KUALA LUMPUR (Oct 30): SCAN Associates Bhd’s external auditor Baker Tilly Monteiro Heng has issued a “disclaimer of opinion” over the company’s and group’s financial statements for the financial period ended June 30, 2015 (FY15) and said it could not obtain sufficient audit evidence regarding the group and company's ability to continue as going concerns.

In its annual audited accounts for the year ended June 30 (2015), the external auditor said the group and the company’s current liabilities, as at June 30, have exceeded its current assets by RM7.22 million and RM9.08 million respectively.

The group and company also recorded a capital deficiency of RM5.84 million and RM7.80 million respectively, “thereby indicating the existence of a material uncertainty which may cast significant doubt about the group’s and the company’s ability to continue as going concerns”.

It also noted that certain creditors had instituted legal suits and letters of demands against SCAN Associates, in addition to the fact that SCAN Associates have been listed as a Guidance Note 3 (GN3) affected issuer under Bursa’s listing requirements for the ACE Market.

It said the ability of the group and company to continue as going concerns are dependent on the successful implementation of any regularisation plan to restore its financial position and achieve sustainable and viable operations, and the successful negotiation with creditors on an amicable solution to their demands.

It also failed to obtain sufficient appropriate audit evidence regarding an impairment loss amounting to RM6.82 million, as there was no impairment assessment made by the directors in accordance with the regulations.

Additionally, it could not obtain confirmations from the group and company’s solicitors on the status of the litigations, and could not satisfy itself as to the nature, quantum and completeness of the said litigations and its related disclosures, and whether any provisions are required to be recognised.

It was also unable to confirm or verify the completeness of the group and company’s recorded fixed deposits or its bank borrowings.

“Because of the significance of the matters discussed, we have not been able to obtain sufficient appropriate audit evidence to provide a basis of an audit opinion. Accordingly, we do not express an opinion on the financial statements,” the auditor added.

However, the loss-making information and communication technology solutions provider said in response — in a separate filing — that it is constantly reviewing and monitoring the operations of the company and its subsidiaries to improve the financial position of the group.

According to its annual audited account for the 18 months through June 2015, it posted a net loss of RM19.19 million (at the group level), while recording a net loss of RM22.67 million at company level.

Shares in SCAN Associates closed unchanged at 5 sen today, for a market capitalisation of RM10 million. Year to date, its market value has halved from when the counter was trading at 10 sen.

(Note: The Edge Research's fundamental score reflects a company's profitability and balance sheet strength, calculated based on historical numbers. The valuation score determines if a stock is attractively valued or not, also based on historical numbers. A score of 3 suggests strong fundamentals and attractive valuations.)