Serba Dinamik slips into PN17 status as auditor expresses disclaimer of opinion on accounts

Serba Dinamik slips into PN17 status as auditor expresses disclaimer of opinion on accounts
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KUALA LUMPUR (Jan 6): Serba Dinamik Holdings Bhd said it is now classified as a Practice Note 17 (PN17) company, after its external auditor expressed a disclaimer of opinion on its audited financial statements for the 18-month financial period ended June 30, 2021.

In a bourse filing, the oil and gas engineering company said it has 12 months to regularise its financial condition, failing which it could be delisted from Bursa Malaysia.

“The company is taking the necessary steps to address its PN17 status,” Serba Dinamik said. “The company is in the midst of formulating a plan to regularise its financial condition.”

In a separate filing, Serba Dinamik’s external auditor, Nexia SSY PLT, said a number of factors had constrained its completion of the group’s audit, including the non-availability of the report on the independent review conducted by Ernst & Young Consulting Sdn Bhd (EY).

“Our scope of services in our letter of engagement makes reference to the availability of the EY Review report for the purpose of completing our audit.

“The EY independent review is ongoing and a situation has arisen where as a consequence of a directive of Bursa Securities of Oct 22, 2021 to the company to announce preliminary factual findings of EY by Oct 26, 2021, the company had responded to the said directive on Nov 3, 2021 with the filing of an originating summons at the High Court of Malaya at Kuala Lumpur against Bursa Securities,” Nexia said, adding that Serba Dinamik has also filed a lawsuit against EY pertaining to the independent review.

“The outcome of these legal suits extends beyond the timelines determined by Bursa to the company for submission of the annual report,” Nexia explained.

Not able to obtain sufficient audit evidence

The auditor also said it did not express an opinion on the accompanying financial statements of Serba Dinamik, as it had not been able to obtain sufficient appropriate audit evidence to provide a basis for an audit opinion on the statements.

Nexia said the auditing procedures on Serba Dinamik’s recognition of revenue, purchases, receivables payables and inventories for the 18-month period to June 30, 2021, have been impeded by time limitations and the occurrence of additional significant events. 

“Other considerations were that in view of the timing of our appointment, we were not in a position to observe the counting of physical inventories at the end of the period.

“Alternative means to verify the inventory quantities held at June 30, 2021 is still pending. Additionally, there are significant matters which we require that are outstanding at the date of our report and we have not been able to compile sufficient appropriate audit evidence to provide a basis for our audit opinion,” the auditor explained.

Nexia said Serba Dinamik had triggered events of default for various contracts and obligations in respect of certain contracts.

It said these events or conditions indicate the existence of material uncertainties that may cast significant doubt on the group’s ability to continue as a going concern.

“Be that as it may, the financial statements of the group and of the company have been prepared on a going concern basis, the validity of which is highly dependent on the successful implementation of the directors’ plans,” it added.

Over 10% deviation between audited and unaudited results

In another filing, Serba Dinamik reported a deviation of more than 10% between its audited and unaudited financial results for the 18-month period ended June 30, 2021.

The unaudited financial statement showed a profit after tax of RM758.38 million, as compared to a loss after tax of RM185.37 million in the audited financial statement released on Thursday.

Serba Dinamik said the deviation was due to the impairment of trade receivables made by subsidiaries of the group amounting to RM395 million, which was underprovided during the release of the financial statement.

It added that the deviation was also due to an inventory write-down of RM552.6 million due to the disruption and termination of several projects undertaken by the group.

Shares of Serba Dinamik have been suspended from trading since Oct 22 last year. They last traded at 35 sen, valuing the group at RM1.3 billion.

S Kanagaraju