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Chaswood Resources' independent auditor issues disclaimer of opinion

MOORE Stephens, the independent auditor of Chaswood Resources Holdings, has issued a disclaimer of opinion on the group's financial statements for the financial year ended Dec 31, 2018.

It said it did not have sufficient appropriate evidence to provide a basis for an audit opinion on the financial statements. 

Moore Stephens said that Chaswood's management had prepared the financial statements on the assumption that the group will continue as a going concern - this is because the directors believe they can carry out a restructuring exercise.

However, the auditor highlighted that the ability of the group to continue as a going concern is dependent on certain assumptions and the successful outcome of the various efforts by the group, of which the outcome is inherently uncertain. 

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It also highlighted that the group's subsidiaries are facing various legal proceedings brought against them, and that Chaswood has also received a statutory demand for payment of S$3 million relating to a corporate guarantee provided for redeemable exchangeable bonds issued by a subsidiary. 

"These conditions indicate the existence of material uncertainties which may cast significant doubt on the ability of the group and Chaswood to continue as going concerns and to realise their assets and discharge their liabilities in the ordinary course of business," Moore Stephens added.

"In light of the material uncertainties, we do not have sufficient audit evidence regarding the use of the going concern assumption in the preparation of the financial statements."

The auditor also said that it was unable to obtain sufficient financial information relating to the liabilities of Chaswood Resources Sdn Bhd (CRSB) as replies to confirmation requests from certain creditors are outstanding. In addition, it was unable to obtain sufficient documentary evidence concerning the status of CRSB Group's litigation matters.

As it was unable to obtain sufficient appropriate audit evidence on assets and liabilities directly associated with CRSB as well as the loss for the year from discontinued operations, it was unable to determine whether any adjustments and/or additional disclosures to thefinancial statements were necessary.

Commenting on the appropriateness of the going concern assumption, Chaswood's board of directors believe that the group will be able to continue as a going concern with sufficient working capital for the next 12 months if it can complete the restructuring exercise. The restructuring involves a scheme of arrangement in Malaysia with its creditors, the proposed disposal of CRSB, the proposed disposal of CRSB's TGI Friday's business in Malaysia and Teh Tarik Place business, the proposed issuance of redeemable convertible notes due 2021 for a principal amount of up to S$50 million as well as a proposed scheme of arrangement with its Singapore creditors. 

Trading in the company's shares has been suspended since June 18 last year.

In a separate filing to the Singapore Exchange (SGX) on Wednesday, Chaswood said that the SGX had approved a time extension to submit its resumption proposal to resume trading to June 16, 2020.