Bursa directs CAP to have 1Q results reviewed

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KUALA LUMPUR (June 19): Bursa Malaysia Securities Bhd has directed China Automobile Parts Holdings Ltd (CAP) to have its financial results for the first quarter ended March 31, 2017 (1QFY17) reviewed by its external auditor.

The regulator issued a directive to CAP on June 16 to make an immediate announcement on the matter, according to CAP's filing on Bursa Malaysia today.

Bursa raised concerns that the quarterly report may not be accurate or reliable due to the withdrawal by PKF on May 25 of its audit report for CAP's 2015 financial statement, and concerns raised by the auditor regarding CAP's 2016 financial statement.

Among the concerns were those regarding the verification of CAP's value-added tax devices with the relevant authorities' tax system directly, and the completion of verification of consignment notes or appropriate delivery documentation against the sales invoices.

The auditor is also concerned about an ongoing litigation involving CAP and certain of its directors, in which certain records indicate that CAP had taken significant borrowings and had defaulted in repayment. This had resulted in a claim and litigation in its 2016 financial year (FY16) against CAP and a number of its directors by the lending bank.

Moreover, the auditor had issues regarding confirmation with banks on the company's recorded bank balances.

Hence, the regulator directed that the scope of the review should include verification of CAP's value-added tax devices, confirmation from banks on CAP's recorded bank balances, the ongoing litigation, and notice of the judicial action of buildings and land use rights owned by CAP's wholly-owned subsidiary Quanzhou Fensun Automobiles Parts Co Ltd.

The last was because CAP had failed to respond to Bursa's enquiry on June 9 regarding the judicial auction initiated by the Quanzhou Immediate People's Court involving the said assets.

CAP shares had been suspended from trading on June 8 following its failure to submit its 1QFY17 results.

The suspension, said Bursa today, will remain until the quarterly report is reviewed by the external auditor and released to the public.