Minority shareholders may look to EPF and KWAP for truth of Serba Dinamik’s financials

Minority shareholders may look to EPF and KWAP for truth of Serba Dinamik’s financials
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KUALA LUMPUR (May 29): The Minority Shareholders Watchdog Group (MSWG) issued a statement today to urge the minority shareholders of Serba Dinamik Holdings Bhd not to change the company’s external auditor KPMG, citing this is a way to uncover the truth of the audit issues brought up by the auditor. 

In the statement, the MSWG said KPMG should be allowed to complete its work and report to shareholders in the upcoming annual general meeting (AGM) as part of good governance.

Will KPMG be able to stay on to conclude its audit of Serba Dinamik’s financial accounts? 

How the government-linked shareholders, namely the Employees Provident Fund (EPF) and Kumpulan Wang Persaraan (Diperbadankan) (KWAP), vote in the extraordinary general meeting (EGM) on the matter will play an important role.

The EPF is the third largest shareholder, holding 10.157%, while KWAP holds a 5.263% stake. Collectively, the duo control roughly a 15.42% stake. Meanwhile, the State Financial Secretary Sarawak holds 4.11%.  

It is not known if the top management of Serba Dinamik already had a meeting with the two government-linked entities to explain the audit issues that put the company’s corporate governance and financial integrity at stake.

The issues flagged by KPMG are related to several sales transactions, receivables and payables, including its IT contract abroad. The total sum involved is more than RM3 billion. 

To recap, Serba Dinamik yesterday announced that its non-independent non-executive director Datuk Abdul Kadier Sahib, who is also the second largest shareholder, had proposed to remove KPMG PLT as the company’s external auditor.

However, the announcement did not state Kadier’s rationale for the change of auditor. 

Holding a 15.96% stake in Serba Dinamik, Abdul Kadier also proposed to appoint BDO PLT as the company’s new auditor “in place of KPMG PLT for the financial year ending June 30, 2021”.

The proposal to change the auditor came two days after the oil and gas (O&G) company dropped a bombshell announcing that it wants to conduct an independent review of the issues raised by KPMG during its statutory audit.

When asked whether he would also vote for the proposal to change the auditor, the company’s single largest shareholder Datuk Dr Mohd Abdul Karim Abdullah at a virtual press conference today replied that it is a decision he needs to make and it will be known in the EGM. 

Karim, who is also the group managing director and chief executive officer (CEO), controls a 26.93% shareholding in Serba Dinamik.

"We have not done anything wrong," he said at the press conference today.

Only a simple majority is required to pass the resolution to change the auditor.  

Karim told the media that it was not appropriate for KPMG to raise the audit issues to the independent directors before the management simply because the independent directors are not involved in the day-to-day operations, so they would not be of help to address the issues flagged.

Serba Dinamik’s board is chaired by Datuk Mohamed Nor Abu Bakar, formerly the chairman of Petronas’ Kerteh Integrated Petrochemical Complex up until 2007.

The company’s independent directors include KPMG Malaysia's former partner Hasman Yusri Yusoff, Nationwide Express Holdings Bhd's former managing director Rozilawati Basir, as well as accountant Sharifah Irina Syed Ahmad Razi and lawyer Tengku Datuk Seri Hasmuddin Tengku Othman.

The MSWG highlighted that external auditors are appointed by shareholders to provide an independent opinion on whether a company’s financial statements present a true and fair view.

“Since the company is setting up a special independent review by appointing an independent firm to assess the veracity and accuracy of the matters brought up by the external auditor, the external auditor should be around to defend their findings and explain themselves.

“There is no urgency to remove the auditor at this juncture. As such, the MSWG urges all shareholders to vote against the resolution to remove the auditor,” it said.

Read also:
KPMG raised audit issues on transactions involving over RM3 billion, says Serba Dinamik
Serba Dinamik's second largest shareholder proposes removal of KPMG as auditor
Serba Dinamik board wanted KPMG to resign, but auditor refused to do so, says executive director Syed Nazim
'We have done nothing wrong,' says Serba Dinamik MD Abdul Karim
MSWG urges Serba Dinamik minority shareholders to vote against removal of external auditor

Surin Murugiah