KUALA LUMPUR (Dec 31): The external auditor of Practice Note No. 17 (PN17) company Nakamichi Corporation Bhd is unable to verify several transactions and account balances of the company’s audited financial statements for the financial year ended Dec 31, 2013 due to insufficient information and documentation.
In a filing with Bursa Malaysia today, auditor PKF Malaysia said it is unable to provide an audit opinion on the company's financial statements as a dispute among shareholders has hampered efforts by the current management to obtain sufficient documentation and information from the company’s previous management.
It also said the documentation is inadequate to support several transactions involving administrative expenses; financial costs; non-trade receivables, deposits and prepayments as well as non-trade payable balances.
“Because of the significance of the matters discussed in the basis for disclaimer opinion paragraph, we have not been able to obtain sufficient appropriate audit evidence to provide a basis for an audit opinion,” the filing stated.
“Accordingly, we do not express an opinion on the financial statements,” it added.
Among seven transactions and account balances, PKF Malaysia said it was unable to obtain sufficient audit evidence of payments made on behalf of the group and company by Nakamichi’s former chief executive officer and executive director Lo Man Heng amounting to RM85,148, accounted for as advances.
To recap, the Kuala Lumpur High Court had found Lo guilty of breaching his fiduciary duty after the company brought Lo to court in August 2013.
The court also found his sister Lo Shwu Fen and wife Lai Yun Fung jointly liable to pay Nakamichi RM19.21 million as shortfall for the profit guarantee for both 2012 and 2011, as provided for under previous agreements signed on Nakamichi's acquisition of Tamabina Sdn Bhd in 2008.
The court also ruled that Nakamichi is at liberty to file an application to the court to ask Man Heng and Lee Jyh Kiong - the former chief financial officer of Nakamichi - to furnish the documents, based on a list provided by the company.
Additionally, it held that Man Heng, Shwu Fen and Lai, are to pay RM150,000 in costs to Nakamichi.
Nakamichi was embroiled in a legal tussle with its 51%-owned Tamabina and the latter's directors Shwu Fen and Lai after they failed to hand over Tamabina's management accounts to Goh Kheng Peow and his wife See Thoo Chan, who are the largest shareholders of Nakamichi.
Without the management accounts, Nakamichi could not submit its results from the second quarter ended June 30, 2013 (2QFY13) to the fourth quarter ended Dec 31, 2014 (4QFY14) within the time frame set by Bursa Malaysia. Consequently, the group's shares have been suspended of trading on Bursa Malaysia since September 2013.
This also hampered the company from releasing its annual audited accounts for the financial year ended Dec 31, 2013.
PKF Malaysia also said today the directors of the company have failed to provide documentation for payable balances previously accounted to a director of the subsidiaries Tamabina and Faktor Juta Sdn Bhd, which have both since been deconsolidated.
The auditor also said it is unable to determine the effect of consolidation of both Tamabina and Faktor Juta to the financial performance and cash flow of the group as Nakamichi has not been able to obtain financial information on Tamabina and Faktor Juta from Jan 1, 2013 to July 29, 2013 for the purpose of consolidation.
Nakamichi fell into PN17 status after creditors wound up the company’s last operating subsidiary, Tamabina on April 28.
Nakamichi is required to submit a regularisation plan to the Securities Commission and Bursa Malaysia and implement the plan according to a set time frame, to regularise its condition and be uplifted from the category.
PKF Malaysia said as at Dec 30, 2015, the company has not formalised a regularisation plan for the group and company, thereby indicating “the existence of the material uncertainty which casts significant doubt about the group’s and company’s ability to continue as going concerns.”