KPMG issues disclaimer of opinion on Vibrant

Auditor says it is unable to get sufficient and appropriate evidence to give basis for opinion

The independent auditor for logistics player Vibrant Group has issued a disclaimer of opinion on the firm's financial statements for this financial year (FY).

KPMG explained that it has not been able to obtain sufficient and appropriate audit evidence to provide a basis for an opinion on these financial statements.

Among other things, KPMG noted that it identified irregularities and discrepancies in relation to certain invoices and receipts during its audit of Blackgold Group for the financial year ended April 30, 2018.

Blackgold is a Chinese coal miner owned by mainboard-listed Vibrant.

According to a bourse filing by KPMG yesterday, "the accounting records of Blackgold were destroyed in a fire incident" in August last year.

In addition, in a report by the company's investigating auditors, KPMG noted that there were "multiple potential material misstatements" in the financial position of Blackgold as at its acquisition on July 13, 2017, and in Blackgold's financial results for the period up to April 30 last year.

Accordingly, KPMG said it was not able to complete its audit procedures, as it was unable to obtain sufficient and appropriate audit evidence over the account balances of Blackgold, as well as the transactions of Blackgold from the date of its acquisition till April 30 this year.

Moreover, Vibrant's management has not consolidated the balances and transactions relating to Blackgold in the group's consolidated financial statements for FY2018 and FY2019, KPMG said.

According to a bourse filing by KPMG yesterday, "the accounting records of Blackgold were destroyed in a fire incident" in August last year.

As a result, the auditor said it is unable to determine the extent of adjustments necessary with regard to the group's consolidated financial statements for the years ended April 30, 2018 and April 30, 2019.

In a separate regulatory filing yesterday, Vibrant highlighted "certain reclassifications and material differences" between the group's audited and unaudited financial statements for this financial year.

Figures from the group's audited financial statements show that net profit attributable to owners of the company for the financial year ended April 30 came in at $7.7 million, up from $5.6 million previously recorded in its unaudited financial statements, representing a difference of about $2.1 million, or 37 per cent.

While revenue remained the same, share of profit from its associates, net of tax surged to $11.1 million in its audited financial statements, from just $270,000 in its unaudited financial statements. Vibrant credited the variance to fair value gain on an investment property held by its associate Ececil.

Nonetheless, this profit was partially offset by the share of loss from China Southwest Energy Corporation, as a result of the impairment loss on receivables, Vibrant said.

Income tax expense stood higher at $8.3 million in its audited financial statements, versus $6 million recorded in its unaudited statements. The company attributed the $2.3 million increase in expenses to "deferred tax liabilities from the temporary differences recognised by its subsidiaries".

Furthermore, there were also differences between its audited and unaudited financial statements due to the reclassification from "other income" and "other operating expenses" to "impairment loss on trade and other receivables", Vibrant noted.

A special audit report released by EY Advisory in January said Blackgold appeared to have falsified accounts and grossly inflated sales figures since it was acquired by Vibrant in July 2017.

Vibrant shares closed yesterday at 15.5 cents, up 3.3 per cent, or 0.5 cent.

A version of this article appeared in the print edition of The Straits Times on August 16, 2019, with the headline 'KPMG issues disclaimer of opinion on Vibrant'. Print Edition | Subscribe