Auditors of Epicentre Holdings cannot verify the Apple reseller's books

Epicentre's auditors have highlighted four issues relating to the Apple premium reseller's accounts. PHOTO: ST FILE

SINGAPORE - The auditors of Catalist-listed Epicentre Holdings, which positions itself as an Apple premium reseller, have issued a disclaimer of opinion on the company's accounts for the financial year ended June 30, 2017.

Auditors BDO could not say if the accounting and other records of Epicentre and its Singapore subsidiaries were properly kept as they were unable to obtain sufficient appropriate audit evidence to provide a basis for an audit opinion on these financial statements.

The disclaimer of opinion was over four issues relating to:

(a) purported transactions relating to consultancy services;

(b) purported advances to and refunds from a supplier;

(c) purported transactions relating to a loan of $1.76 million; and

(d) internal controls and corporate governance.

Some of the issues identified by BDO concern Epicentre executive chairman and acting chief executive Lim Tiong Hian, such as those relating to a loan transaction.

During the financial year, the group entered into an agreement with a company owned by a shareholder of Epicentre for a loan of $1.76 million at an interest rate of 24 per cent a year.

The loan was disbursed to the group in September 2016, of which $1.2 million was made by way of cash deposits.

In September 2016, Epicentre, the lender and Mr Lim entered into an agreement to novate the loan from the lender to Mr Lim.

The next month, the group made a loan repayment of $400,000 to the lender. Thereafter, the group made repayments totalling $1.05 million to Mr Lim's private vehicle.

As at June 30, 2017, the outstanding loan balance of $310,000 owing to Mr Lim was disclosed as "borrowings" in Note 13 to the financial statements.

The auditors said they were unable to obtain sufficient appropriate audit evidence regarding the veracity of the transactions, particularly with respect to:

(a) The source of funds purportedly received from the lender;

(b) The legality and legitimacy of the novation agreement;

(c) The rationale of novating the loan from the lender to Mr Lim; and

(d) The rationale of loan repayment of $400,000 made to the lender in October 2016 after the loan was novated.

In response, Epicentre said in a statement that it had appointed Deloitte & Touche to carry out an independent review of the issues.

The board will update shareholders and announce a summary of the key findings once the review has been completed, it added.

The statement was made by order of the board and signed by Mr Lim himself.

Epicentre shares rose by 0.2 cent to 12.5 cents. The announcement was made after the market closed.

The stock is down 34.2 per cent year to date.

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