Sample Disclosure – Auditors’ Report With Qualified Opinion (16 December 2010)

ABC SDN. BHD.

(Incorporated in Malaysia)

INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF ABC SDN. BHD.

Report on the Financial Statements

We have audited the financial statements of ABC SDN. BHD., which comprise the balance sheets as at 30 September 2010 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 X 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.

Auditors’ Responsibility

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. 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. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on our judgment, 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.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Basis for Qualified Opinion

Included in trade receivables is an amount of RM203,876,431 in relation to a construction contract which has been completed on 2 March 2010. The customer disputed this sum claimed by the Company and agreed that an independent project consulting firm be appointed to ascertain the appropriate claim amount. As at the date of this report, the appointed project consultanting firm has yet to provide its final certification of the related claims. No allowance for doubtful debt has been made in respect of this amount as the directors, after seeking the relevant legal advice they deem fits, the Company has a high chance of recovering the entire amount owing by the customer.

In the absence of final certification of the related claims by the appointed project consulting firm and other audit evidence to substantiate the recoverability of this outstanding amount, we are unable to ascertain the extent of recoverability of this RM203,876,431 amount owing to the Company and therefore unable to comment as to whether the trade receivables stated in the balance sheet as at 30 September 2010 is fairly stated. We are therefore unable to comment as to whether the relevant affected  items in the current year financial statements by the amount of allowance for doubtful debts that is necessary (including the relevant effect of income tax amount, be it current year income tax and/or deferred taxation), upon final determination of the agreed sum to be settled, are fairly stated.

Qualified Opinion

In our opinion, except for the effect of the adjustment that may be required to be made on the financial statements due to the matters described in the Basis for Qualified Opinion paragraphs above, the financial statements have been properly drawn up in accordance with Financial Reporting Standards and the Companies Act, 1965 in Malaysia so as to give a true and fair view of the financial position of the Group and of the Company as at 30 September 2010, and the financial performance and cash flows of the Group and of the Company for the year then ended.

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 have been properly kept in accordance with the provisions of the Act.

b)       we have considered the audited financial statements 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 financial statements of the subsidiary companies that have been consolidated with Company’s financial statements are in the 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 as required by us for those purposes.

Other Matters

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.

[ AF : 0012345 ] [ 123/01/13(J) ]
AUDITORS & ASSOCIATES AWANG BIN SALLEH
Chartered Accountants Chartered Accountant

Wonderland

Dated:

Sample Disclosure – Auditors’ Report With Disclaimer Opinion (15 December 2010)

ABC SDN. BHD.

(Incorporated in Malaysia)

INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF ABC SDN. BHD.

Report on the Financial Statements

We have audited the financial statements of ABC SDN. BHD., which comprise the balance sheets as at 30 September 2010 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 X 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.

Auditors’ Responsibility

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. 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. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on our judgment, 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 for Disclaimer of Opinion

1.    Effect of unresolved matters resulted in disclaimer of opinion expressed by the previous year’s auditors

The financial statements of the Group and of the Company for the previous year ended 30 September 2009 were audited by another auditors whose report dated 21 December 2009 expressed a disclaimer of opinion due to the following matters:-

a.    Insufficient audit evidence to satisfy themselves in relation to the transactions with the sub-contractors of the Company.

b.    Relevant information were not obtained in relation to the adequacy of the allowance for doubtful debts made on the amount due by the sub-contractors of the Company which comprised mainly interest free advance to these sub-contractors in the course of carrying out the relevant contract work granted to these sub-contractors by the Company, amounted to RM142,235,211.

c.    Insufficient audit evidence to satisfy themselves that the impairment loss made for plant and equipment held by the Company’s sub-contractors on behalf of the Company amounted to RM35,342,871 are adequate.

d.    Outstanding confirmation of balances and other alternative audit evidence including unreconciled differences on trade receivables with a total balance of RM10,982,456.

e.    Insufficient audit evidence and information in relation to the nature of payments made to certain suppliers amounted to RM2,387,965.

f.     Insufficient audit eveidence and information in relation to the carrying amount of borrowings shown on the balance sheet of RM125,000,000 as at 30 September 2009 and outstanding confirmation of balance on such borrrowings from the lenders.

g.    Outstanding confirmation of trade and other payables with a total amount of RM181,983,912 as at 30 September 2009 and this total amount was RM23,874,985 lesser than the total of trade and other payables subsidiary ledger. The difference of RM23,874,985 remained unreconciled.

h.    Other outstanding confirmation of balances, information and/or supporting documents in relation to other class of accounts which are considered by the auditors to be material sum or amounts, and have not been provided to the auditors for verification:

i.    Basis and supporting documents for the accruals sum of RM2,456,987.

