KUALA LUMPUR (Dec 29): Asset tracking and supply chain management solutions provider SMTrack Bhd finally submitted its long overdue 2016 annual report to Bursa Malaysia today, but the group’s external auditor Messrs KC Chia & Noor had expressed a qualified opinion on its financial statement.

In a filing with the exchange, SMTrack said the auditor highlighted three issues that remained unresolved during the fiscal period ended July 31, 2016 (FY16), namely the carrying value of certain assets, accounts’ opening balances and a gain on disposal of a subsidiary company.

The independent auditors’ report pointed out that their predecessor was unable to obtain satisfactory appropriate audit evidence concerning the recoverable amount of IT equipment, and IT equipment under installation, which amounted to RM2.87 million and RM3.26 million respectively as at March 31, 2015 (FY15).

These equipment were related to a project which was terminated during the financial period.

SMTrack’s previous auditor was Messrs Baker Tilly Monteiro Heng, which tendered its resignation via a letter dated Aug 24 this year.

Back then, Baker Tilly was not able to ascertain the carrying amount of certain intangible assets worth RM1.39 million as at FY15, which consists of product development costs that relate to the above-mentioned project.

For FY16, the value of SMTrack’s IT equipment and IT equipment under installation declined to RM1.29 million and RM1.90 million respectively, and the group managed to rent these assets out for one year from October 2016, in order to generate economic benefits.

The intangible asset also saw its value depreciate to RM701,306 for FY16, but Messrs KC Chia & Noor said the matter remains unresolved in FY16.

“Although annual depreciation has been provided by the management, we were unable to ascertain the directors’ assessment of the recoverable amount of the asset and we could not determine the effect of adjustments, if any, that might have been found to be necessary on the financial position of the group and the company as at FY16, or on its financial performance and cash flows for the financial period then ended,” it said.

Messrs KC Chia & Noor was appointed in October this year, and it said it was not able to access Baker Tilly’s audit working papers, which led to inability to verify SMTrack account’s opening balances.

“Since the opening balances substantially enter into determination of the financial performance and cash flows [for] the current financial period, we therefore could not determine the effect of adjustments, if any, that might have been found to be necessary [with] respect of the current period’s loss of the financial performance and cash flows of the group and the company for FY16,” Messrs KC Chia & Noor said.

Lastly, the audit firm said it was not able to verify a gain on the disposal of SMTrack’s subsidiary, called LEYS International Ltd.

“The financial statements of the group have been consolidated using the unaudited management financial statements of the said subsidiary company, prior to the date of disposal,” Messrs KC Chia & Noor said.

“We were unable to obtain sufficient appropriate audit evidence on the completeness of the results of the said subsidiary company for FY16 that was included in the statement of profit and loss of the group,” it added.

The auditors noted that except for the matters described as the basis for its qualified opinion, the financial statements give a true and fair view of the financial position of the group as at July 31, 2016.

SMTrack has been suspended from trading since Dec 8 this year, because of delay in submission of its annual report. With today's submission, the counter will resume its trading tomorrow.