Sample Disclosure – Auditors’ Report With Disclaimer Opinion (19 may 2009)
INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF
(Incorporated in Malaysia)
Company No: XXXXX-X
Report on the Financial Statements
We have audited the financial statements of ABC Berhad, which comprise the balance sheets of the Group and of the Company as at day/moth/year, the income statements, statements of changes in equity and cash flow statements of the Group and of the Company for the financial year then ended, and a summary of significant accounting policies and other explanatory notes, as set out on pages XX to XX.
Directors’ Responsibilities 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. We conducted our audit in accordance with approved standards on auditing in Malaysia, except that the scope of our work has been limited as explained below. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement. However, the evidence available to us was limited as discussed below. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on our judgement, including the assessment of risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the Company’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the financial statements.
Basis of Disclaimer of Opinion
(a) Fundamental uncertainty relating to the going concern basis
We draw attention to Note X to the financial statements, which disclose that the financial statements of the Group and of the Company have been prepared on a going concern basis, notwithstanding that the Group and the Company had incurred a net loss of RMXX,XXX,XXX and RMXX,XXX,XXX respectively for the financial year ended day/month/year. At this date, the Group and the Company had capital deficiency of RMXXX,XXX,XXX and RMXX,XXX,XXX respectively. The current liabilities of the Group and of the Company exceeded the current assets by RMXXX,XXX,XXX and RMXX,XXX,XXX respectively. The Group has also defaulted in payment on its borrowings whereby certain financial institutions have initiated litigation actions against the Group and the Company as disclosed in Note X to the financial statements. The directors are in the midst of arranging to regularise the financial position of the Group and of the Company including discussion with financial institutions for resolving the matters relating to default of borrowings repayment out of court and considering various options in terms of “financial rescue plan” available and/or offered by interested parties before announcing the selected arrangement. However, as of the date of this report, we are unable to evaluate the outcome of such plan/arrangement and its impact on the business operations as well as the ability of the Group and the Company to continue as a going concern.
(b) Limitation of Audit Scope – Audit confirmations
The confirmations from certain receivables, payables, financial institutions and solicitors to ensure the existence and completeness of the balances and the status of on-going litigations at financial year end are still outstanding as at the date of our report and therefore we were unable to complete these audit procedures. There were no other alternative procedures whereby sufficient evidence and explanation to ensure the existence and completeness of these balances. Any adjustments found to be necessary to the amounts would affect the related disclosures thereof in the financial statements.
Disclaimer of Opinion
Because of the significance of the matters discussed in the preceding paragraphs, we do not express an opinion whether the financial statements of the Group and of the Company have been prepared in accordance to the Companies Act, 1965 and Financial Reporting Standards in Malaysia so as to give a true and fair view of:-
(i) the financial position of the Group and of the Company as at day/month/year and of its financial performance and cash flows for the financial year then ended; and
(ii) the matters required by Section 169 of the Companies Act, 1965 to be dealt with in the financial statements of the Group and of the Company.
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 subsidiary companies of which we have acted as auditors have been properly kept in accordance with the provisions of the Act.
b) We have considered the financial statements and the auditors’ reports of all the subsidiary companies of which we have not acted as auditors, as disclosed in Note XX to the financial statements.
c) We are satisfied ourselves that the financial statements of the subsidiary companies that have been consolidated with the Company’s financial statements 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.
d) Except for the auditors’ reports on the financial statements of XXX Sdn. Bhd. and XXX Sdn. Bhd. which were not subject to any qualification and did not include any comment made under Section 174 (3) of the Act, the auditors’ reports on the financial statements of other subsidiary companies were qualified 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.
[Name of firm] [Name of partner]
AF: 0001 No. 1001/01/2010
Chartered Accountants Chartered Accountant
19 May 2009