Raffles Infrastructure: Auditors provide no opinion on financial statements, doubts on going concern

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Raffles Infrastructure said on Wednesday that its independent auditors, RT LLP, have included a “disclaimer of opinion,” on its 2017 financial statements due to the lack of “sufficient appropriate audit evidence” for forming an opinion.

The independent auditor’s report said that it was unable to determine if the opening balances for 2017 were fairly stated, due to a disclaimer of opinion on the 2016 financial statements, meaning it couldn’t determine changes in equity and cash flows.

The auditor pointed to factors including a lack of documentation supporting certain transactions and the inability to obtain sufficient evidence of the existence and quantum of certain bank balances and borrowings.

It also noted a “material uncertainty” over Raffles Infrastructure’s availability and sustainability of cash flow and/or operating funds, with the 2017 results showing current liabilities exceeded current assets by 10.24 million yuan.

“This may cast significant doubt over the group’s and the company’s ability to continue as going concerns,” the auditor said, noting that the statements were prepared on a going concern basis, which assumes an entity will remain in business for the foreseeable future.

“Based on the limited information about the group and of the company made available to us, and the severe limitation of scope faced in the conduct of our audit, we were unable to perform alternative procedures to determine the appropriateness of the use of the going concern assumption,” the auditor report said.

Among the auditor’s concerns, it noted that in 2015, Raffles Infrastructure’s wholly owned subsidiary Shishi Simwa Knitting & Dyeing received notices from three customers alleging substantial damages and financial losses as the subsidiary’s products didn’t meet specified requirements, causing de-coloration of their end-products.

The auditor said it wasn’t provided with and couldn’t obtain any independent evidence to draw conclusions on the claims’ validity and accounting treatment.

It also said it wasn’t provided with any supporting documentation on whether three loans of an aggregate 12.9 million yuan, which matured in 2018, were fully settled.

In the 2017 statements, 4.796 million yuan was due from a subsidiary and 4.896 million yuan was due to a subsidiary, the auditor noted, adding that it wasn’t able to carry out auditing procedures on these amounts as documentation supporting the transactions weren’t available and it wasn’t able to determine the validity, existence and accuracy by other means.

 

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