Serba Dinamik’s financials are free of financial transgressions and fraud

By Pearlwhite 14^th December 2021, 8.58PM

Accounting is a system of capturing financial data to be presented in a meaningful way to provide accurate, complete and appropriate financial information for various purposes.   This system, in its most rudimentary form, is called the “double entry system” where a recording of a financial transaction requires two entries (Debit entry and Credit entry).

The key take-away for the purpose of this article is that if fraud were to be committed, it requires two entries for that fraud to happen.

For example, if one were to record fictitious revenue to a RM100 million sale to a customer, it must record a RM100 million fictitious payment from the customer.

A recap of KPMG’s findings was in the areas of Debtors, Payables, Assets (including materials on site).

A) KPMG and Bursa’s Originating Summons did not raise any audit discrepancies with Cash and Cash Equivalents

Below is the financial information pertaining to Revenue and Debtors for Serba Dinamik for the financial years 2016 to 2020.  Bear in mind, the same analysis can be applied to Payables.

Source : Serba Dinamik Annual Report and Quarterly Report

Based on the above information, it can be deduced that Debtors & Contract Assets owed by customers of Serba Dinamik have all been settled within the stipulated timeframes.  Which is to say, with Revenues of RM20.5 billion for the financial years 2016 to 2020, only RM2.6 billion remain outstanding as at the end of the financial year 2020.

Granted, there would be cases where customers are unable to pay and there would be instances where customers’ assets would be used for partial repayments and/or bad debts are provided or written off.   Serba Dinamik had none of that and it was not a discrepancy for KPMG.

Moreover, Debtor’s payments to Serba Dinamik would be scrutinised and reviewed and the accuracy and completeness of the cash and cash equivalents would further be confirmed by Serba Dinamik’s panel bankers the likes of HSBC, RHB, and etc.,. with bank confirmations which are initiated by the auditors themselves and reverted to by the banks directly.

B) KPMG did not raise audit discrepancies in relation to revenue and debtors being re-classified as expenses

As part of the external audit and Special Independent review, auditors would scrutinise the accounting transactions pertaining to each of the Debtors.  In cases of fraud, typically transactions of moving debtor transactions to expense requires detailed review and explanations.

C) The issue for KPMG, were on the confirmations and/or physical/site visits to establish the existence of such customers

Serba Dinamik’s special audit review facing ‘operational matters’

Wednesday, October 27th, 2021 at Markets | News

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

“Hopefully the easing of standard operating procedures on Covid-19 restrictions in different countries can help to expedite the verification process.  It depends on agreement or cooperation of all parties involved,” he told The Malaysian Reserve when asked about the date the group will be able to announce the findings.

On the other hand, inability to verify confirmations and/or physical/site visits of customers can also be cross examined against bank receipts / export credit notes / transfer documents, subsequent to the financial year end to determine once and for all, as to the actual location and in some instances confirmation of amount owing in the event that payments are for the outstanding balance.

This verification can be done by the auditors with the banks without the involvement of Serba Dinamik.

In conclusion, Serba Dinamik’s financials are free of financial transgressions and fraud since its customers have been excellent paymasters for the past 5 financial years. 

Tactics and methods used to commit financial transgressions and fraud are well documented and known by auditors and financial forensic investigators alike and would always be easy to identify. 

It is safe to say, Serba Dinamik's accounting system do not share the hallmarks of XINGQUAN INTERNATIONAL SPORTS HOLDINGS LTD that committed a classic fraud method by falsifying the transactions in the double entry system.

* 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.