MICPA says auditors must be allowed to complete their task without being intimidated

Friday 26 Apr 2024

KUALA LUMPUR (June 24): Auditors must be allowed to complete their task without being intimidated. They are exercising their duty under the legislation and that must be respected, said Malaysian Institute of Certified Public Accountants (MICPA) president Dr Veerinderjeet Singh when commenting on KPMG’s decision to resign as the external auditor of Serba Dinamik Holdings Bhd.

Dr Veerinderjeet explained that when an auditor decides to resign, it is a professional decision that the auditor would have to make having taken into consideration all factors and circumstances.

“The best way is to resolve the issues raised by the auditor, and then the audit will be completed. Now, because of the circumstances that it can’t objectively proceed with its works, [it] chooses to tender its resignation,” he told The Edge when contacted.

KPMG decided to resign as Serba Dinamik’s external auditor two days after the client took legal action against it for alleged negligence.

The listed entity has been embroiled in audit issues, which will soon become a legal tussle with KPMG after the latter raised red flags on Serba Dinamik’s financial accounts for the financial year ended Dec 31, 2020 (FY20). The discrepancies involved transactions to the tune of more than RM4 billion.

“The auditor will have to do what is necessary, and if the auditor is unable to objectively carry out its audit and its professional or business judgement is compromised by way of a conflict interest or undue influence of others, etc, then the auditor has to assess the situation and duly consider a possible resignation,” he added.

On the other hand, Dr Veerinderjeet, who is also the president of the Malaysian Institute of Accountants (MIA), pointed out that in the circumstance that an entity is unhappy with the performance of the annual audit, it has the right to ask the auditor to resign and appoint a replacement once it has completed its tasks.

“That is the right of the entity but the auditor should be allowed to complete its work in line with international auditing standards and ensure the financial statements are prepared in line with the International Financial Reporting Standards (IFRS).

In a statement issued today, MICPA reiterated that an auditor plays an essential role in providing a check and balance on an entity’s financial reporting, and in contributing to an efficient and transparent capital market for its many stakeholders.

The institute demands the highest standards of ethical behaviour from accountants and auditors through adherence to the fundamental principles of integrity, objectivity, professional competence, due care, confidentiality and professional behaviour, including compliance with laws and regulations.

“Any issues that arise in the course of the audit should be resolved to the satisfaction of the auditor. Where the relationship between the listed entity and its auditor is strained, the auditor may need to reconsider its role,” it commented.

Meanwhile, Minority Shareholders Watch Group chief executive officer (CEO) Devanesan Evanson commented that the audit issues raised by KPMG “should be resolved in a timely manner” despite the resignation of the auditor.

“There must be a satisfactory resolution of the matters raised by KPMG. This is a pressing and current need,” he added.

In an email reply to The Edge, Devanesan highlighted that the oil services and engineering company will now have to appoint a new auditor to ensure that the audited financial statements come out on time.

“KPMG has the legal right to resign as the auditor under the Companies Act. KPMG has stated its reason for its resignation — that the suit filed by the company on June 22, 2021 against it in regard to the ongoing statutory audit of the company for the financial period ending June 30, 2021 has compromised its ability to independently continue the audit engagement and discharge its professional duties as the auditor of the company.

“As such, its position, by its own admission, has become untenable,” he said.

Devanesan commented that the appointment of an independent reviewer would help shed light on the matters raised by KPMG.

Previously, Serba Dinamik agreed in principle to appoint Ernst & Young Advisory Services Sdn Bhd (EY) as an independent reviewer to assess the veracity and accuracy of the issues highlighted by KPMG with regard to its FY20 financials.

Edited ByKathy Fong

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