This article first appeared in The Edge Financial Daily, on February 12, 2016.

KUALA LUMPUR: Maxwell International Holdings Bhd is undertaking an extended audit of the company’s advertisement expenses in its retail business. The expenses resulted in the company slipping into the red.

The company, which is engaged in textile and sports shoe manufacturing in China, said it engaged accounting firm Ferrier Hodgson MH Sdn Bhd to conduct the extended audit on the recommendation of its audit committee.

The announcement came a day after the company said management had yet to provide a satisfactory justification for the advertisement expenditure, and that its independent and non-executive director Lee Chong Hoe had resigned from the board. The company had earlier blamed the advertisement expenses for the RM46.25 million net loss that it suffered in the third quarter ended Sept 30, 2015 (3QFY15), compared with a net profit of RM12.18 million in the previous corresponding quarter.

Cash-rich Maxwell incurred selling and distribution expenses of RM42.59 million for 3QFY15, which is a sharp jump compared with RM1.09 million in the previous corresponding quarter.

Besides the extended audit, Maxwell pointed out that its statutory auditor, Baker Tilly Monteiro Heng, highlighted additional issues relating to the annual report for the year ended 2015, which required further clarification on Feb 5.

Maxwell’s share price started dropping since March last year, falling from 24 sen to barely 7.5 sen yesterday, with a market capitalisation of RM29.9 million.