Bursa and TheEdge : Is this auditing standards and is it really good for the capital markets?

By Pearlwhite

30th November, 2021 9.45AM (Updated 30th November 2021 6.40PM)

The revelations made by The Edge in its feature length coverage on 29th November 2021 entitled “Bursa’s suits sheds more light on Serba Dinamik’s financials” is really worth a read.  So much so, that the only addition to what is already mainstream knowledge in the entire coverage was the following, apart from highlighting EY’s one sentence finding in the four areas,

“EY Consulting’s findings update recorded in the court documents highlight the same concerns that KPMG had over the company’s transactions.  The Company state that the financial impact on the company from EY Consulting’s findings under the SIR amounted to RM1.438 billion as at Oct 22, 2021.”

Recaps are definitely a good way to reinforce how serious EY Consulting’s findings are.  For the list KPMG’s findings previously, here it is.

https://www.bursamalaysia.com/market_information/announcements/company_announcement/announcement_details?ann_id=3162085

https://www.theedgemarkets.com/article/kpmg-raised-audit-issues-transactions-involving-over-rm3-billion-says-serba-dinamik

This involved RM3 billion of transactions with audit issues excluding trade/non-trade receivables.

https://themalaysianreserve.com/2021/10/27/serba-dinamiks-special-audit-review-facing-operational-matters

This involved more than RM3.5 billion of transactions with audit issues.

https://focusmalaysia.my/serbas-head-honcho-denies-rm4-5-bil-audit-discrepancies

There are three observations arising from this.

Firstly, the question is that does "EY shared the same concerns" or "EY found discrepancies" a conclusion that cannot be disputed? Not once was there any mention of words that suggests "finalisation", "completion", "conclusion" or some words towards that effect.

Secondly, since EY's findings all concur with KPMG's finding, why is the impact now RM1.438 billion? It is lower than the RM3 billion to RM4.5 billion than previously thought.  Are there any explanations for this revised value?

Finally, EY’s opinion that the impact is RM1.438 billion and not more than RM3.5 billion (and possibly up to RM4.5 billion) as previously reported.  Does this mean RM2 billion to RM3 billion worth of transactions have been resolved? This is in fact a good progress, since 57% up to 67% of the contentious value respectively has been cleared.

In a nutshell, given these three observations, it is evident that EY’s SIR, albeit still work in progress, had managed to resolve up to RM3 billion worth of transactions.  The balance of RM1.438 billion needs to have further audit verification works to be done in order to conclusively close the matter at hand.

When RM1.438 billion is disclaimed against any reliance to be placed on it, it is thus reasonable to have it resolved prior to disclosure even if EY's stands by its work and Bursa stands by it opinion.

* In respect of the article, it is recommended that you consult with a Certified Accountant/Chartered Accountant/Chartered Internal Auditor, Chief Financial Officer, Legal Counsel and/or Tax Advisor for advice concerning the article.

It is not recommend that consultations be made with Certified Financial Analyst, Brokers, Traders and/or MBA/MA Finance Graduates as they are deemed not to have the necessary competency and skills to evaluate and advise on such matters discussed in the article.