Auditors step up

AUDITED accounts are the best way to gauge companies’ health.

That is why public-listed companies have to have all their accounts audited. And this is also why the auditors looking at public companies’ books are held up to high standards. The Securities Commission’s Audit Oversight Board ensures that this is the case. It keeps a close tab on the standards of the auditors and punishes those that fall below that. Perhaps, this is why we see more cases of auditors stepping up action on public-listed companies.

This week alone two cases emerged. Auditors Grant Thornton Malaysia expressed a disclaimer of opinion on Sumatec Resources Bhd’s audited financial statements for the financial year ended Dec 31, 2017 (FY17). Grant Thornton said it was unable to obtain sufficient audit evidence on the appropriateness of its going concern assumption on Sumatec.

On the same day, the trading in the shares of engineering and construction outfit Zelan Bhd was halted for an hour after its external auditors expressed concerns about the company’s future. The company said its external auditors, PricewaterhouseCoopers PLT (PwC), had issued a statement – “Material uncertainty related to the going concern of the group and the company” in respect of the company’s financial statements for FY17. The auditors pointed out that the group and the company had incurred a net loss after taxation of RM74.3mil and RM2.2mil, respectively, for FY17 and, as of that date, the group and the company’s liabilities exceeded their assets by RM269.5mil and RM47.4mil, respectively.

PwC said that those events and conditions, along with other matters, indicate that a material uncertainty exists that may cast significant doubt on the ability of the group and the company to continue as going concerns. Zelan said it “will continue to undertake measures to manage and strengthen the group’s cash flow position.”

Auditors ought to keep up their vigilant stance so as to ensure that the investing public is not misled.