these figures to negative 2.3% and negative 2.8%, respectively.

The return on total assets also shifted from negative 0.01% to a much steeper negative 1.5%.

These aren’t marginal tweaks; they are material restatements that significantly alter the financial narrative of the company.

Such drastic corrections cast doubt not only on the company’s financial health but on its reporting credibility.

This tide of errata suggests that many PLCs are treating corporate reporting as a procedural necessity rather than a responsibility of trust.

The issuance of vague errata, without specifying what has changed, further undermines the purpose of correction.

Investors are left guessing which numbers to trust, which can lead to misinformed decisions and misplaced valuations.

PIE Industrial’s discrepancies

MSWG also highlights concerns on PIE Industrial Bhd, an electronics manufacturing services provider.

Its 2024 annual report, riddled with discrepancies, remains uncorrected at the time of writing.

Among the more glaring issues are inconsistencies in its capital expenditure figures.

While the management discussion and analysis section state the group had incurred RM88.29mil in capital expenditures for FY24, the financial statements disclose a higher figure of RM90.74mil.

Elsewhere, the company reports differing revenue numbers related to its dealings with related parties and major customers, with variations of several million ringgit.

Even the ownership structure of one of its subsidiaries in Thailand is inconsistent, reported as 55% in one section and 100% in another.

These aren’t trivial oversights, they reflect a lack of rigorous internal review, poor documentation control, and perhaps most worryingly, a disregard for the expectations of informed investors.

More troubling still is PIE Industrial’s apparent delay in disclosing price-sensitive information.

In April 2024, news of a lucrative new AI server client was already circulating in analyst reports and media articles, sparking a notable rise in the company’s share price.

Yet, the company waited two weeks before confirming the deal publicly.

This sequence of events raises uncomfortable questions about selective disclosure and whether all shareholders are treated equitably.

Transparency is not an optional virtue, it is the bedrock of fair markets.

MSWG’s concern is not misplaced.

These issues point to systemic weaknesses: ineffective internal control systems, lack of diligence in financial reporting, and a shortfall in the professionalism expected of external auditors.

Auditors are meant to challenge and verify disclosures with a healthy dose of scepticism, not act as rubber stamps for management assertions.

When material discrepancies slip through their review, the value of the audit process itself is diminished.

What’s urgently needed is a governance reset.

Boards must be held accountable for the accuracy of their companies’ disclosures.

Management teams must prioritise thoroughness and transparency in preparing annual reports.

Auditors must recommit to rigour and objectivity.

Regulators, too, should consider mandating clearer errata disclosures, with detailed explanations of what has been amended and why.

If Corporate Malaysia wishes to uphold its appeal as an investment destination, it cannot allow disclosure errors, especially unacknowledged or unexplained ones, to proliferate unchecked.