SCIB’s auditor expresses a qualified opinion on the financial statements for the year 22

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KUALA LUMPUR (8 November): Sarawak Consolidated Industries Bhd (SCIB) said its external auditor had expressed a qualified opinion on the group’s financial statements for the year ended 30 June 2022 (FY22), relating to a settlement agreement relating to six construction projects carried out in Qatar and Oman.

The qualified opinion relates to the settlement agreement signed between SCIB and the project customers on November 10, 2021, the civil engineering group said in a filing, citing the report of the auditor, Nexia SSY PLT.

According to the report, due to the lack of sufficient evidence on the transactions, Nexia was unable to determine the “accuracy, existence and completeness” of the group and company claims owed by foreign project owners as of July 1, 2021, amounting to RM60.67 million and RM11.86 million respectively.

Additionally, Nexia said it was also unable to determine the “accuracy and correctness” of the cumulative losses as of July 1, 2021, amounting to RM53.92 million and RM38 million respectively. RM11 million for the group and the company.

“We have not been able to ensure that subsequent transactions, if any, affecting these balances do not contain material misstatements that materially affect the current period financial statements.

“We are therefore unable to be satisfied with the following assertions and obtain sufficient appropriate audit evidence to determine whether the following items are free from material misstatement,” the auditor said.

Nexia said SCIB’s settlement agreements with the owners of the construction project had developed with a termination clause triggered due to the latter’s non-payment of a deposit due on June 30, 2022.

Subsequently, novation agreements between the parties were signed in September, according to which the responsibilities of the SCIB towards the subcontractors of the projects were to be assumed by the project owners.

“The Class Legal Representative has agreed to be named as a party to the payment, performance and/or administration of the Novation and Settlement Agreements,” Nexia said.

In response to the qualified opinion, the SCIB said the group did not expect the audit matters to be deferred to FY23.

“There is no financial impact in particular on trade receivables balances with foreign project owners, which have been fully written down in the FY22 financial statements,” the group said.

Shares of SCIB closed unchanged at 15 sen on Tuesday (8 November), giving the group a market capitalization of RM84.58 million.

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