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SERBA AUDIT HASSLE EXPLAINED - Things KPMG won’t tell you & will never tell you, unless in court.
Disclaimer: Below are merely discussion for better understanding on how audit is conducted & for general public educational purposes. Any party who feel offended due to whatever reasons below, pls consult your company's auditors, MIA, SC or/and Bursa first for clarification & confirmation, before you consult your lawyer.
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Let's try to take a look at normal audit process conducted by KPMG over Serba accounts in early years
1) Serba informed KPMG, accounts are ready for audit
2) KPMG & Serba concluded audit program
3) KPMG sent a team to Serba office & liaise with accounting department
4) Along the audit process, KPMG team would communicate with accountant/managers of account department over certain audit matters
5) after all vouching works, audit risk analysis & management explanations obtained for certain audit queries, KPMG team would compile the audit working papers & sent for KPMG manager's review.
6) assuming only mirror audit issues & without suspicious of frauds, KPMG will meet Serba Group CFO for final meeting.
7) Serba drafted financial statements & sent to KPMG for review.
8) once all were good, KPMG issued auditors report with "true & fair view"
>>>> Not sure if there were a few good golf games in between for better working relationships? (welcome to confirm or deny <<<<
SO WHAT POSSIBLY WOULD GO WRONG IN AN AUDIT?
If you look at item 4 & 5 above, no further audit were needed with below situations:
A1) invoices to customers & payments from customers were in satisfactorily good order
A2) acquisition of PPE & leased assets were supported with proper documentation, postings & payments by Serba
A3) inventories were purchased in the ordinary way of transactions
A4) Contract assets were supported with proper documentation & in accordance with the terms of the contracts
Hardly we see any auditors conduct background investigation or physical checks on client's customers or/and suppliers because:
A5) no need. As long as the audit findings & tests on estimates so far were good & in satisfactory manner
A6) cost (audit industry is not big fat but indeed pity little profit industry)
UNLESS:
B1) someone in the company told auditors something very fishy in the accounts, and that information were proven reliable
B2) auditors discovered some documents which were not supposed to be stored in the company's premises, say unusual quantities of the customers/suppliers internal documents
B3) accounting postings or reclassification across the item A1 to A4 abnormally or inconsistent to general acceptable manner.
B4) payment transactions or records among item A1 to A4 were abnormal or suspicious
B5) unusual or inconsistent information were discovered during the audit and when checked with management, the explanations given by the management were contradicted or not in satisfactory manner
B6) ______________ (others?)
An audit partner needs to decide if there is any need to conduct investigative audit over the inconsistent or unusual audit findings if B1 to B6 existed, in order for the audit partner to discharge his duty & responsibilities as auditors.
AFTER CONDUCTING FURTHER BACKGROUND INVESTIGATION & PHYSICAL CHECKS, WHAT NEXT?
I personally don't know what triggered KPMG (please refer Item B1 to B6) to conduct such background checks on these customers & suppliers.
After received the check results and if I were the audit partner in-charge of KPMG for Serba audit, I would start sweating......I will definitely discuss the issues with other partners and collectively a decision will be made by KPMG management.
Can you follow until now? If you can't, please leave your comments below.
Now, let’s see what was happening after that:
C1) In the very high ranking meeting with Serba, KPMG raised queries over the subject matters
C2) Serba responded & replied with their version of findings & explanation, if not on the spot, later.
C3) KPMG opined that the replies from Serba were NOT satisfactorily justified & thus requested independent 3rd party to review the validity of the replies & evidences produced by Serba. By getting internationally recognized audit firm to be the independent reviewer to review over the evidences, the outcome of the review will be able to assist KPMG to conclude the audit.
C4) But Serba refused such suggestion from KPMG and labelled that request WAS UNNECESSARY. (Go read yourself on the statement of claim point 58 by Serba over the law suit to KPMG)
C5) Now KPMG & Serba had disagreements over the evidences & the situation remained unresolved. How?
C6) KPMG should bring the disagreement & matters to the Serba Audit Committee for their attention & assistance. They did indeed.
C7) It is professionally right for KPMG as auditors to report the matters to SC IF they believed they should. So KPMG did.
MIA, SC & Bursa have not reprimanded or questioned KPMG's action so far, so is KPMG wrong or right in this situation? Market replied in share price. What is yours?
