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Serba Dinamik in limelight this week amid RM3bil audit uproar?

By NST Business - May 31, 2021 @ 10:28am

KUALA LUMPUR: Investor eyes will be on Serba Dinamik Holdings Bhd this week when the oil and gas service provider resumes trading on Bursa Malaysia following its external auditor KPMG flagging some audit issues over transactions worth about RM3 billion.

Serba Dinamik had requested for trading suspension on Friday pending the release of further clarification of the announcement made on May 25.

The company expects the voluntary suspension of its shares to be lifted on Monday.

The counter last closed at RM1.61, valuing it at RM6 billion.

Two days later, its second largest shareholder Datuk Abdul Kadier Sahib sent a notice to Serba Dinamik proposing to change the auditor without stating the rationale for the move.

In a filing with Bursa, Serba Dinamik said KPMG had raised issues relating to sales, trade payables and material on site balances involving 11 parties which accounted for total sales transactions of RM2.32 billion, a trade receivables balance of RM652 million and materials on site balance of RM569 million.

KPMG also raised issues around Serba Dinamik's customer and supplier in Bahrain, involving total sales transactions of US$101 million (RM417.48 million) and trade receivables balance of US$24 million (RM99.2 million).

Based on the unaudited accounts, Serba Dinamik's receivables had ballooned to RM1.86 billion as at end-2020 from RM880 million at end-2017.

Last Saturday, group managing director Datuk Dr Mohd Abdul Karim Abdullah reiterated at a virtual press conference that the management did nothing wrong.

"I would like to stress that there is no genuine issue of legitimacy and value of the contracts raised by the external auditor," said Abdul Karim.

He said the board of directors had decided to appoint an independent firm to assist the matters that the external auditor was unable to perform and to review the process of confirmation.

"From the onset when the external auditor presented the audit planning for the financial year and subsequent interim audit which commenced in October 2020, we have been in full cooperation with the external auditor to ensure timely deliverables of the financial statements as per the listing requirements.

"The management was only informed of the audit finding in early May 2021 and had reacted quickly to address the queries. However, the external auditor had decided to stop the audit and requested for an independent review without specifying the scope," he said.

Abdul Karim said the company had felt that it was unfair for the external auditor to take such actions without further engagement with the management to complete the audit as well as only highlighted the issues nearer to the deadline for the company to announce the audited accounts.

He said the company was uncertain as to why this year would have the challenge to get the said confirmations, as the company had not changed its business structure materially since its initial public offering in 2017.

"We can only note that the only differences for the financial year earning 2020 is that we have taken on new clients across a few more countries, the prolonged Covid-19 pandemic globally from March 2020 until now and, that there was a change of audit partner of our external auditor recently," he added.

Critically evaluate the case and apply relevant theory to explain the issue between parties involved. What would be the consequences if the notice regarding the change of external auditor without stating any reason be agreed and approved by all shareholders?

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