ii.    Confirmation from solicitors on the impact and status of legal cases faced by the Company.

iii.    Information/supporting documents of staff costs amounted to RM23,876,515

iv.    Supporting document of sales and purchases amounted to RM87,616,324 and RM76,565,919 respectively.

v.    The basis of the fair value of an investment property amounted to RM135,000,000 determined by the directors and hence affecting the fair value reduction adjustment made of RM20,000,000 recognised in the income statement

There were no information and/or supporting documents provided to us to resolve the above matters and we are unable to carry out any other audit procedures to satisfy ourselves that the opening balances of the Company are fairly stated. As a result, we are unable to satisfy ourselves that the opening balances as at 1 October 2009 do not contain misstatements that may materially afftect the current year amounts reflected in the financial statements.

2.    Current year unresolved matters

In the course of carrying out our audit, we have attempted to obtain sufficient and appropriate audit evidence to satisfy ourselves that the following items reflected in the financial statemnets are faily stated, but failed:

a.    Bank balances amounted to RM590,871 and borrowings amounted to RM87,987. The relevant documents such as bank confirmation letters, bank facilities letter, loan agreements, bank statements and others could not be provided to us for verification.

b.    An amount of RM20,687,525 recorded in the revenue of the Company in which no supporting documents such as sales invoices, dispatch notes, bills of lading and others that could substantiate these sales except for the relevant bank-in-slips in which the directors represented that the money received by the Company represents revenue from sale of goods to overseas customers. According to the directors, the relevant sales documents have been misplaced by the Company’s personnel who has left the Company. There were no other information and/or supporting documents provided to us to resolve the above matters and we are unable to carry out any other audit procedures to satisfy ourselves that the proceeds received represent sales revenue of the Company.

3.    Going concern issue

The Group and the Company have a capital deficiency of RM362,071,837 (2009 – RM306,305,399) and RM300,734,790 (2009 – RM203,333,943) respectively as at 30 September 2010 as a result of losses sustained over the years. In addition, the current liabilities exceed the current assets. As mentioned in Note XX to the financial statements, the financial statements have been prepared on the accounting principles applicable to a going concern which contemplates the realisation of assets and the satisfaction of liabilities in the normal courses of business. Continuity as going concern is therefore, dependent on future profitable operations of the Group and of the Company and the availability of funds to meet the obligations as and when they fall due.

The evidence available to us to confirm the appropriateness of preparing the financial statements on the going concern basis was inadequate. The circumstances of which, together with the possible effect on the financial statements should this basis be inappropriate, are set out in Note XX to the financial statements. As a result, and in the absence of any alternative evidence available to us, we are unable to form an opinion as to whether the financial statements which have been prepared on the accounting principles applicable to a going concern, gives a true and fair view of the financial position of the Group and of the Company as at 30 September 2010, and of the results of the operations, the cash flows and changes in equity for the financial year ended on that date.

Disclaimer Opinion

Because of the matters described in the Basis for Disclaimer Opinion paragraphs above, we are unable to form an opinion as to the appropriateness of the financial statements which were prepared on going concern basis.

Report on Other Legal and Regulatory Requirements

In accordance with the requirements of the Companies Act, 1965 in Malaysia, we report that in our opinion:

a)       except for the matters as described in the Basis for Disclaimer Opinion paragraphs, the accounting and other records and the registers required by the Act to be kept by the Company have been properly kept in accordance with the provisions of the Act.

b)       we have considered the audited financial statements 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 financial statements of the subsidiary companies that have been consolidated with Company’s financial statements are in the 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 as required by us for those purposes.

Other Matters

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.

[ AF : 0012345 ] [ 123/01/13(J) ]
AUDITORS & ASSOCIATES AWANG BIN SALLEH
Chartered Accountants Chartered Accountant

Wonderland

Dated:

Sample Disclosure – Note On Provision For Liabilities (15 December 2010)

PROVISION FOR LIABILITIES


a)   Guaranteed Rental Returns & Marketing Incentives

Provision for guaranteed rental returns and marketing incentives are in respect of the sale of development properties. The provision is made for the expected guaranteed rental returns and marketing incentives granted to the purchasers based on the agreements entered into by the Company with these purchasers. These agreements set out the terms and conditions in which upon fulfilment, would result in the purchasers entitled to payments to be made by the Company.

b)   Liquidated Ascertained Damages

Provision for liquidated ascertained damages is in respect of projects undertaken by the Company. The provision is recognised for expected amount of liquidated ascertained damages claims based on the applicable agreements entered into by the Company.