As a side note, while I am not sure if any wrong doing in Serba or by Karim just yet (give little bit of benefits la, or else nanti kena sue, how?), I personally strongly doubt on the ability of Serba Group CFO over the whole mess for his failure in advising Karim correctly & competently.
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Discussions
6 people like this. Showing 50 of 94 comments
Agreed.
There are loopholes here & there in Serba announcements if you read carefully. Beware of it. Ordinary people who are not well trained in legal area will find it no issue.
Auditors are always careful with the words used, the lesser the better.
Opposite to lawyer, the more the better, so that you can’t find North :)
————-++++++++————
qqq3333 I was an auditor before and so also kingdom I believe... on this issue it's understandable that people who were never auditors before get the issues wrong.
30/06/2021 11:01 AM
2021-06-30 11:52
Yes, it happened, by SC. Audit firm cannot audit PLC due to incompetent.
Go check google, all are there.
———-++++++++————-
AlsvinChangan Can an audit company banned from practice?
IF YES, any examples?
2021-06-30 12:00
Auditor
Jz academic
Take up tis audit
OrlandoOilSemiconIoT Ok good.. insider
Ok let's make u a shadow 1 man audit team attempting to audit Serbadks MATERIALS ON SITE
1. For an O&M service provider like Serbadk materials on site comprises?
Kindly provide detailed breakdowns
2. For an O&M service provider like Serbadk is it a fair assumption that the materials on site are located at Serbadks customers premises with only a small part located at Serbadks own premises?
Kindly provide detailed breakdowns
30/06/2021 8:11 AM
2021-06-30 12:20
It is good that Serba need Kpmg help for the EY review, this means KPMG can collect back all its outstanding audit fees loh!
2021-06-30 12:23
@stockraider
SerbaDK will still need to settle all outstanding audit fees. Otherwise, KPMG will not give a professional clearance letter to the new auditor whoever it is.
2021-06-30 12:30
Appointment of EY is not appointing serba new auditor for statutory audit by right do not need KPMG clearance letter, but since EY wanted KPMG audit records....EY need KPMG cooperation to do it...Serba has no choice but to pay up despite suing KPMG loh!
Posted by gohkimhock > Jun 30, 2021 12:30 PM | Report Abuse
@stockraider
SerbaDK will still need to settle all outstanding audit fees. Otherwise, KPMG will not give a professional clearance letter to the new auditor whoever it is.
2021-06-30 12:35
words of wisdom... auditors less word the better, lawyers currency is words, so many words u will not find true north
2021-06-30 12:35
Main audit higher assurance
Review audit less assurance
do you agreed?
2021-06-30 12:35
@stockraider i am referring to the NEW auditor WHOEVER it is. It might be Deloitte or PWC. As for special independent revier, KPMG will give the cooperation to EY as this case is now under the radar of SC and Bursa.
2021-06-30 12:37
thousands of lawyers in Malaysia, Serba has to find Najib lawyers..... this gave Malaysians a shock.
2021-06-30 12:38
In this case KPMG will need to give to clearance letter loh...1 to EY for the review & the other clearance for appointment of new statutory audit auditor later loh!
Posted by gohkimhock > Jun 30, 2021 12:37 PM | Report Abuse
@stockraider i am referring to the NEW auditor WHOEVER it is. It might be Deloitte or PWC. As for special independent revier, KPMG will give the cooperation to EY as this case is now under the radar of SC and Bursa.
2021-06-30 12:40
Only ppl work in audit line or finance division know how serious are these ‘trivial’ issues.
2021-06-30 12:43
@stockraider SerbaDK will still need to appoint an external auditor right? The auditor cannot be appointed legally without the professional clearance letter from previous auditor.
The role of special independent reviewer does not need professional clearance letter. EY just need to access some working papers from KPMG only. But with KPMG's consent. EY will not give any audit opinion after it had done its job. Only the auditor can do it.
I am not sure why you are still confused..
2021-06-30 12:46
for traders and retailers Serba at this price looks attractive for a trade but I will advise against it.
2021-06-30 12:53
I am wondering too why must use Najib lawyer. Should not hire a lawyer link to politician, it will make Serba looks like a political NGO
2021-06-30 13:14
As I said earlier, as long as there is court case against KPMG by Serba, it is impossible for KPMG to open its files because the information has now become confidential court evidences.
