Auditor issues disclaimer for Singapore Kitchen Equipment's FY2020 report

Singapore

ACCOUNTING firm BDO has issued a disclaimer of opinion in its independent auditor's report on Singapore Kitchen Equipment (SKE)'s financial statements for the year ended Dec 31, 2020.

"We have not been able to obtain sufficient appropriate audit evidence to provide a basis for an audit opinion on these financial statements," BDO said.

The reasons are linked to the 8 flagged transactions that were made public in August this year, with the matter reported to the Minister for Finance.

Catalist-listed SKE received a debit note from its major shareholder, QKE Holdings, on Mar 30, 2020, claiming reimbursement of the 8 payment transactions that had been paid on SKE's behalf between April 2018 and May 2019. On Apr 1, 2020, SKE paid for the 8 payment transactions, totalling S$1.4 million, to QKE.

QKE is controlled by SKE's chief executive officer and executive director Sally Chua Chwee Hoo, her husband Lee Chong Hoe (who is also SKE's executive director), and Cheng Chun Choi.

Prior to the receipt of the debit note, the group had not recorded the expenses relating to the payment transactions in its accounting system. Other irregularities were subsequently identified, including uncovering of altered bank statements.

"We were also presented with new information in relation to arrangements with customers which were inconsistent with those management representations which we had obtained in prior periods," said BDO in its independent auditor's report incorporated in SKE's FY2020 annual report, released late Friday (Oct 22).

The matters were brought to the attention of SKE's audit committee. Management revisited the accounting records and financial information prepared in prior periods, and several adjustments and restatements were made consequently.

"In view of the above, we assessed the impact of the various irregularities, inconsistencies in management representation and the potential lapses in internal control over the financial reporting processes," BDO said.

The auditor determined that there may be misstatements in multiple elements of the financial statements such as revenue, costs of sales, administrative expenses, and amount due to/from the ultimate holding company, among other things.

BDO said that it was unable to obtain sufficient appropriate audit evidence to, among other things, ascertain the existence, completeness, accuracy, rights and obligations, valuation and/or classification, and related disclosures, of various transactions and balances entered into with customers, suppliers and the ultimate holding company, including the prior-year adjustments made by management.