Its ongoing legal lawsuit against Bursa Malaysia and EY Consulting have further constrained completion of Nexia’s audit work 

by PRIYA VASU & NUR HANANI AZMAN / pic by TMR FILE

SERBA Dinamik Holdings Bhd’s external auditors, Messrs Nexia SSY was not able to compile sufficient appropriate audit evidence to provide a basis for audit opinion due to procedures impeded by time limitations and occurrence of additional significant events impacting the completion of the audit. 

In Serba Dinamik’s annual report filed to Bursa Malaysia yesterday, the auditor stated Serba Dinamik’s ongoing legal lawsuit against Bursa Malaysia Securities and EY Consulting have further constrained completion of its audit work. 

It also added the timing of the firm’s appointment also made it difficult for the auditor to count physical inventories of the company at the end of the period. 

Alternative means to verify the inventory quantities held as at June 30, 2021, are still pending. 

“The group and company have triggered events of default for various contracts and obligations in respect of these contracts. These events or conditions indicate the existence of material uncertainties that may cast significant doubt on the group’s and the company’s ability to continue as a going concern. 

“Be that as it may, the financial statements of the group and 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 in responding to the conditions,” Nexia stated. 

The auditing firm added the scope of its services in a letter of engagement that refers to the availability of the EY Review report to complete 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, to announce preliminary factual findings of EY by Oct 26, 2021, Serba Dinamik 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. 

“On Nov 5, 2021, the company also filed an Originating Summons at the High Court of Malaya at Kuala Lumpur against EY pertaining to the said independent review. At the date of our report, the high court had fixed the next case management for a legal suit against EY on Jan 6, 2022, and the hearing for a legal suit against Bursa Securities on Jan 17, 2022. The outcome of these legal suits extends beyond the timeline determined by 

Bursa to the firm for submission of the annual report,” said Nexia. 

The board of Serba Dinamik stated they will formulate a comprehensive regularisation plan for submission to Bursa Securities by the end of January 2023. 

The regularisation plan includes inter-alia, funds raising exercise to be undertaken by the company, the proceeds raised therefrom will be used as working capital and funds for future projects. 

The company will appoint a principal advisor to advise the company on a regularisation plan, will focus on cost-saving and optimisation plans to remain competitive in the current business environment. 

It also includes the group will closely engage secured lenders and will discuss options to find an amicable solution for the debt resolution. 

“Barring any unforeseen circumstances, the group expects to resolve the issues relating to the disclaimer of opinion above within the next financial year,” said Serba Dinamik. 

The group also filed its annual report yesterday for the financial year ended June 30, 2021 (FY21) (18 months period), which stated a revised audited net loss of RM185.3 million versus a net profit of RM758.4 million in the unaudited accounts due to inventory write-downs of RM552.6 million and impairment of trade receivable of RM395 million.

In the annual report filed, its former chairman Datuk Seri Mohamed Farid Abu Hassan stated there is surely no hiding that Serba Dinamik has found itself “on the reverse gear” with massive erosion of its share price and market capitalisation following the flagging of statutory audit matters in its FY20 accounts by the former external auditor KPMG Ltd.

“Against such a backdrop, Serba Dinamik wishes to assure its shareholders that the company is still in good hands by not letting the accounting saga overwhelm its day-by-day operations.

“In essence, it’s still business as usual at the group with the key focus being proactively sourcing for new income streams — or expanding the scope of existing ones — to enhance earnings and drive shareholders’ value,” he said in an annual report. 

Serba Dinamik Group MD and CEO Datuk Dr Mohd Abdul Karim Abdullah said the purported PM4.54 billion in questionable transactions have caused excessive damage to the company’s share price and market capitalisation. 

“This leaves us with no better option than to do the unthinkable — filing a civil suit against the auditing firm over damages of PM4.9 billion stemming from the plunge in Serba Dinamik’s market cap along with loss of confidence from customers, investors and financial institutions.

“Not wanting to put our bet entirely on the oil and gas industry, Serba Dinamik has set its sight to be a leading service provider in the realm of the space economy. This is given we have great faith that we possess the relevant technological know-how to spearhead the exploration of the space economy which can put Malaysia at par with other developed countries,” he said. 

Serba Dinamik shares have been suspended since Oct 22 at the last traded price of 35 sen a share. 

The filed annual report comes after Serba Dinamik and its executive officials including its founder and CEO/MD Abdul Karim were charged in court last week in relation to the group’s submission of a false statement to Bursa Malaysia. 

The officials were charged for allegedly creating fictitious sales, causing falsified revenue to be recorded in Serba Dinamik’s earnings report for the quarter and year ended Dec 31, 2020. 

Serba Dinamik, in an exchange filing on Wednesday, stated its AGM will be held on Jan 31, 2022, at 3pm and resolution to be tabled include getting shareholder approval to undertake a share buy-back and payment of directors fees and benefits from Feb 1, 2022, until the next AGM of the company of up to a total amount not exceeding RM3 million.