Auditors' report bears sour fruit for Apple reseller

The Epicentre store at Ion Orchard. The Apple reseller's shares fell by 12 per cent after auditors would not sign off on the company's financial statements over transactions with entities involving company shareholders.
The Epicentre store at Ion Orchard. The Apple reseller's shares fell by 12 per cent after auditors would not sign off on the company's financial statements over transactions with entities involving company shareholders. ST FILE PHOTO

Shares of Apple reseller Epicentre Holdings fell by 12 per cent after auditors would not sign off on the company's financial statements.

Multimillion-dollar transactions with entities involving company shareholders were flagged in a report by accountancy firm BDO. Epicentre shares fell 1.5 cents to close at 11 cents yesterday, after a late Singapore Exchange filing on Monday.

The firm said it has appointed Deloitte and Touche to do an independent review of issues raised. Shareholders will be told of the outcome.

Three deals were put under the microscope in the BDO report.

In one, Epicentre purportedly entered into consultancy services agreements with customer entities where some directors were company shareholders. It recorded $6.45 million in income and other receivables from these agreements. But the auditors said they were not given enough satisfactory evidence for the veracity of the transactions.

The audit report also highlighted advances to and refunds from a supplier in Shenzhen, China. Epicentre was said to have paid about $4.4 million to this supplier through a company owned by its own executive chairman, who is also acting chief executive, as well as through another company owned by a company shareholder. The supplier then purportedly refunded $2.1 million through one of these firms.

The auditors said that they were not provided with sufficient evidence on issues such as the recoverability of the roughly $2.34 millon puportedly with the supplier.

Also under scrutiny was a $1.76 million loan Epicentre took from a lender owned by a shareholder. An agreement was later inked to swop out the Epicentre executive chairman for the original lender.

"Because of the significance of the matters described", the audit team said it could not issue an opinion on Epicentre's full-year statements. The unaudited financial statement had claimed a $560,000 net profit on revenue of $100 million.

The company saw a change in top management in July last year. Mr Fong Teck Loon stepped down as chief executive, and director Lim Tiong Hian was made executive chairman and acting CEO.

A version of this article appeared in the print edition of The Straits Times on October 11, 2017, with the headline 'Auditors' report bears sour fruit for Apple reseller'. Print Edition | Subscribe