Auditor expresses qualified opinion on SMTrack’s audited financial statements

PETALING JAYA: Track and trace solutions provider SMTrack Bhd’s external auditor, Messrs KC Chia & Noor, has expressed a qualified opinion on the company’s annual audited financial statements for the financial year ended July 31, 2016 (FY16).

In a filing with Bursa Malaysia, SMTrack said the auditor highlighted three issues that remained unresolved during the financial year in question – the carrying value of certain assets, accounts’ opening balances and a gain on disposal of a subsidiary company.

Messrs KC Chia & Noor said one of the bases for the qualified opinion was that the predecessor auditor was unable to obtain satisfactory appropriate audit evidence concerning the recoverable amount of IT equipment, and IT equipment under installation, which amounted to RM2.87mil and RM3.25mil, respectively, as at March 31, 2015.

It said the carrying amount of the intangible assets of RM1.39mil as at March 31, 2015 consists of product development costs that relate to a project terminated during the financial period.

Thus, the auditor said it was unable to ascertain the directors’ assessment of the recoverable amount from the said assets and they could not determine the effect of adjustments, if any, on the financial position of the group and the company as at March 31, 2015, or on its financial performance and cashflows for the financial period then ended.

For FY16, the carrying value of SMTrack’s IT equipment and IT equipment under installation stood at RM1.288mil and RM1.89mil, respectively. The group managed to rent these assets out for one year from October 2016 in order to generate economic benefits.

The intangible asset also saw its value depreciate to RM701,306 for FY16, but Messrs KC Chia & Noor said the matter remains unresolved in FY16.

“Although annual depreciation has been provided by the management, we were unable to ascertain the directors’ assessment of the recoverable amount of the asset and we could not determine the effect of adjustments, if any, that might have been found to be necessary on the financial position of the group and the company as at FY16, or on its financial performance and cash flows for the financial period then ended,” Messrs KC Chia & Noor said.

Messrs KC Chia & Noor noted that it was appointed in October 2016 and that it was unable to access the audit working papers of the predecessor auditors and unable to verify SMTrack account’s opening balances.

“Since the opening balances substantially enter into determination of the financial performance and cash flows of the current financial period, we therefore could not determine the effect of adjustments, if any, that might have been found to be necessary in respect of the current period’s loss of the financial performance and cashflows of the group and the company for FY16,” it said.

The auditor also said that it was unable to perform any verification on a gain on the disposal of SMTrack’s subsidiary, LEYS International Ltd.