An internal audit of timber flooring company Jason Holdings has uncovered potential mis-statements in the group's accounts for the half year ended June 30 last year.

Executive director and chief executive Jason Sim said in a Singapore Exchange filing yesterday that there has been a "potential overstatement of about $2 million" in the profit and loss position for the period. This was due to omissions in the recognition of cost of goods sold, as "there had been lapses in the group's internal control systems in respect of timely and adequate recording of transactions".

The internal audit, which was carried out in response to an employee's feedback, also found that a subsidiary, Jason Parquet Specialist (JPS), did not pay the salaries of certain employees on time.

It found as well that JPS did not comply with certain bank covenants relating to three banking facilities as at June 30 last year, while there were erroneous submissions of supporting documents for the application of short-term trade facilities.

Mr Sim said the board will commission a special independent committee to review the findings in detail and to conduct a review and assessment of the cash flow projections for the next 12 months.

"This review is to ensure that the internal controls are adequate to safeguard shareholders' investments, the company's assets and ensure the integrity of the company's financial statements," said Mr Sim.

Once the review is completed, the special committee will look into the recommendations of the internal auditors and take necessary steps to further strengthen internal controls.

Jason Holdings, which is listed on the Catalist board, closed at 6.2 cents on Jan 5 before a trading halt was called.

The company requested to convert the trading halt to a voluntary trading suspension on Wednesday.