Auditors issue qualified opinion on YFG accounts, raises potential going concern issues

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KUALA LUMPUR (Nov 6): KPMG Malaysia, the external auditors for YFG Bhd, have issued a qualified opinion on the company’s financial statements for the financial year ended June 30, 2014 (FY14).

In its report, the audit firm also included an emphasis of matter (EOM) paragraph, highlighting events that may affect the company’s ability to continue as a going concern.

In a filing with Bursa Malaysia today, YFG had enclosed the auditors report with the qualified opinion, in which KPMG had stated in its basis for qualified opinion paragraph.

The report said YFG had partially impaired an amount due from a contract customer, although the completion of the project remains uncertain as full project financing has yet to be secured by the customer.

“There is an amount of RM3.37 million, of which recoverability is dependent on the customer’s ability to secure financing to reactivate the project, [and] based on information available to-date, we are unable to ascertain the adequacy of impairment loss made on the amount due from the said contract customer,” said KPMG in its audit report.

The audit firm also included an EOM paragraph in its audit report, which stated that subsequent to its financial year end, a contract customer of a development project has called upon the performance bond of a subsidiary of YFG, in the form of a banker’s guarantee amounting to RM5.73 million.

The customer had alleged delay in the completion of the project, and had terminated YFG’s subsidiary as a contractor on July 17, 2014.

“Arising from the termination, there will be potential delay of payments of the trade amounts owing by the contract customer, and also on the amount due to YFG, amounting to approximately RM29 million as at June 30, 2014,” said KPMG in its EOM paragraph.

The audit firm said the events of the termination and delay of payments has put a strain on YFG's cash flow, and may affect its ability to meet its obligations when they fall due.

"These [events] have cast significant doubt upon the group’s and the company’s ability to continue as a going concern," said KPMG.