Singapore Kitchen Equipment said Friday its independent auditor, BDO LLP, has included a disclaimer of opinion on the company’s financial statements for 2020 as it couldn’t determine whether the results were materially misstated or accurate.
“We have not been able to obtain sufficient and appropriate audit evidence to provide a basis for an audit opinion on these financial statements,” said the report on the audit, which the company filed to SGX. “We determined that there may be misstatements in multiple elements of the financial statements.”
The report pointed to a debit note from ultimate holding company, QKE Holdings, on 30 March 2020, claiming reimbursement for eight payment transactions totalling S$1.39 million, which Singapore Kitchen Equipment paid in 2018 and 2019.
The initial management representation was the payments were for a staff bonus, advertising expenses and donations for the 2019 financial year, but it was later determined the staff bonus was paid for staff performance in 2018, while the other expenses were in 2018 and 2019, the audit report said. Before receiving the debit note, the group didn’t record the expenses in the accounting system, the auditor said.
The audit report said there were other irregularities, including altered supplier’s invoices, cheque images and bank statements as well as discovering payment vouchers constructed for the staff bonus payments which weren’t made out by the group.
Additionally, there were contracts with customers which weren’t identified in prior periods, resulting in improper recognition of revenue in previous financial years, the report said.
“We were also presented with new information in relation to arrangements with customers which were inconsistent with those management representations which we had obtained in prior periods,” the audit report said.
The auditor also pointed to an investigation, announced in September 2020, by the Corrupt Practices Investigation Bureau over entertainment expenses and sales commissions on certain projects by company subsidiary Q’son Kitchen Equipment. The auditor noted the investigation is ongoing and no charges have been filed.
Singapore Kitchen Equipment indicated it was working to correct lapses in its accounting.
“In responding to the disclaimer of opinion provided, Audit Committee (AC) is of the view that the group’s systems of internal controls may not be adequate to address financial, operational, compliance and information technology controls and risk management systems during the year,” the company statement said.
Singapore Kitchen Equipment said it has appointed Baker Tilly Consultancy (Singapore) as internal auditors to review and improve its operating procedures and internal controls.
“The AC will review the findings of the internal auditor and will ensure that the company follows up on the internal auditors’ recommendations raised during the internal audit process to address any internal control gaps,” the company said.
“The board has taken immediate steps to address the aforementioned lapses that were brought to its attention and had implemented various measures to strengthen internal controls to ensure adherence to proper corporate governance,” the statement added.