Sample Disclosure – Auditors’ Report With Adverse Opinion (9 February 2011)

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 could not obtain sufficient and appropriate audit evidence in the course of our audit and therefore an adverse opinion is expressed.

Basis for Adverse Opinion

1.    As disclosed in Note XX to the financial statements, the accounting records of the Company and its subsidiary companies were destroyed by the previous management. The current management attempted to reconstruct the Company’s accounting records based on information and documents available to them and also based on the best estimates made by the directors, in situations that such estimates are required to be made. The Company’s financial statements produced using this basis has been provided to us for audit. However, the current management is unable to reconstruct the accounting records of its subsidiary companies. As a result, no consolidated financial statements have been prepared and this is not in compliance with FRS 127 Consolidated Financial Statements which requires the Company as a parent entity to prepare consolidated financial statements.

2.    We were unable to obtain sufficient and appropriate audit evidence as to the balances of trade & other payables and borrowings of the Company due to lack of supporting documentary evidence made available to us for our verification due to the matters mentioned in paragraph 1 above.

3.    As disclosed in Note XX and Note XX to the financial statements, the Company reported a total borrowings of RM158,653,000 (2009 – RM167,500,000) and the relevant interest accrued of RM23,567,000 (2009 – RM14,573,200). As disclosed in Note XX to the financial statements, the Company provided corporate guarantees of RM56,789,000 (2009 – RM56,789,000) to licensed banks in respect of the bank borrowings facilities granted to its subsidiary companies. The subsidiary companies have defaulted their repayment obligation and therefore the Company as the issuer of the corporate guarantees, is required to reimburse the licensed banks in respect of the banks’ losses suffered.

The financial statements of the current year and of the previous year did not include any provision for penalty interest and financial guarantees due by the Company to the licensed banks. This is not in compliance with the requirements of FRS 137 Provisions, Contingent Liabilities and Contingent Assets which require such provision for penalty interest and financial guarantees to be recognised in the financial statements of the Company.

We are therefore unable to satisfy ourselves that the total bank borrowings and the relevant liabilities reflected in the financial statements are fairly stated.

4.    To date of this report, we have not received replies from certain licensed banks to our letters requesting these banks to confirm the bank balances and any related liabilities (including contingent liabilities, if any). There were no other alternative means for us to carry out the relevant verification work to confirm the completeness of bank balances recorded in the financial statements and any related liabilities or contingent liabilities of the Company.

5.    The relevant tax returns of the Company from 2005 to 2009 have not been prepared and therefore no tax returns have been submitted to the Inland Revenue Board of Malaysia and this has violated the requirements of the Income Tax Act, 1967 in Malaysia to submit such tax returns within the stipulated time frame and hence penalty on the outstanding tax payable, if there is any tax payable, and also penalty for non-filing of tax returns are expected to be imposed on the Company.

6.    Due to the matters highlighted in paragraphs 1 to 5, we are unable to satisfy ourselves that all the relevant tax payables, penalties and their related disclosure notes have been included in the financial statements of the Company and disclosed accordingly.

7.    We have expressed an adverse opinion in our audit report in respect of our audit of the previous financial year’s financial statements because of similar matters described in paragraphs 1 to 6 above.

Adverse Opinion

Because of the matters described in the Basis for Adverse Opinion paragraphs above, we could not express an opinion on the consolidated financial statements as no such financial statements have been prepared and made available for our audit, and we are of the opinion that the financial statements of the Company do not give a true and fair view of the financial position of the Company as at 31 December 2010 and of its financial performance and cash flows for the year then ended in accordance with the Financial Reporting Standards in Malaysia.

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)       The accounting and other records have not been properly kept as described in Basis for Adverse Opinion above. However, 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)       The financial statements of the subsidiary companies have not been prepared due to the matters highlighted in paragraph 1 of Basis for Adverse Opinion above and no consolidated financial statements have been prepared and provided to us for our audit. Therefore, we are unable to comment and satisfy ourselves as to the appropriateness of the financial statements of the subsidiary companies included in the consolidated financial statements.

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 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 – Auditors’ Report With Qualified Audit Opinion (13 November 2009)

INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF ABC BERHAD (12345X) 

Report on the Financial Statements

We have audited the financial statements of ABC BERHAD, which comprise the balance sheets as at 30 June 2009 of the Group and of the Company, and the income statements, statement 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.

