THE Institutional Investors Council (IIC) has joined the Minority Shareholders Watch Group (MSWG) in objecting to the proposal by Serba Dinamik Holdings Bhd board to remove external auditor KPMG PLT in light of the flagging of some audit matters in relation to the company’s FY2020 financials.

This is because such move shall undermine the corporate governance process considering that external auditors play a major role as gatekeepers, according to its adviser Lya Rahman.

“After all, it is their (KPMG’s) responsibilities to highlight any issues of concerns, in particular those pertaining to financial transactions and how contracts were awarded which in Serba Dinamik’s case, appear to be questionable.” she told FocusM.

“Why the urgency to remove KPMG before the commencement of investigation and the results of the investigation known?

“Why is the company’s non-independent non-executive (Datuk Abdul Kadier Sahib) proposing to remove KPMG? What is the role of its audit committee and board? And who recommended the appointment of BDO PLT as replacement? Has due process on the removal and nomination taken place?”

In a Bursa Malaysia filing late last Friday (May 28), Abdul Kadier who holds a 15.96% stake in Serba Dinamik has mooted the convening of an extraordinary general meeting (EGM) to appoint BDO as KPMG’s replacement pursuant to Sections 277 and 322 of the Companies Act 2016 for the company’s financial year ending June 30, 2021.

“A comprehensive investigation needs to be undertaken independently to get to the bottom of the issue with no stone to be left unturned. The independent directors are now expected to play their role independently and not beholden to any major shareholder or management,” asserted Lya.

With regard to Serba Dinamik’s move to set up an independent international review parties to evaluate KPMG’s findings, Lya further commented:

“What is the scope of work by these independent parties? Why can’t they conduct internal enquiry to review the issues raised by KPMG? What is the role of audit committee and internal auditors on this?

“The concern is also on the composition of the independent committee as announced by the company – by having members of the management – how can the committee be deemed as independent?”

Oblivious to what was brewing in Serba Dinamik, the EPF had in this month alone (between May 4 and 24) acquired 1.8 million shares in the O&G industry player to bring its stake in the company to 10.16%.

MSWG’s viewpoints

In echoing IIC’s stance, a MSWG’s CEO Devanesan Evanson urged all minority shareholders to vote against the resolution to remove the auditor.

As part of good governance, KPMG should be allowed to complete their work and report to Serba Dinamik’s shareholders at the company’s forthcoming AGM, he added.

“Since the company is setting up a special independent review by appointing an independent firm to assess the veracity and accuracy of the matters brought up by the external auditors, the external auditor should be around to defend their findings and explain themselves,” he opined.

“There is no urgency to remove the auditor at this juncture. As such, MSWG urges all shareholders to vote against the resolution to remove the auditor.”

Very broadly, the shareholder activism group is of the view that external auditors are appointed by shareholders to provide an independent opinion on whether a company’s financial statements present a true and fair view.

“The external auditors’ opinion on a company’s financial statements will be presented in the annual report along with the audited financial statements,” suggested MSWG. “In addition, the external auditors will be present at the AGM to address shareholders queries in relation to their opinion.”

Having been suspended since May 27 (Thursday), Serba Dinamik is widely expected to resume trading tomorrow (May 31). The company was last traded at RM1.61 on May 25 with a market capitalisation of RM6 bil. – May 30, 2021

https://focusmalaysia.my/markets/investor-bodies-question-serba-dinamiks-eagerness-to-boot-out-auditor/