KUALA LUMPUR (Feb 8): Reneuco Bhd’s external auditor Al Jafree Salihin Kuzaimi PLT has issued a disclaimer of opinion for the group’s 15-month financial statements ended Sept 30, 2023 (FY2023) due to insufficient appropriate audit evidence.

The auditor stated the view in its audit report which was submitted to Bursa Malaysia Securities by Reneuco on Thursday, along with the group's FY2023 annual report. Thursday is the final deadline before the stock exchange initiates a process to suspend the trading of the group's shares.

Following the submission of the annual report, Reneuco said there will be no suspension in the trading of its shares.

Reneuco has however been classified as a Practice Note 17 (PN17) company based on the disclaimer of opinion issued by the auditor.

Disclaimer of opinion simply means that an auditor does not express an opinion. It is one of the four conclusions — the other three being unqualified, qualified and adverse opinion — by audit firms in expressing whether a set of financial statements provides a true and fair view of a company’s financials.

In the case of Reneuco, its auditor's basis for disclaimer of opinion mainly revolved around the veracity of the group’s trade receivables, trade payables, revenue and costs of sales.

In view of these doubts, the auditor has requested Reneuco’s audit committee to conduct special independent review (SIR) and technical due diligence and cost-performance review on three local projects to ascertain the veracity of transactions related to them.

These procedures have yet to be completed due to time limitation and hence Al Jafree said it is unable to obtain sufficient appropriate audit evidence on the veracity of trade receivables amounting to RM37.14 million, trade payables of RM1.44 million, revenue of RM40.34 million and cost of sales totalling RM7.24 million in FY2023.

The auditor also said it could not obtain enough evidence for the cumulative revenue of RM321.26 million and cost of sales amounting to RM196.31 million between FY2020 and FY2023.

Al Jafree also said it could not obtain sufficient audit evidence on transactions entered between companies linked to Reneuco’s “previous major shareholder”, which gave rise to revenue of RM33.62 million and cost of sales amounting to RM30.93 million in wholly-owned Reneuco Engineering Sdn Bhd during “previous financial years”.

Another area that the auditor could not obtain sufficient evidence was recognition of other income at Reneuco’s wholly-owned Reneuco International (L) Ltd, involving the RM10.58 million withdrawal of invoices from foreign suppliers and reversal of contract liabilities from foreign projects amounting to RM11.33 million.

The two matters relating to Reneuco Engineering and Reneuco International were brought to the attention of the Audit Committee and covered under the scope of the SIR, said the auditor.

Al Jafree said there were also significant outstanding matters related to Reneuco Engineering, Reneuco International and another two wholly-owned units, Reneuco Digital Sdn Bhd and Reneuco RE Sdn Bhd.

“There are significant matters which we require that are outstanding at the date of our report and we have not been able to compile sufficient appropriate audit evidence to provide a basis for our audit opinion.

“Consequently, we were unable to determine whether any adjustments to the financial statements were necessary,” said the auditor.

For FY2023, Reneuco posted a net loss of RM117.04 million, versus a net profit of RM6.04 million during the 12-month FY2022, while revenue fell 54% to RM64.6 million from RM140.38 million.

The group has cash and bank balances of RM14.5 million as at FY2023, with deposits and prepayments amounting to RM9.83 million, while also bearing short-term borrowings of RM20.78 million and long-term debts of RM73.63 million.

Shares of Reneuco closed two sen or 40% higher at seven sen on Thursday, valuing the group at RM78.54 million.