Imagine this way:
A sue B to court, and then later ask B, you must help me, give me what you have on hands.
Quite a joke for asking help from someone you are now suing.
Nothing to do whether help or not help, professional or not.
So, When i saw Serba announcement that need help from KPMG AND comment from the famous long nose lying Chairman said “the ball is at the court of KPMG”
I REALLY FELL DOWN FROM MY CHAIR & CAN’T STOP LAUGHING
———-+++++++++———-
stockraider KpMG will definitely help mah...bcos being professional mah!
Also being professional definitely kpmg will ask serba to settle all the outstanding fees immediately b4 granting EY access loh
2021-06-30 14:03
KPMG will never able give an opinion in SB accounts as long as court case is ongoing. SIR severes only Bursa /SC directive purposes.
2021-06-30 15:00
U keep reading statements wrongly
And now u are no longer even talking sense
If KPMG refuses to cooperate tis is d best outcome for Serbadk
Serbadk will tell SC we try to proceed wit d independent review but KPMG refused to cooperate
As KPMG refused to cooperate as such the independent review cannot proceed
INDEPENDENT REVIEW CANNOT PROCEED DUE TO KPMGs fault
Stock Kingdom As I said earlier, as long as there is court case against KPMG by Serba, it is impossible for KPMG to open its files because the information has now become confidential court evidences.
2021-06-30 15:26
Bursa and SC don't have the right to ask SD dropping the court case. Suspension coming?
2021-06-30 16:16
OK OK OK, I know what you wanted to say all these while.
you want to say it’s all KPMG fault, right? I know, I truly know it,
I understand your thought, you believed All these mess & the collapse of Serba price because of KPMG’s fault. I got it, OK?
NOW, IF SERBA CANNOT APPOINT EY AS INDEPENDENT REVIEWER, IT IS DUE TO KPMG’s FAULT, RIGHT?
I TRULY KNOW WHAT YOU SAID, RIGHT? SO LETS GO BACK TO HAVE A GOOD REST & SLEEP, OK?
———-+++++++———
OrlandoOilSemiconIoT
If KPMG refuses to cooperate tis is d best outcome for Serbadk
Serbadk will tell SC we try to proceed wit d independent review but KPMG refused to cooperate
As KPMG refused to cooperate as such the independent review cannot proceed
INDEPENDENT REVIEW CANNOT PROCEED DUE TO KPMGs fault .
30/06/2021 3:26 PM
2021-06-30 16:56
Why write so long o??
Jz say la.... FINE !!
OK u hv a good rest
Don't let ur dogs out
2021-06-30 17:03
Suspending of SD is at the best interest of KLSE as a whole. Investors are being hunted of reading SD saga news everyday.
2021-06-30 18:32
Seem you have issue of understanding little english here, let me explain to you ya, no worry, I understood one.
When i said below:
Your mouth is what your heart is
Words come from you mouth are what you have in your heart
Peace be with you all
It means:
whatever come out of your mouth, are what you have in your heart.
If your heart is full of love, words come out from your mouth will be lovely and pleasant to hear.
Otherwise apply.
——-+++++——-
AlsvinChangan A real auditor or scam auditor?
your mouth is your heart
30/06/2021 5:39 PM
2021-06-30 19:47
Sue KMPG? SD has obviously mis managed the situation or being silly. No clean audit report from the external auditors, bankers will demand for repayment of loans. Money doesn't fall from the sky . Bankers and lenders are heavily relying on the audited report in making assessment of loans.
2021-06-30 20:33
SD was able to borrow RM 4 billion from the lenders are supported by KPMG clean audit report. Without a clean audit report from big 4, my foot. The lenders of SD are shivering in this high profile saga. Stop being lcly in treating the external auditor.
2021-06-30 21:05
thanks for elaborate what happened
So many ikan bilis blindly believe & support what Karim said, may be they are smarter than KPMG, who knows
2021-07-01 10:50
Serba at 30 surely attracts a lot of people who think they are smarter than fund managers smarter than Kpmg.