Auditors’ Responsibility

Our responsibility is to express an opinion on these financial statements based on our audit. Except as described in the Basis for Qualified Opinion paragraph below, 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 audit opinion.

Basis for Qualified Opinion

  1. A major portion of the financial records of a branch have been destroyed by fire. As a result, the Company is unable to re-produce the financial statements of this branch and hence no such financial statements were made available to us for our audit. The current year financial statements of the Group and of the Company have excluded this branch. Therefore, our audit of the Group and of the Company excludes this branch and we do not consider the financial effect of this branch on the financial statements of the Group and of the Company.
  2. The financial statements of the Group were prepared based on the financial statements of the Company and all of its subsidiaries. However, for this purpose unaudited financial statements of two foreign subsidiaries, DEF Pte. Ltd. and GHI Ltd. were used. At the date of this report, the auditors of these two subsidiaries have not completed the audit and hence have not replied to our Group Audit Questionnaire and have refused our request to review their audit work papers which we intend to rely upon to express our opinion as to whether we are satisfied that the financial statements 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. The directors have given us written assurance that they do not expect significant and material differences between the unaudited financial statements and the audited financial statements to be issued later upon completion of audit of these two subsidiaries. As a result, we wish to report that the Group’s financial statements are subject to changes that may be of significant and material in nature, depending on the outcome of the audit of the financial statements of these two foreign subsidiaries.

 Qualified Opinion

 In our opinion, except for the effects of the adjustments on the financial statements, if any, as mentioned in the preceeding paragraph, 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 June 2009 and of their financial performance and the cash flows for the financial 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 the following:

a) In our opinion, except for effect of the matters described in the Basis for Qualified Opinion paragraph above, the accounting and other records and 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’ reports of subsidiaries of which we have not acted as auditors, which are indicated in Note XX to the financial statements.

c) Except for the effect of the matters as described in the Basis for Qualified Opinion paragraph above the financial statements, we are satisfied that the financial statements 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.

d) Except for the two foreign subsidiaries mentioned in Paragraph 2 of our Basis of Qualified Opinion above, the auditors’ reports on the financial statements of the other subsidiaries were not subject to any other qualification significant and material to the consolidated financial statements and did not include any comment required to be made under Section 174 (3) of the Act.

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.

 

_______________________

XYZ & CO.

AF 1234

CHARTERED ACCOUNTANTS

 

____________________

BENJAMIN WONG

1234/01/11(J)

CHARTERED ACCOUNTANT

WONDERLAND, MALAYSIA

10 November 2009

Sample Disclosure – Auditors’ Report Of Companies With Associates and or Jointly Controlled Entities But Do Not Have Any Subsidiaries (11 November 2009)

INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF ABC BERHAD

Report on the Financial Statements

We have audited the financial statements of ABC Berhad, which comprise the balance sheets as at 30 June 2009 of the Economic Entity and of the Company and the income statements, statements of changes in equity and cash flow statements for the year then ended of the Economic Entity and of the Company, 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.

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 audit opinion.

Audit Opinion

In our opinion, 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 Economic Entity and of the Company as of 30 June 2009 and of their financial performance and cash flows 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, 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.

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.

 

 

(Name Of Audit Firm)

[AF: 1234]

Chartered Accountants

 

 

 

(Name Of Partner)

[1234/05/11 (J/PH)]

Chartered Accountant

Wonderland, Malaysia

Date:

 

Note: This sample independent auditors’ report uses the term “Economic Entity” to describe the financial statements comprising the associates and/or jointly controlled entities ONLY with NO SUBSIDIARIES. An entity should define the composition of the “Economic Entity” in the financial statements. Other terms such as “Group” is not suitable to describe such financial statements as “Group” is defined in FRS 127, Consolidated and Separate Financial Statements to include a parent and its subsidiaries. This requirement applies to those companies that need to comply with Financial Reporting Standards in Malaysia and not Private Entities Reporting Standards. For those companies that need to comply with Private Entities Reporting Standards, investment in associates and/or jointly controlled entities are stated in the separate financial statements of the investor at cost or revalued amount.

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.

Auditors’ Responsibility

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.

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.

 

DEF & Co.

 

(No. AF: 1234)

Chartered Accountants

 

 

(No. 1234/1/10 (J))

Chartered Accountant

Wonderland

Day/month/year