KUALA LUMPUR (June 14): Audit firm Afrizan Tarmili Khairul Azhar (AFTAAS) is seeking close to RM35 million in damages from the Securities Commission Malaysia (SC) after the High Court here set aside the SC's sanctions on the audit firm for alleged non-compliance with auditing standards.

According to AFTAAS' affidavit, which theedgemarkets.com sighted,  AFTAAS and its partners claimed that as a result of the decision of the Audit Oversight Board (AOB) of the SC to impose the sanctions on AFTAAS, the audit firm had lost many clients, including Bursa Malaysia-listed companies.

AFTAAS claimed that the SC’s decision had affected the audit firm's profit and reputation.

The court document, which referred to the Bursa-listed companies including Supermax Corp Bhd, Seacera Group Bhd, Mentiga Corp Bhd and Alam Maritim Resources Bhd as public interest entities (PIEs), claimed that the SC’s suspension resulted in AFTAAS being prohibited for 12 months in 2019 from auditing the PIEs' financial statements.

AFTAAS also claimed that it was penalised with a sum of RM631,000 by the SC for the alleged non-compliance with auditing standards. 

The court document said AFTAAS is concerned that failure to complete the auditing of financial reports of the PIEs will result in the audit firm facing civil lawsuits by the PIEs for professional negligence and misconduct.

AFTAAS claimed that the SC's sanctions also resulted in the audit firm losing audit fees from non-PIEs.

AFTAAS’ website indicates that Datuk Mohd Afrizan Husain is the executive chairman of the audit firm.

The audit firm’s partners include Khairul Azahar Ariffin and Tarmili Dulah Kusni.

Speaking to theedgemarkets.com, Afrizan questioned why AFTAAS was punished by the SC with a 12-month suspension despite confirmation from the High Court that there were no losses suffered by the investing public, while other audit firms said to be in a similar situation were let off with a stern warning.

He expressed concern that the SC’s decision to impose sanctions on AFTAAS does not augur well for the future of the industry, which is said to be seeing a declining number of audit firms.

It was reported on Aug 11, 2020 that the High Court here a day earlier set aside the SC's sanctions imposed on AFTAAS for the alleged non-compliance with auditing standards.

It was reported that the SC's AOB had also prohibited AFTAAS and its partners from accepting new clients since Nov 25, 2019.

According to news reports, then High Court Judge Datuk Seri Mariana Yahya allowed AFTAAS and its partners' judicial review application against the SC's decision to impose sanctions on the audit firm.

Justice Mariana is now a Court of Appeal judge.

It is understood that the SC is appealing against the High Court’s decision but the hearing date has yet to be fixed.

AFTAAS is represented by law firm Sukhwinder Singh N Mahinder Singh, which earlier filed the audit firm’s affidavit with the court to seek close to RM35 million in damages from the SC.

According to the court document, the RM35 million include RM16.647 million and RM3.43 million in damages for restitution and income loss respectively.

The RM35 million also include aggravated and exemplary damages worth RM4 million and RM1.5 million respectively.