Singapore Kitchen Equipment’s ex-CFO made or asked for document alterations to ‘simplify’ audit process, review finds
Kelly Ng
THE former chief financial officer of Singapore Kitchen Equipment (SKE) Chow Mei Ling had unilaterally altered the company’s documents, or instructed such alterations, to “simplify” the external audit, lawyers involved in a fact-finding review of the Catalist-listed company have found.
At the centre of scrutiny are 8 flagged transactions worth about S$1.4 million, which the company’s majority shareholder, QKE Holdings (QKEH), had made on behalf of its main operating subsidiary, Q’son Kitchen Equipment.
Lawyers from Rajah & Tann led the review called after the audit of its financial statements for the year ended Dec 31, 2020. The lawyers have not seen independent evidence supporting explanations from Chow and the company’s management for the payment arrangements, but they did find that the transactions were made for their stated purposes.
Chow, who resigned from her role on Aug 8 last year, and the company’s management had explained that some time in early 2018, SKE’s sponsor for the proposed listing on the Hong Kong Stock Exchange had advised the company to “conserve as much cash as possible”.
The management also understood that the company should “refrain from entering into certain categories of transactions, including advertising”. But the management “mistakenly believed” that QKEH could first make the payments, and be subsequently reimbursed by Q’son Kitchen Equipment without legal implications, and chief executive officer Sally Chua then authorised the 8 transactions on behalf of Q’son Kitchen Equipment.
The findings showed that Chow had “unilaterally made and/or instructed the making of the document alterations in order to simplify the external audit process”, and that there was no evidence that SKE’s executive directors had knowledge of or participated in these alterations.
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There is no evidence, however, that the altered documents were shown to any third parties, save for SKE’s external auditors. Rajah & Tann said it has not uncovered any evidence to suggest that the alterations were to facilitate or conceal criminal breach of trust, or fraud involving third parties.
While SKE has controls in place to prevent unauthorised payments and inaccurate recording of transactions, the 8 payments were not initially subject to these controls, since they were improperly made by QKEH on behalf of Q’son Kitchen Equipment.
The company has since taken steps to strengthen internal controls, such as by designating 2 groups of signatories to approve payments. All interested-person trasnactions and expenses incurred by the executive director would have to be approved by the board’s independent directors, and payments from Q’son Kitchen Equipment to QKEH are now strictly prohibited, the lawyers said.
Rajah & Tann said that any inaccuracies in Q’son Kitchen Equipment’s financial statements as a result of the improper transactions by QKEH could be viewed as breaches of the Companies Act as well as the Singapore Exchange’s Catalist Rules. Any inaccuracies found to have material impact on the market for the company’s securities could also constitute potential liability under the Securities and Futures Act.
The alteration of accounting records may constitute criminal offences under Singapore law, Rajah & Tann said.
The findings were made public in a bourse filing on Wednesday (Jun 8). SKE said its board is reviewing the report and will address the areas of concern identified after consulting its auditors, audit committee, management team and other professional advisors.
SKE is also under investigation by the Accounting and Corporate Regulatory Authority for possible breaches of Section 402(1) of the Companies Act. The section makes it an offence for a company’s officer, with intent to deceive, to make, furnish, or knowingly and wilfully authorise or permit the making or furnishing of any false or misleading statement or report to a director, auditor, member, or debenture holder of the corporation, or to an auditor of its parent company.
Trading in the company’s shares has been suspended since last August.
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