Sample Disclosure – Auditors’ Report with Disclaimer Opinion (25 November 2008)
Independent auditors’ report to the members of ABC Bhd. (Incorporated in Malaysia)
Report on the Financial Statements
We were engaged to audit the financial statements of ABC Bhd., which comprise the balance sheets as at (date/month/year) of the Group and of the Company, and the income statements, statements of changes in equity and cash flow statements of the Group and of the Company for the year then ended, and a summary of significant accounting policies and other explanatory notes, as set out on pages XX to XX.
Directors’ responsibility for the financial statements
The directors of the Company are responsible for the preparation and fair presentation of these financial statements in accordance with Financial Reporting Standards and the Companies Act, 1965 in Malaysia. This responsibility includes: designing, implementing and maintaining internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances.
Our responsibility is to express an opinion on these financial statements based on our audit. Because of the matters described in the Basis for disclaimer of opinion paragraphs, we were not able to provide a basis for an audit opinion.
Basis for disclaimer of opinion:
1. As disclosed in Note XX to the financial statements, there were total payments by the Group of RMXX million on behalf of and to various parties, including related parties in settlement of total receipts of RMXX million from various parties, including related parties during the financial year and RMXX million due to certain of these parties as at (date/month/year). Certain of these payments made by the Group resulted in net amounts due from various parties ranging from RMXX to RMXX million on various dates between (date/month/year) and (date/month/year).
The total payments and receipts referred to in the preceding paragraph included total payments by the Company of RMXX million on behalf of and to various parties, including related parties in settlement of total receipts of RMXX million from these various parties including related parties during the financial period and RMXX million due to certain of these parties as at (date/month/year). Certain of these payments made by the Company resulted in an amount due from one of the various parties amounting to RMXX million on (date/month/year).
During the financial year ended (date/month/year), there were no gains or losses recorded in the income statements of the Group and of the Company arising from the above transactions and neither were there any amounts owing to or from any parties as at (date/month/year).
2. In the previous financial year, one of the Company’s wholly-owned subsidiaries, DEF Sdn. Bhd. (“DEF”) entered into a business arrangement with a company (“Financial Promoter”) to inter alia, assist in the winding down of the operations of DEF and various other activities on the terms and conditions as further disclosed in Notes XX and XX to the financial statements. However, the details of the above arrangements were only provided to us in (month/year) arising from our enquiries on certain receipts and payments noted in paragraph (1) above. We were also informed that the said business arrangement had no effects on the financial statements of the Group. The said arrangement was rescinded in (month/year).
There was no evidence that approvals were obtained from the Board of Directors prior to entering into the above transactions.
As at the date of this report, we are unable to satisfy ourselves as to the intent, purpose, nature and extent of the above transactions. Accordingly, we are unable to determine as to whether these transactions have any effects on the financial statements of the Group or the Company for the financial year ended (date/month/year).
Because of the significance of the matters as discussed in the Basis for disclaimer of opinion paragraphs, we do not express an opinion on the financial statements of the Group and the Company for the financial year ended (date/month/year).
Report on other legal and regulatory requirements
In accordance with the requirements of the Companies Act, 1965 in Malaysia, we also report the following:
(a) In our opinion, the accounting and other records and the registers required by the Act to be kept by the Company and its subsidiaries of which we have acted as auditors have been properly kept in accordance with the provisions of the Act, except in respect of the matters described in the Basis for disclaimer above.
(b) We have considered the financial statements and the auditors’ reports of all the subsidiaries of which we have not acted as auditors, which are indicated in Note XX to the financial statements.
(c) We are satisfied that the accounts of the subsidiaries that have been consolidated with the financial statements of the Company are in form and content appropriate and proper for the purposes of the preparation of the consolidated financial statements and we have received satisfactory information and explanations required by us for those purposes, except in respect of the matters described in the Basis for disclaimer above.
(d) The auditors’ reports on the financial statements of the subsidiaries were not subject to any qualification and did not include any comment required to be made under Section 174(3) of the Act, except as disclosed in Note XX to the financial statements.
This report is made solely to the members of the Company, as a body, in accordance with Section 174 of the Companies Act, 1965 in Malaysia and for no other purpose. We do not assume responsibility to any other person for the content of this report.