Bursa Malaysia Wants Independent Review of Serba Dinamik's Deals after KPMG's Red Flags

June 24, 2021

Credit: William/AdobeStock
Credit: William/AdobeStock

Malaysian oil and gas service provider Serba Dinamik Holdings Bhd must appoint an independent reviewer to address issues raised by the company's external auditor, the national stock exchange said on Wednesday.

In May, Serba said auditor KPMG had not been able to verify contracts and transactions worth 3.5 billion ringgit ($840.74 million) with 11 customers.

Serba rejected the concerns and has said it saw no issues with the existence or legitimacy of the contracts.

The company said last week it has agreed in principle to appoint Ernst & Young Advisory Services as the independent reviewer to assess the veracity and accuracy of the matters highlighted by KPMG, but has not finalized the appointment.

"To provide clarity to the market, it is imperative that (Serba Dinamik) undertake the necessary steps to appoint the independent reviewer immediately to address the uncertainty surrounding the veracity and accuracy of the matters, as highlighted by its external auditors, in a timely manner," Bursa Malaysia said in a statement.

The exchange also asked Serba to provide a timeframe for the appointment of the reviewer.

It was not immediately clear what the consequences will be for Serba if it did not fulfill the exchange's requirement.

Serba said earlier this week it has taken legal action against KPMG, saying the auditor "negligently red-flagged some issues". KPMG responded by saying it will vigorously contest any court proceedings.

In a stock exchange filing, Serba said late on Wednesday its board will be deliberating on Friday whether the scope of work of the independent reviewer has to be expanded. It did not specify what it meant by expanded scope, but the filing indicated it was seeking an end to its relationship with KPMG.

"Based on legal advice, the company is of the view KPMG PLT can no longer act independently as external auditors," it said.

Serba has lost two-thirds of its market value since KPMG raised its concerns in May.

In a separate statement on Wednesday, Malaysia's securities regulator said its investigation into Serba Dinamik was ongoing.

It had launched the investigation last month when the audit issues first came to light.

 ($1 = 4.1630 ringgit) 

(Reporting by Liz Lee; Editing by Martin Petty and Muralikumar Anantharaman)




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