KUALA LUMPUR (Jan 31): Lambo Group Bhd said its auditor Messrs ChengCo PLT has expressed a qualified opinion on its audited financial statements for the financial year ended Sept 30, 2023 (FY2023).

According to Lambo's filing on Wednesday (Jan 31), the external auditor noted in its audit report that it was unable to ascertain the accuracy, completeness and validity of the comparative figure on the Fujian Accsoft Technology Development Co Ltd’s income statement.

This is because prior to the audit of the current financial year, Fujian Accsoft was wound up on May 16, 2022, which makes its financial statements from June 1, 2021 up to the deregistration date not available for the auditors to audit.

Prior to its deregistration, Fujian Accsoft was a subsidiary of Lambo. The winding up of the company has resulted in the deconsolidation of Fujian Accsoft in Lambo’s financial statement from the beginning of the financial year June 1, 2021 and a loss on deregistration of RM3.96 million, which were included in the group’s income statement.

“As such, we were unable to ascertain the accuracy, completeness and validity of the comparative figure on the Fujian Accsoft’s Statement of Profit or Loss and Other Comprehensive Income from the beginning of the financial year, June 1, 2021 until the date of deregistration (winding up) as at May 16, 2022 and loss on deregistration (winding up) of the subsidiary in the Statement of Profit or Loss and Other Comprehensive Income,” the auditors stated in the report.

Fujian Accsoft was involved in software development, internet information services, enterprise management and consulting services.

Prior to the deregistration of Fujian Accsoft, Lambo had reached out to China's finance ministry and the past and present auditors of Fujian Accsoft over alleged wrongdoing in relation to the Chinese firm's financial report.

China's Global Times reported in July 2022 that the country's finance ministry had imposed an administrative fine against an accounting firm for cross-border accounting audit supervision on Fujian Accsoft.

The report said Fujian Accsoft's 2016 to 2018 financial reports were seriously falsified and constituted a suspected crime, and added that the accounting firm should take major responsibilities for the audit of the financial statements amid severe lack of audit procedures.

The ministry's inspection also found that Fujian Accsoft continued to see losses from 2016 to 2018 and it had no more than five employees during the time.

Secondly, the auditor said Lambo had classified a company it had acquired 23.27% stake in as “other investment” instead of investment in associate in accordance with Malaysian Financial Reporting Standards (MFRS) 128 — Investment in Associates and Joint Ventures, and to be equity accounted in the group’s financial statements.

“As such, we were unable to ascertain the classification and measurement of the other investment,” it noted.

On top of that, the auditor's audit report stated that key audit matters on the recognition of right of use assets and lease liabilities as well as a presumption of a risk of fraud in the area of revenue recognition in accordance with International Standards on Auditing (ISA) 240 — The Auditor’s Responsibilities Relating to Fraud in an Audit of Financial Statements.

"The group’s right of use assets and lease liabilities amounting to RM7.3 million and RM7.6 million, representing approximately 4.13% of the group’s total assets and 61.3% of the group’s total liabilities respectively as at Sept 30, 2023," its filing showed.

Lambo’s board said it will seek professional advice to look into the issues as highlighted in the qualified opinion section of the independent auditors’ report.

Lambo’s share price closed up 0.5 sen or 20% at three sen, bringing the group a market capitalisation of RM46 million.