This article first appeared in The Edge Malaysia Weekly on December 16, 2019 - December 22, 2019

Brahim’s Holdings Bhd lost 19.3% or RM13 million in market capitalisation the day after it said PricewaterhouseCoopers PLT (PwC) had voluntarily resigned as its external auditor with immediate effect.

The Dec 12 announcement offered no reason for the resignation, which came seven months after PwC was re-appointed as auditors at Brahim’s last annual general meeting on May 4 for the financial year ending Dec 31, 2019.

The company did not specifically say when PwC indicated it would resign but PwC’s written notice was dated Nov 28, which Brahim’s says it received on Dec 11.

Brahim’s announced PwC’s resignation to Bursa the same day it received the consent letter, dated Dec 11, from its new external auditor, Messrs Baker Tilly Monteiro Heng PLT.

PwC’s sudden departure clearly spooked investors, going by the 19.3% plunge in Brahim’s share price, from 28.5 sen on Dec 12 to 23 sen on Dec 13.

While the Companies Act 2016 does not require external auditors to provide a reason for resignation, shareholders have the right to know. Clarity is even more important with Practice Note 17 status looming over it.

Investors would recall that PwC in FY2018 flagged a material uncertainty on the going concern as Brahim’s booked a RM116 million net loss, saw current liabilities exceed current assets by RM56.6 million and failed to meet certain financial covenants for a term loan. The board, however, eased shareholders’ concerns by providing a detailed explanation on how it will not be asked to repay the entire RM67.8 million outstanding loan and that institutions had agreed to review payment terms together with the submission of its regularisation plan.

Clearly, investors want the same level of details with regard to PwC’s departure and Brahim’s board should not disappoint.

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