Acra inspects KPMG's 2011 to 2018 audit of Hyflux

Singapore

THE Accounting and Corporate Regulatory Authority (Acra) is inspecting the audit work done by KPMG for Hyflux as part of a larger probe into the water treatment firm's compliance with accounting and auditing standards over a period of years from 2011 to 2018. KPMG was the auditor for Hyflux during that period.

A spokesperson for the accounting watchdog told The Business Times on Wednesday: "Acra, under the Practice Monitoring Programme (PMP), inspects audits carried out by auditors registered with Acra to assess their compliance with Singapore Standards on Auditing. The inspection on the audit of Hyflux is carried out under the PMP and is currently ongoing."

On Tuesday, Acra, together with the Commercial Affairs Department of the Singapore Police Force and the Monetary Authority of Singapore (MAS), said that Hyflux and its current and former directors are under investigation for suspected false and misleading statements and breaches of disclosure rules that may have taken place over a period of years.

Hyflux owes S$900 million to 34,000 retail investors who had bought its perpetuals and preference shares.

A number of these investors as well as Hyflux medium-term note holders have asked the Securities Investors Association of Singapore (Sias) if it can help to initiate legal action against the directors.

"Sias knows that such an initiative now would affect any restructuring plan. We have advised the investors interested in legal action to seek their own legal counsel or wait for the right time that would warrant such an action," said Sias president David Gerald on Wednesday.

But the credibility of Hyflux's board of directors is now in question, he added, saying: "Where directors are under investigation of serious offences, they must ask themselves whether they should step aside and allow new directors - especially independent directors with expertise and fresh mind - to deal with new offers.

"As early as January 2019, Sias called on the Hyflux board to step down. If the board stays on, it must work harder and be willing to communicate better with its stakeholders in a timely manner. Sias is disappointed that the board has on numerous occasions failed to respond to questions raised on behalf of our retail investors in Hyflux.

"Sias still hopes that the Hyflux board will do the right thing expeditiously in the interest of all investors who have put their faith in them and were ready to part with their money on the basis on what was put out in their documents."

In April last year, MAS told reporters that it had not uncovered any impropriety by DBS Bank in arranging the sale of Hyflux perps in 2016. "As the issue manager, DBS conducted due diligence checks to ensure that material information relating to Hyflux was highlighted in the offering document," MAS said at the time.

Asked by BT to confirm whether or not DBS Bank is being probed for its role in arranging Hyflux's S$400 million preference share issuance in 2011 and S$500 million perpetuals issuance in 2016 as part of the investigation announced on Tuesday, an MAS spokesperson said on Wednesday: "It is inappropriate to comment further as investigations are ongoing."