2021-07-01 11:10
"Serba Dinamik said it had filed a civil suit for substantial damages against KPMG on the grounds of alleged professional negligence, breach of contract and breach of statutory duty. KPMG resigned as the firm’s auditor the next day, citing the legal action."
https://www.google.com.vn/amp/s/www.energyvoice.com/oilandgas/asia/333223/four-serba-dinamik-directors-quit-after-firms-suit-against-kpmg-amid-finance-probe/amp/
2021-07-01 14:09
Tis term is not directed at KPMG
Tis term is EY telling Serbadk u cannot in anyways whatsoever stop us from communicating with KPMG.... we must hv total full unfettered access to KOMG to communication wit KPMG.
So it is basically EY telling Serbadk u cannot limit our scope of work... no limitation of scope
So KPMG can or cannot accept tis term is irrelevant coz it is not directed to KPMG
Haiz u stock kingdom
1. EY need to have full and unfettered access to KPMG PLT for information and confirmation for the purpose of analysing the transactions and concerns highlighted;
OrlandoOilSemiconIoT stock kingdom to interpret tis again carefully tis time
U hv got it wrong again
1. EY need to have full and unfettered access to KPMG PLT for information and confirmation for the purpose of analysing the transactions and concerns highlighted;
Posted by Stock Kingdom > Jun 28, 2021 7:15 PM | Report Abuse
I have never heard one audit firm can have “full and unfettered access” on the working papers of another audit firm. Never in the history locally & internationally.
Some more that one is KPMG.
Haha, forget the appointment.
Some may think what about apply & get court order to command KPMG handover.
but at what basis? Will KPMG just sit quietly & do nothing letting Serba get the order? By then MIA will jump in to defend for KPMG.
———-++++++———
myinvesting I expect it will be rejected by kp&g due to resigned (no more relationship), confidential and suit case (how to give hold harmless?)
————+++++++———-
1. EY need to have full and unfettered access to KPMG PLT for information and confirmation for the purpose of analysing the transactions and concerns highlighted;
However, in light of the recent resignation of KPMG PLT as the Company’s external auditors, EY required assurance that the above requirements remain in place prior to executing the engagement letter and commencing the review, including a written confirmation from KPMG PLT that co-operation in the form of access and information will be provided to EY for the purpose of understanding the alleged irregularities and anomalies identified, such as
30/06/2021 10:21 AM
2021-07-01 16:03
So as KPMG needs not provides all its audit working papers jz those related to the issues so do u stil think if KPMG refuses to cooperate is reasonable?
2021-07-01 16:32
I have been trying to talk to you as simple as possible, but seems like you have some degree of mental block.
Your thought is like you are the boss, auditors should & shall work exactly what you want.
As I said, it's totally fine with yourself & please go ahead with what you think right, OK?
IF YOU ARE STILL NOT HAPPY, JUST GO COMPLAIN KPMG TO MIA, SC & BURSA, IF NOT ENOUGH, MOF & SSM.
---------------++++++++++++------------
OrlandoOilSemiconIoT Tis term is not directed at KPMG
Tis term is EY telling Serbadk u cannot in anyways whatsoever stop us from communicating with KPMG.... we must hv total full unfettered access to KOMG to communication wit KPMG.
So it is basically EY telling Serbadk u cannot limit our scope of work... no limitation of scope
So KPMG can or cannot accept tis term is irrelevant coz it is not directed to KPMG
Haiz u stock kingdom
OrlandoOilSemiconIoT Haiz stock kingdom u n ur dogs
01/07/2021 4:15 PM
OrlandoOilSemiconIoT So as KPMG needs not provides all its audit working papers jz those related to the issues so do u stil think if KPMG refuses to cooperate is reasonable?
01/07/2021 4:32 PM
2021-07-01 17:06
To put in technical term, your understanding & questions are out of context
2021-07-01 17:12
Thanks for the insight OP, now only time can tells until the court cases are settled. If proven wrong, Serbadk traders gonna lose a lot. If they do win, back to business lol
2021-07-06 17:06
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Stock Kingdom
Yes, auditor was sentenced fine & jailed in Malaysia few years back.
Directors inflated by including the near future sales figures & auditor certified it even he knew before hand that it was not appropriate.
Finally All directors were fine by SC only while THE AUDITOR WENT TO JAIL.
I personally know that auditor, pity him. He knew the directors well & thought did it as favour, since the sales was only about 10% & was genuine.
Can we blame SC? No, rules are rules, auditors must know how to protect themselves FIRST no matter what.
———++++++++————
ahbah Auditors got go to court meh ?
30/06/2021 11:29 AM
2021-06-30 11:46