KUALA LUMPUR (Feb 5): Stone Master Bhd’s external auditors Messrs PKF have expressed a disclaimer of opinion in the Practice Note 17 (PN17) company’s audited financial statements for the financial year ended Sept 30, 2017 (FY17).

In a filing with Bursa Malaysia, the marble and granite products maker said PKF was unable to provide an audit opinion as it could not obtain sufficient appropriate evidence relating to opening balances, unresolved matters during the financial year, contingent liabilities and uncertainty over whether the company is a going concern.

The auditors said they could not verify the accuracy and existence of RM651,986 in trade payables, RM536,508 in amount due to contract customer of the group, and non-trade payables and accrual of the group amounting to RM2.11 million and RM612,822 respectively.

PKF could also not determine whether there were misstatements in the group’s revaluation reserves and corresponding tax liability of RM4.15 million and RM1.9 million respectively, as well as the nature and classification of certain consolidation adjustments amounting to RM1.53 million.

“In view of the above, the external auditors were unable to satisfy themselves that the opening balances do not contain misstatements that may materially affect the financial performance, cash flows and financial position of the group for FY17.

“Accordingly, they were unable to determine whether any adjustments might have been necessary in respect of the financial performance, cash flows and financial position of the group for FY17,” Stone Master said.

The auditors also highlighted the contingent liabilities arising from the legal suit with Quantum March Sdn Bhd, which has a potential financial impact of RM20 million together with an unascertained sum that may be assessed by the court, and another suit with Starfield Capital Sdn Bhd relating to the repayment of loans in default, amounting to RM18 million with interest.

The directors have yet to determine the legal suits as contingent liabilities as the suits are ongoing and there is no indication of a probable outflow of resources arising from the outcome of the suits.

“As there is material uncertainty on the outcome of the legal suit and there is presently insufficient information to assess the possibility of an obligation to the company and the probability of an outflow of resources arising from the outcome of the suites, we have been unable to determine whether the legal suits constitute contingent liabilities under MFRS 137 Provisions, Contingent Liabilities and Contingent Assets that require the appropriate and prescribed disclosure in the financial statements,” PKF said.

There is also material uncertainty over whether Stone Master is a going concern, as the group and the company had incurred a net loss of RM4.66 million and RM5.83 million respectively for FY17.