PwC issues disclaimer of opinion for LionGold

LionGold was one of three small firms which set off a penny stock meltdown in October 2013.
LionGold was one of three small firms which set off a penny stock meltdown in October 2013.ST FILE PHOTO

Auditor says there's not enough appropriate audit evidence to provide basis for opinion

Catalist-listed gold miner LionGold Corp has effectively received a rap on the knuckles from its independent auditor, PricewaterhouseCoopers (PwC).

PwC said it was supposed to express an opinion on the statements for the 2015 financial year after its audit, but could not get enough appropriate audit evidence to provide a basis for an audit opinion - so has issued a "disclaimer of opinion".

It cited various problems in the results of LionGold - one of three small firms which set off a penny stock meltdown in October 2013.

First, the group had reported a total loss of $61.34 million and net cash outflow of $9.5 million for the financial year ended March 31. It also said it is exposed to certain material uncertainties in relation to guarantees provided and contingent liabilities that could cause significant financial obligations.

But while the group has taken steps to get funding for its investment and operational needs, PwC was unable to get enough audit evidence on the likely outcome of the initiatives, and so could not tell if the group can continue operating.

LIONGOLD'S AFFAIRS

If the group is unable to raise the required funding, it may be unable to continue in operational existence for the foreseeable future and adjustments would have to be made to the financial statements.

PRICEWATERHOUSECOOPERS

"If the group is unable to raise the required funding, it may be unable to continue in operational existence for the foreseeable future and adjustments would have to be made to the financial statements," it said.

Also, in April 2014, it was served notices by the Commercial Affairs Department (CAD) of the Singapore Police Force amid a probe into suspected trading irregularities.

As the CAD has not provided details of its probe, PwC was unable to tell whether the investigation would affect the group's ongoing business operations, as well as how significant an adjustment has to be made to the financial statements arising from the probe.

"These factors indicate the existence of material uncertainties which may cast significant doubt about the ability of the company and the group to continue as going concerns. The financial statements do not include the adjustments that would result if the company and the group are unable to continue as going concerns," it said.

Second, the group had included in the loss from discontinued operations, net of tax, in the consolidated statement of comprehensive income, a loss of $6.1 million, attributed to a subsidiary before it had been discontinued and deconsolidated.

But PwC said it could not get enough audit evidence on this loss, and so could not determine if any adjustment to the financial statements was needed.

"Because of the significance of the matters described... we have not been able to obtain sufficient appropriate audit evidence to provide a basis for an audit opinion. Accordingly, we do not express an opinion on the financial statements," it said.

Separately, LionGold announced it will be holding its annual general meeting on Sept 14, and is proposing, as one of its resolutions, to change its auditors from PwC to Baker Tilly. PwC has been its auditors since December 2012.

The company said the move was to reduce costs as the firm's market capitalisation had decreased significantly and the company has reduced its scope of operations.

LionGold said Baker Tilly was "suitably qualified and able to provide audit services to the company at more competitive fees".

A version of this article appeared in the print edition of The Straits Times on August 22, 2015, with the headline 'PwC issues disclaimer of opinion for LionGold'. Print Edition | Subscribe