IN RESPONSE to the legal action brought by Serba Dinamik Holdings Bhd, KPMG PLT has filed a defence by seeking to strike it off as frivolous and scandalous as well as an abuse of the court’s process.
To re-cap, the global integrated oil & gas (O&G) service provider had in June filed a legal action against the audit firm after KPMG raised issues over its inability to verify a number of Serba Dinamik’s contracts and transactions.
KPMG subsequently demanded an independent third-party auditor to be appointed to resolve the issue. Despite not being able to conclude their audit findings, a report was filed to the Securities Commission against Serba Dinamik.
The suit brought by Serba Dinamik is mainly based on KPMG’s negligence, breach of contractual and statutory duty as the former’s appointed auditor.
According to Serba Dinamik, KPMG had in its defence claimed that the company’s media conference to announce its legal suit on June 22 was done in bad faith and was intended to vilify and compromise KPMG’s liability to continue the statutory audit independently. This has ultimately led to KPMG’s resignation.
Additionally, KPMG refuted the claim that it requires the appointment for third-party independent auditor for the ongoing statutory financial audit to resume. It further stated that it has dutifully discharged its role according to Malaysia’s auditing standard.
Nevertheless, KPMG admitted in its defence statement that it was unable to complete the audit and subsequently resigned without completing the task due to the action brought against it.
“KPMG contradicts its claim?”
Serba Dinamik is now facing allegations that its negligence suit against KPMG was misconceived and unfounded on the contention that the O&G outfit had themselves acknowledged that further independent investigations were necessary to determine the issues brought up by KPMG.
“What they flagged as issues was being dealt with. They had our full cooperation and an independent third-party auditor was already appointed in accordance to what was proposed by them” explained Serba Dinamik’s lawyer Tan Sri Muhammad Shafee Abdullah.
He added that KPMG’s demand for the appointment of independent auditor to validate its discovery was contentious in the first place as this reflected the auditor’s uncertainty of its own audit process and findings.
After all, Serba Dinamik – in its eagerness to reconcile the issues – had numerous meetings on the matter with KPMG in attendance and subsequently agreed to KPMG’s request.
“Despite that, KPMG admits to lodging the Section 320 report in its defence and even went to opine that the audit issues may adversely affect Serba Dinamik’s financial position to a material extent,” revealed Shafee.
“This contradicts its claim that it did not conclude its audits and are awaiting the result of the third-party independent audits. Its report was, therefore, premature and questionable. Its honesty and good faith are debatable.”
As a result, Serba Dinamik said it faces the threat of adverse speculations drawn against the company which could have lasting implication on its share price and reputation.
KPMG also refuted Serba Dinamik’s claim for loss and damage, alleging that loss and damage – if there was any – was due to the adverse market reaction to Serba Dinamik’s own failure to discharge its duties and responsibilities.
KPMG further claimed that it is entitled for protection under Section 320(2) of the Capital Market and Services Act 2007.
Professional opinion
Ironically, however, Serba Dinamik is also basing a large part of its claim on Section 320 of the same Act where it alleged that KPMG has acted prematurely in reporting its incomplete findings to the Securities Commission in breach of the requirements of Section 320(1) that requires the auditor to first form a professional opinion that a breach has occurred prior to filing a report.
In the circumstances where KPMG itself demanded for an independent review to complete the audit, Serba Dinamik maintained that it was impossible for its former auditor to have formed any professional opinion prior to the independent review taking place and have accordingly breached its professional standards and duty of confidentiality which overrides any protection under the act.
On this note, Serba Dinamik said it is interesting to recall that its former independent non-executive director Hasman Yusoff was also part of the 44 KPMG partners involved in 1Malaysia Development Bhd (1MDB) legal suit filed on July 9 by the Ministry of Finance Inc (MOF Inc) and the Malaysian Government.
Hasman who was the company’s Audit and Risk Committee chairman when KPMG raised the audit issue had since resigned on June 25. Co-incidentally, he was also being investigated by the police for a criminal offence of threatening Serba Dinamik’s group managing director and CEO Datuk Dr Mohd Abdul Karim Abdullah.
However, regardless of its allegations of bad faith and KPMG’s being disparaged and put in a compromising position, Serba Dinamik noted that the audit firm did not file any counter claim and only seek for the action to be dismissed with cost. – Aug 30, 2021
