This article first appeared in The Edge Financial Daily on November 23, 2017

KUALA LUMPUR: Bursa Malaysia has directed China Stationery Ltd (CSL) to have its financial report for the third quarter ended Sept 30, 2017 (3QFY17) reviewed by its external auditors prior to its issuance.

In a filing with Bursa Malaysia yesterday, CSL said the directive received from the regulator on Nov 21 stated the scope of review by the auditors shall cover the assessment and verificiation of material litigations involving CSL’s subsidiaries — Sakura (Fujian) Packaging & Stationery Co Ltd, Sakura (Fujian) Plastics Enterprise Co Ltd and Ruiyuan (Fujian) Enterprise Co Ltd, and ascertain its financial impact on the company.

The review should also verify CSL’s existing cash and bank balances, as well as its trade and other receivables and revenue.

Bursa also directed CSL to have its advertisement expenses amounting to 146.2 million yuan (RM90.8 million) for the financial year ended Dec 31, 2016 (FY16) be reviewed by the external auditors.

The regulator has directed CSL’s board of directors to announce on Bursa Malaysia by Nov 24 the steps that will be taken by the company to address the aforementioned issues.

The group is also to announce on the same date, the auditors’ confirmation that they have been appointed to undertake the review, the steps to be taken to appoint new directors, and CSL’s lawyer Zhi Jun Law Firm’s confirmation that it has obtained the necessary authority from CSL to undertake the review on the ongoing material litigations.

In the event CSL fails to provide the status updates as set out above, Bursa Securities will suspend the trading of CSL shares from Dec 5.

Bursa said it had taken this decision in consultation with the Securities Commission Malaysia (SC) and after taking into consideration CSL’s lack of cooperation and inability to provide satisfactory response to Bursa and the SC in respect of the outstanding information.

Despite numerous requests by both regulators to the company to verify and clarify the outstanding information, the company has failed to do so, giving rise to the concern on the accuracy and reliability of the financial statements issued by the company to date.

The regulators also said there is uncertainty as to CSL’s management arising from, among others, resignations by its directors and chief financial officer, as well as CSL management’s inability to contact the remaining directors.