Auditor issues disclaimer of opinion on KTL Global's finances

MAINBOARD-LISTED KTL Global's independent auditors, Messrs RT LLP, had issued a disclaimer of opinion on the group's FY20 financial statements, said the company in a bourse filing on Tuesday.

The audit disclaimer of opinion is in relation to the transactions of its subsidiary Bluegas with four branding, operation and procurement (BOP) customers in China.

The auditors noted that they were not able to obtain satisfactory explanations as to why the chief executive officer of Shenzhen Green Leopard Medical Technology Liu Xiao Qing was able to act on behalf these customers.

"We were not able to ascertain the authority under which Liu Xiao Qing signed on behalf of the customers," said the auditors, adding that there could also be related party relationships and arrangements which would require further investigations.

Meanwhile, purported collections from the four BOP customers were received through third-party remittance firms in multiple tranches without any written evidence of whom the payments were from or what the payments were for.

In addition, Mr Liu was the one who determined which debtor's accounts were to be credited. The auditors pointed out it was uncommon for a party outside the company to give such directions.

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The auditors also found that the accounting treatment of the receipts by Bluegas of an aggregate amount of US$700,000 directly and indirectly from Lawrence Group in September 2020 was irregular.

The monies were used to partially offset the balances of the four trade debtors even though the remittances were evidently made by a non-PRC entity from the US and were in US dollars, said the auditors

Bluegas continued to record these amounts as trade receivables collections in the financial statements even after it was made aware by Lawrence Group that the remittances were made based on the understanding that it was for the purchase of surgical gloves.

To the auditors' understanding, however, Bluegas does not engage in the production or sales of surgical gloves.

The auditors were also unable to reach two of the trade debtors. While the remaining two had sent confirmation via emails, the auditor was unable to verify the authenticity of those emails.

The company is also in net current liability position of S$87,000, which may cast significant doubt on the company's ability to continue as a going concern.

Shares of KTL last closed flat at S$0.116 on Aug 6, before it went into a trading halt. It subsequently applied for the trading halt in the company's counter to be converted into a voluntary suspension on Aug 17.