Olivia Lum slapped with three more charges; three KPMG auditors issued orders over Hyflux’s financial statements

HYFLUX founder and former chief executive Olivia Lum Ooi Lin on Friday (May 5) was handed three additional charges over her alleged failure to exercise reasonable diligence as a director. The charges were in relation to Hyflux’s omission to disclose some restricted bank balances.

The auditors from KPMG who handled Hyflux’s financial statements for FY2013 to FY2017 have, meanwhile, been issued orders by the Public Accountants Oversight Committee under the Accountants Act. This was announced in a joint statement issued by the police, the Monetary Authority of Singapore (MAS) and the Accounting and Corporate Regulatory Authority (Acra) on Friday.

Acra maintains oversight of the quality of work of public accountants through the Practice Monitoring Programme (PMP).

Under the PMP, Acra inspects audits performed by public accountants to ascertain if they have complied with the Singapore Standards on Auditing and other requirements. The Public Accountants Oversight Committee is the deciding authority for the inspection outcome.

A spokesperson from Acra, in response to queries from The Business Times, said that the three KPMG auditors in question have been issued orders for their audit work to be subject to review by another auditor. 

Specifically, one of the auditors is required to have 10 audit engagements reviewed by another auditor within 12 months of the order. The two other auditors are required to have three audit engagements reviewed by another auditor within 12 months of the order.

“All three auditors are also required to undergo training courses specific to the audit deficiencies identified,” the spokesperson said.

“As an auditor, it is a serious matter for one’s audit work to be reviewed, and to be under close supervision and monitoring by a fellow auditor. This means that the auditor is unable to practise independently as a professional auditor would normally do. There will be a reputational impact on the auditor,” she added.

The authorities are unable to share any further information due to ongoing civil proceedings related to this matter, the joint statement by the police, MAS and Acra said.

A KPMG spokesperson told BT: “We believe the audit work undertaken for Hyflux in relation to its financial statements was conducted in accordance with prevailing Singapore auditing standards.”

Eddee Ng of Tan Kok Quan Partnership, who is acting for Hyflux in its lawsuits against KPMG and Lum, declined to comment on the auditors having been issued orders for their work.

As for Lum’s new charges, they pertain to Section 157 of the Companies Act.

Lum was charged with failing to exercise reasonable diligence as Hyflux’s director on three dates – Nov 9, 2017, Feb 27, 2018 and May 9, 2018 – when she approved the release of the listed water treatment firm’s unaudited financial statements, where the restricted bank balances for the group had omitted deposits. Those deposits, which the company had undertaken not to withdraw, were with Mizuho Bank.

The financial statements released on Nov 9, 2017 for the third quarter and for the nine months ended September 2017 disclosed restricted bank balances amounting to about S$73.7 million, without the inclusion of US$33.5 million, said one of the charges.

Those released on Feb 27, 2018 for the financial year ended December 2017 disclosed restricted bank balances of about S$67 million, which Acra said should have included the Mizuho Bank deposits of US$33.5 million.

For the statements published on May 9, 2018 for the first quarter ended March 2018, restricted bank balances amounting to about S$65.7 million were disclosed, with US$47.5 million allegedly omitted.

If convicted, the 62-year-old faces a jail term of up to a year or a fine not exceeding S$5,000 on each charge. Also, the accused is liable to Hyflux for any profit made by her, or for any damage suffered by the company as a result of her breach.

Lum is out on bail of S$100,000. The prosecutor from Acra, Kenny Kung, told the court that he was not seeking an increase in bail despite more charges having been levelled against her. She now faces a total of six charges.

When first charged in November with three counts of violations of the Securities and Futures Act and the Companies Act, Lum was prosecuted alongside the former chief financial officer and four independent directors at the material time. But the other accused persons were not charged with more offences on Friday.

These six accused aside, a director, Lee Joo Hai, has been separately charged with one count of neglect over omission of material information on the Tuaspring Integrated Water and Power Project.