You are here
Debao independent auditor issues disclaimer of opinion on FY2018 statements
DEBAO Property Development said on Monday that its independent auditor has issued a disclaimer of opinion on the group's financial statements for the 2018 financial year.
The independent auditor, Nexia TS Public Accounting Corporation, gave a number of reasons why it had difficulties auditing Debao.
It said it could not find confirmations in respect of bank and loan balances amounting to 4.1 million yuan (S$794,000).
As well, the default risk for a certain other receivables amounting to RM43.5 million (S$14.2 million) has "increased significantly since initial recognition", Nexia opined, but Debao's management has determined that there was no increase in credit risk and has assessed the amount to be recoverable.
At the end of 2018, Debao also included land costs pertaining to Elite Starhill of RM173 million in the development properties of the group, brought forward from the previous financial year. But Nexia was unable to verify appropriate source documents or perform any other alternative audit procedures to satisfy itself that the carrying amount of the land costs is fairly stated, it said.
In April 2019, Elite Starhill was issued a warning letter by the local authorities stating that they did not comply with certain construction regulations. Since the date of the warning letter, the construction of the development property has come to a halt, Nexia said.
Among other things, Nexia also noted that Debao's preceding auditor had also issued a disclaimer of opinion in November 2018 after Debao's chief executive was found by a Chinese Court to be guilty of an act of bribery, though these developments were not disclosed to the preceding auditor despite specific enquiries with management on the status of the investigation during the course of the audit.
Debao is also loss-making and "highly dependent on borrowings", Nexia said, having obtained loans from individuals and other non-financial institutions to support its operating cash flow requirements with annual interest rates ranging from 18 to 38 per cent.
But the board of directors believes the group should still be considered as a going concern, despite the existence of material uncertainties, Nexia said.