Serba Dinamik takes legal action against KPMG

It alleges KPMG has been negligent and breaches its contractual and statutory duties to the group

by NUR HANANI AZMAN

SERBA Dinamik Holdings Bhd’s board has decided to take legal action against its external auditor KPMG PLT, on the ground that the auditor caused reputational damage by flagging accounting discrepancies in the company’s financials.

It alleged KPMG had been negligent and breached its contractual and statutory duties to the group.

Serba Dinamik’s newly appointed chairman Datuk Mohamed Ilyas Pakeer Mohamed (picture) said the external auditor has blown the audit issues out of proportion.

“Not only negligent, because of their red flag, Serba Dinamik has lost over RM3 billion in market capitalisation. We cannot allow any auditor to behave like what KPMG has done.

“If KPMG can mislead our directors, Bursa Malaysia and the Securities Commission, I don’t think we are supposed to work with them anymore,” he told reporters yesterday.

At this juncture, Serba Dinamik is of the view that KPMG’s act of halting the audit process pending a third-party independent review was in the circumstances negligent as it would have delayed the preparation of the audit report and would under normal circumstances create unnecessary speculation in the market.

Serba Dinamik’s legal consultant Tan Sri Muhammad Shafee Abdullah described the cost of damages as astronomical.

“The claims were made after taking into consideration the loss of RM4.9 billion in market capitalisation that reflected in a drop of each unit of share.

“A loss of confidence in the market from Serba Dinamik’s shareholders, investors and financial institutions, and a loss of confidence with its customers, domestically and internationally,” he added.

Serba Dinamik has been embroiled in an auditing dispute with KPMG after its auditor highlighted discrepancies involving transactions to the tune of RM4.54 billion to the company’s independent directors last month.

The issues raised were based on the financial accounts for the financial year ended Dec 31, 2020.

When asked why the company seeking legal action before Ernst & Young (EY) could conclude its finding on the auditing concerns, Muhammad Shafee said Serba Dinamik has yet to finalise the appointment EY to conduct the independent review over the audit matters.

He said the decision still lies with its board of directors, and the process of appointing an independent reviewer and whether it will be EY, is still being deliberated on.

“The legal action becomes critical now to show that the company is not at fault. I would suggest to the board of directors to start an EGM to remove them because that’s the fastest way to remove KPMG.

“The process of audit can be completed very quickly if we were to appoint any one of the top four that can do a decent job,” he added.

Serba Dinamik largest shareholder and group CEO Datuk Dr Mohd Abdul Karim Abdullah said what has been announced on the independent review is status quo, and it will remain as what it is.

“In terms of the timeline, we will work out the necessary timeline to meet the deadlines imposed onto the company. It should be manageable,” he added.

Serba Dinamik shares closed 2.5 sen higher at 62.5 sen yesterday, well below the RM1.60 levels before the audit concerns were announced.