Y Ventures: Board believes no fraud involved in erroneous accounting

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Y Ventures said on Friday its board believed there was no fraud involved in the erroneous accounting that led to it restating its first-half results to a loss.

That was “based on the additional work carried out by the company to verify the restated financial figures, including checking the figures against the source records, and retracing the steps, processes and protocols involved when the wrong accounting entries were initially input by the relevant accounting staff,” Y Ventures said in response to further queries from SGX.

“This was an administrative inadvertence from the incorrect entry of unit costs for certain inventories,” Y Ventures said in the filing to SGX late on Friday.

It added that the errors were discovered via the company’s existing control procedures and that management had acted promptly to conduct further checks and reviews, as well as develop improvements to its processes to prevent a recurrence.

The first-half results were restated to show higher operating expenditure of US$1.2 million, resulting in a net loss of US$1.0 million for the period, compared with claiming a net profit of US$100,000 previously.

Earlier this week, in response to the initial queries from SGX and its sponsor, Catalist-listed Y Ventures had said that its transaction volume and business operations had expanded since its listing, creating “higher complexity” in acquiring and documenting inventory, and that its earlier processes, including using Excel for inventory management, had come under stress.

Y Ventures uses large e-commerce platforms, including Lazada and Amazon, to distribute third-party products across multiple countries while incorporating a data-analytics service.

On Friday, it reiterated that it has since developed an in-house computerized inventory management system (IMS) to lower the risk of clerical and manual data entry errors.

In response to SGX’s query on whether the new IMS had been tested to withstand the current high transaction volumes, Y Ventures said the system was tested “rigorously” over the past few months.

In addition, in response to SGX’s query on why there was a gap of 1.5 months between when the errors were identified in mid-November and the late-December meeting with the former chief financial officer to discuss the adjustment worksheet, Y Ventures said that additional work was carried out to verify the restated figures, identify the causes, consider steps to prevent a recurrence, prepare the restated results and an assessment of the implications of the results.

When asked why the revised results weren’t released until late January, Y Ventures said it had to verify the figures against source records and determine what caused the errors and the urgency to address the issues.

“Once the development and stress-testing of the IMS was completed in December 2018, the financial figures were verified in early Janaury 2019 using the restated inventory balance,” which was generated with the new IMS, it said.

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