Sakae Holdings to improve internal control processes following review

SINGAPORE (THE BUSINESS TIMES) - Erroneous accounting entries and internal control weaknesses were uncovered in reviews of restaurant operator Sakae Holdings' auditing practices, noted the Singapore Exchange Regulation (SGX RegCo).

The company's independent auditor, Deloitte & Touche, had said it could not obtain appropriate audit evidence and certain information related to the loss of control of Sakae subsidiary Cocosa Export, including the existence of gross receivables amounting to $5.4 million and $1.3 million from a non-controlling shareholder.

There were also the reconciled differences arising from the intragroup balance amounting to $1.5 million.

Sakae had appointed KPMG Services to conduct an independent audit on the company's investment in Cocosa Export.

Meanwhile, Deloitte undertook an agreed-upon procedure in relation to the reconciliation of the intragroup differences identified in the auditor's report of the company and its subsidiaries for the year ended June 30, 2019.

KPMG disclosed on Wednesday (May 12) that it did not note any impropriety in receivables from both Cocosa Export and its non-controlling shareholder. However, errors were noted in the accounting records that might have been attributable to the high staff turnover in Sakae's finance department.

Deloitte had reviewed and reconciled most of the differences in the intragroup balance - with the exception of $178,665 - and the necessary audit adjustments for the 2020 financial year.

Sakae said on Wednesday that the auditors' reports indicate no sign of "fraudulent or dishonest impropriety" but the group acknowledged that internal control processes can be further improved.

It noted that it had appointed an external consultant in April 2019 to review its internal control policies. The board has since approved the amended policies.

These include amending its payments processing policy to address situations where if the second group of authorised signatories are not present to process urgent transactions, a request for written approval (via e-mail) should be sent to the relevant authorised signatory.

The firm will implement a new internal accounting control policy that consolidates and documents the company's internal accounting policies and procedures.

It will also formally document staff retention practices such as periodic review by management of employee work scope and competency, remuneration packages, health benefits and insurance plans.

Finally, it has introduced policies that require the management to consider the experience and expertise required when executing new businesses or projects. The management will also be required to implement internal controls to ensure that the company's interests are protected.

"The company will continue to strengthen its work processes and policies to improve its internal control environment," it said.

Sakae shares last traded on April 6 at 14.4 cents.