Auditor files report with MOF over Yamada audit

Yamada Green Resources, citing unfavourable factors in its cultivation business, flagged a loss for the fourth quarter and full year in a profit guidance on Aug 11.
Yamada Green Resources, citing unfavourable factors in its cultivation business, flagged a loss for the fourth quarter and full year in a profit guidance on Aug 11.PHOTO: YAMADA GREEN RESOURCES

It points to certain inconsistencies in group's financial records; Yamada to get legal advice

The external auditor of shiitake mushroom supplier Yamada Green Resources has taken the rare step of filing a report with Singapore's Ministry of Finance (MOF) in the course of auditing the S-chip company.

The report was filed under Section 207(9A) of the Companies Act, said Yamada in a notification to the Singapore Exchange last week.

This section of the Act relates to a situation in which an auditor, in the course of his duties, has reason to believe that a serious offence involving fraud or dishonesty is being or has been committed against the firm by its officers or employees.

Yamada said it is not privy to the contents of the report, although the auditor, BDO Singapore, has confirmed that it relates to certain inconsistencies in the group's financial records.

The report also covers other queries which were raised in the course of its audit of the group's financial statements for fiscal year 2017, as announced on Sept 5.

Yamada said it plans to obtain legal advice on the matter before deciding on its next steps.

At the same time, Yamada said it has been drawn to its attention that a formal notice issued by the Ministry of Finance of China and the China Securities Regulatory Commission stated that BDO China - the Chinese affiliate of BDO Singapore - was suspended from taking on "securities-related engagements" as at May 23, pending the implementation of certain rectification works.

The suspension was lifted on Aug 10.

"The board takes a serious view of this matter as audit work had been performed by BDO China for the group's PRC subsidiaries during the suspension period, and this may have potentially serious implications for the group," said Yamada.

It added that it is seeking advice and awaiting clarification from BDO Singapore as to whether it would be appropriate for BDO Singapore and/or BDO China to perform certain audit tasks in the light of the suspension notice, as well as the extent of any implications on the group in relation to the audit work performed by BDO China.

Yamada was referring to additional audit works to be carried out in relation to the inconsistencies that the external auditor had raised.

The setback is the latest in a series of unfortunate events that have beset Yamada.

Last month, it reported that a vehicle transporting finance documents and IT/computer hardware went up in flames somewhere in China's Fuzhou city on Aug 30, with the driver suffering minor injuries.

The vehicle was moving the documents and hardware from the group's research and development centre to its offices as part of an administration consolidation.

A preliminary check had found that many of the documents relating to the 2017 and 2018 financial years were among the papers affected or destroyed, Yamada claimed.

Consequently, management "commenced efforts to reconstruct or reproduce the documents affected but will require some time to do so". Under these circumstances, it said its audit for this year is expected to be delayed and the external auditor BDO may face certain difficulties in the finalisation of the audit of the group's financial statements for the year.

Yamada, citing unfavourable factors in its cultivation business, such as bad weather, rising labour costs and a slowdown in China's economy, flagged a loss for the fourth quarter and full year in a profit guidance on Aug 11.

Trading in Yamada shares has been suspended. They last changed hands at 33 cents on Aug 30.

A version of this article appeared in the print edition of The Straits Times on October 02, 2017, with the headline 'Auditor files report with MOF over Yamada audit'. Print Edition | Subscribe