INDEPENDENT auditor Foo Kon Tan has included a disclaimer of opinion over Singapore Kitchen Equipment's (SKE) financial statements for the financial year ended Dec 31, 2021.
The auditor, in a report released late on Thursday (Jul 14), said it was not able to ascertain the existence, completeness and accuracy of the company's recognised revenue for FY2021, among other issues highlighted.
In response to the auditor's disclaimer of opinion, SKE's board has said the group's systems of internal controls may not be enough to address financial, operational, compliance and information technology controls and risk management systems during the year.
It has directed one of its internal auditors, Baker Tilly Consultancy Singapore, to conduct a follow-up review on the lapses identified in the company's operating procedures and internal controls.
These lapses were highlighted in a finalised audit report by Baker Tilly and Rajah & Tann Singapore (R&T), both appointed on Jun 8 to review and enhance the company's operating procedures and internal controls.
At the centre of scrutiny are 8 flagged transactions worth about S$1.4 million, which the company's majority shareholder, QKE Holdings, had made on behalf of its main operating subsidiary, Q'son Kitchen Equipment.
Baker Tilly and R&T's report were among the documents requested by the Commercial Affairs Department on Jun 29 to assist with a probe. A draft version of the same report was also handed over to the Accounting and Corporate Regulatory Authority for its investigation into possible falsification of a report.
In its report on SKE's FY2021 financials, Foo Kon Tan said it was not able to obtain sufficient documentary evidence of the group's sale of some S$20.2 million in kitchen equipment for the financial year. This includes delivery orders with dates of acknowledgement indicated by customers upon receiving and accepting the goods to show that revenue was recorded in the correct accounting period.
Additionally, the auditor was unable to determine whether the company's opening balances as at Jan 1, 2021, were fairly stated.
It also could not determine the need for any adjustments in SKE's FY2021 statements, due to "carry-forward effects" on the financial performance and cash flows for the year and the group's closing balances of assets and liabilities.
These carry-forward effects refer to findings from the R&T and Baker Tilly audit, as well as previous findings from the audit of SKE's FY2020 statements. The auditor at the time, BDO, also gave a disclaimer of opinion.
When it came to inventories, purchases and cost of sales, Foo Kon Tan said it was not able to obtain relevant supporting documents for the S$719,026 in spare parts recorded under the group's inventories in its financial statements. It also could not ascertain the appropriateness of purchases, cost of sales and write-down on inventories recognised in profit or loss for FY2021, due to lack of sufficient documentary evidence.
Under trade receivables, Foo Kon Tan said it was unable to obtain sufficient appropriate audit evidence to ascertain the recoverability of the outstanding amounts and the expected credit losses on trade receivables. It also could not establish if the revenue was recorded in the correct accounting period - which has a corresponding impact on trade receivables.
Trading in the company's shares has been suspended since last August.