Serba Dinamik Holding Berhad said on Tuesday it has taken legal action against KPMG after the auditor raised issues with some of the company's contracts and transactions.

KPMG has "negligently red flagged some issues", its chairman Mohamed Ilyas Pakeer Mohamed said at a news conference.

In May, Serba said KPMG had not been able to verify contracts and transactions worth RM3.5bil with 11 customers of the oil and gas services group.

Serba rejected the concerns and has said it saw no issues with the existence or legitimacy of the contracts. Its shares have dropped around 60% since the audit issues were made public.

In a stock exchange filing, Serba said it has filed a suit at the high court against KPMG. It will be seeking punitive and aggravated damages.

The company said the claims were made taking into account the loss of RM4.93bil in its market capitalisation, and loss of confidence from its shareholders and customers.

KPMG told Reuters it will vigorously contest any court proceedings.

"The potential claim relates to a statutory audit that is still in progress and we are unable to make any comments," the audit firm said.