China Automobile Parts auditor withdraws opinion on audited accounts

KUALA LUMPUR: PKF Malaysia Sdn Bhd, the auditor of China Automobile Parts Holdings Ltd (CAP), has in an unusual move, withdrawn its opinion on the company’s audited accounts for the financial year ended Dec 31, 2015.

In a filing with Bursa Malaysia on Friday, CAP said PKF Malaysia had expressed its non reliance of the auditor’s report for financial statement FY15 as several ligitation cases involving a subsidiary had not been disclosed.

“We will proceed to notify the Securities Commission, Bursa Malaysia and any other regulatory agencies having relevant jurisdiction over the company (CAP) as well as any other party known to us to be relying on the company’s financial statements for FY15, in the most efficient manner possible, that our auditor’s report dated April 6, 2016 in respect of the company’s financial statements for the FY15 is not to be relied upon,” PKF said in the letter addressed to CAP’s board of directors. 

PKF said it has requested during a meeting held on April 25, 2017 for CAP to disclose the seven cases in litigation involving a subsidiary of CAP, QuanZhou Fen Sun Automobile Parts Co. Ltd (FenSun).

PFK said the cases were not disclosed to the audit firm by the directors of the company during the course of its audit or at all. 

“Subsequent to the meeting on April 25, we engaged Yuan Tai Law Offices to carry out an independent legal due diligence on FenSun. Yuan Tai Law Offices has since confirmed the reliability of the information we had relayed to you. 

“Further, there are numerous other cases in litigation -whether at trial or enforcement stage - in the sum of no less than 260.05 million renminbi involving FenSun,” PKF said. 

The auditor said the information it obtained had been corroborated by Yuan Tai Law Offices shown that there were significant unreported borrowings and material litigation during FenSun’s financial year ended Dec 31, 2015.

“The directors of the company were obliged to disclose these matters and further, were obliged to make available the appropriate records for our audit in respect of the FY15. The directors failed, refused and/ or neglected to fulfil these obligations,” PKF said. 

It added that it had discusses the matter with the audit committee and the board of directors and recorded its view in a letter dated May 1.

“In spite of our advice, no appropriate and effective action on behalf of the company has been taken to address this matter to date. The state of affairs thus far is unsatisfactory and may possibly infer an attempt to continue the suppression of the facts and circumstances surrounding the material litigation now revealed,” PKF said. 

PKF said it has also advised the audit committee and the board of directors on April 25 that the directors of the company further need to consider whether the company’s audited financial statements for FY14 may be relied on in view of the said unreported events.