Sample Disclosure – Note On Capital Commitments (10 December 2010)

CAPITAL COMMITMENTS

Capital commitments contracted but not provided for in the financial statements are as follows:

On 1 April 2010, the Company entered into a sale and purchase agreement (“SPA”) to purchase a piece of land for a consideration of RM49 million. As at the date of this report, the Company has paid a deposit sum of RM4.9 million, representing 10% of the purchase consideration of the said land. Settlement of the balance sum is currently pending fulfilment of certain key SPA conditions by the vendor.

Sample Disclosure – Note On Change Of Comparative Figures (1 December 2010)

COMPARATIVES

The following paragraphs describe the impact in relation to the new standards, amendment to published standard that have been adopted by the Group on the comparatives of the financial statements.

(a) FRS 8 “Operating segments”

FRS 8 “Operating segment” requires a “management approach”, under which segment information is presented on the same basis as that used for internal reporting purposes. This has resulted in an increase in the number of reportable segments as compared to the previously reported segments as follows:

(i) Engineering and Construction;

(ii) Concessions (which also includes Infrastructure and Investment) and

(iii) Operating and Maintenance.

The adoption of FRS 8 “Operating segment” has resulted in a consequential amendment to FRS 136 “Impairment of assets” in respect of the allocation of goodwill for impairment testing. As a result, each unit or group of units to which goodwill is allocated shall not be larger than an operating segment determined in accordance with FRS 8 instead of the previous standard, FRS 114 “Segment reporting”.

The change in reportable segments of the Group has not resulted in any additional goodwill impairment. Other than the segment presentation change, there was no impact on the measurement of the group’s assets and liabilities.

(b) IC Interpretation 12 “Service concession arrangements”

The early adoption of IC Interpretation 12 has resulted in a change in accounting policy for concession consideration components of construction services (FRS111) and operation services (FRS118) generated from Service Concession Agreements.

Prior to the adoption of this IC Interpretation 12, no construction revenue was recognised from the Service Concession Agreements and the Infrastructure Assets were recognised as property, plant and equipment of the Group. This change in accounting policy requires that the fair value of construction revenue be recognised as financial assets and the effect has been accounted for retrospectively in accordance with requirements of FRS 108 – Accounting policies, Changes in Accounting Estimates and Errors. Comparatives have been restated to conform to current year’s presentation.

The effects on prior year’s consolidated financial statements are set out below.

Restatement of the income statements for the financial year ended 30 September 2009

The following table discloses the adjustments that have been made in accordance with the change in accounting policy to each of the line items in the Group and Company’s income statement for the financial year ended 30 September 2009 and reclassification of prior year’s comparatives to conform with current year presentation.


Restatement of the balance sheets as at 30 September 2009

The following table discloses the adjustments that have been made in accordance with the change in accounting policy to each of the line items in the Group and Company’s balance sheet as at 30 September 2009 and reclassification of prior year’s comparatives to conform with current year presentation.


Restatement of the cash flow statement for the financial year ended 30 September 2009

The following table discloses the adjustments that have been made in accordance with the change in accounting policy to each of the line items in the Group’s cash flows for the financial year ended 30 June 2009 and reclassification of prior year’s comparatives to conform with current year presentation.


Sample Disclosure – Note On Significant Event During The Year On Affected Listed Issuer Status (1 December 2010)

Significant Event – Affected Listed Issuer Status

Pursuant to the Listing Requirements (“LR”) of Bursa Malaysia Securities Berhad (“Bursa Securities”) in relation to the Amended Practice Note No. 17/2005 (“PN 17”), the Company had on 20 February 2009 announced that it is deemed an Affected Listed Issuer as defined in PN 17 as the Group and the Company have defaulted in their interest payments as announced in pursuant to Practice Note No. 1/2001 (“PN 1”).

As an Affected Listed Issuer, the Company is required to comply with the following obligations pursuant to paragraph 3.1 (a)(ii) of the Amended PN17:

a)    To announce details of the regularisation plan as referred to in paragraph 8.14C(3) of the Listing Requirements and the announcement must fulfil the requirements set out in paragraph 3.1A of the Amended PN17/2005;

b)    To submit the regularisation plan to Bursa Securities and other relevant authorities (“Approving Authorities”), for approval within eight months from the date of the announcement; and to implement the regularisation plan within the time frame stipulated by the relevant Approving Authority;

c)    To announce the status of its plan to regularise its condition and the number of months to the relevant timeframes referred thereto, as  may be applicable, on a monthly basis until further notice from Bursa Securities; and

d)    To announce its compliance or non-compliance with a particular obligation imposed pursuant to the Amended PN17/2005 on an immediate basis.

In the event that the Company fails to comply with the obligation to regularise its condition, all its listed securities shall be suspended from trading from the 5th market day after the submission time frame or implementation time frame, as the case may be, and delisting procedures shall be taken against the Company by Bursa Securities.