Sample Disclosure – Auditors’ Report With Disclaimer Opinion (28 September 2009)
INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF ABC BERHAD (CO. NO. X-123456)
REPORT ON THE FINANCIAL STATEMENTS
We were engaged to audit the financial statements of ABC Berhad, which comprise the balance sheets as at day/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 financial 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 MASB Approved Accounting Standards in Malaysia for Entities Other than Private Entities and the Companies Act, 1965. 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 obtain sufficient appropriate audit evidence to provide a basis for an audit opinion.
Basis for Disclaimer of Opinion
As disclosed in Note X to the financial statements on Basis of Preparation, the Company has defaulted on the repayment of bank borrowings amounting to RMXXX,XXX,XXX which was due for payment on day/month/year and the solicitors representing the financier of the borrowings issued a notice of demand to the Company for full settlement of the outstanding borrowings and interests due as at day/month/year. At the date of this report, the Receiver and Manager appointed is assessing a number of proposals in respect of the borrowings but no decision has been made. We could not obtain sufficient appropriate evidence on the following:
(a) the appropriateness of the use of the going concern assumption in the preparation of the financial statements. As disclosed in Note X to the financial statements. The default of the borrowings and the relevant events occurred subsequently together with the lack of clear evidence to support the ability of the Group and of the Company to meet the repayment of the borrowings and the interest thereon have casted significant doubt on the Group and the Company’s ability to continue in operations and therefore the Group and the Company may be unable to realise its assets and discharge its liabilities in the normal course of business;
(b) the recoverability of the carrying value of the property, plant and equipment of the Group amounting to RMXXX,XXX,XXX, as disclosed in Note X to the financial statements; and
(c) the Company’s ability to recover the entire carrying value of its investments in subsidiaries and advances to subsidiaries. As at day/month/year.
Disclaimer of opinion
Because of the significance of the matters referred to in the Basis for Disclaimer of Opinion above, we do not express an opinion on the financial statements.
REPORT ON OTHER LEGAL AND REGULATORY REQUIREMENTS
In accordance with the requirements of the Companies Act, 1965 in Malaysia, we also report that, in our opinion:
(a) 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.
(b) we have considered the financial statements and the auditors’ report of the subsidiary of which we have not acted as auditors,
(c) we have not been able to satisfy ourselves that the financial statements of the subsidiaries 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 financial statements of the Group due to the matters referred to in Note X to the financial statements. We have not received satisfactory information and explanations required by us for those purposes.
(d) the audit reports on the financial statements of all the subsidiaries were qualified in the manner as disclosed in Note X 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.
DEF & Co.
(No. AF: 1234)
(No. 1234/1/10 (J))