KUALA LUMPUR (Dec 1): Bursa Malaysia Securities Bhd has reprimanded Sarawak Consolidated Industries Bhd (SCIB) and two of its former directors, Datuk Mohd Abdul Karim Abdullah and Rosland Othman, for failing to submit the group’s 2021 annual report within the approved timeline.

The regulator also fined Mohd Karim, the group's non-independent and non-executive chairman at the material time, and Rosland, its then managing director cum chief executive officer, RM27,000 each. Mohd Karim, 57, stepped down from his chairman post in October 2022 and retired from the group's board in December that year, while Rosland, 50, left the group in June this year.

In a statement, Bursa said SCIB had failed to issue the annual report, including the audited financial statements and its auditors’ and directors’ report for the 18 months ended June 30, 2021 (AR 2021), on or before Oct 31, 2021.

SCIB only issued the AR 2021 on Jan 17, 2022, after a delay of approximately two months, it said.

According to Bursa, SCIB’s failure to issue the AR 2021 on time was mainly due to the failure to address or resolve audit issues on revenue recognition and recoverability of receivables from overseas construction projects, which its external auditor at the time — KPMG PLT — had raised since November 2020.  

“SCIB had subsequently re-classified the transactions relating to the overseas construction contracts/projects by disclosing the net amount due to the group and to the company of US$15,670,756 (RM64,223,196) and US$4,246,080 (RM17,847,637), respectively as project management fee.  

“Consequently, adjustments were made to the financial statements which included a reduction of the group’s revenue from RM748,551,678 (based entirely on the construction contracts previously) to RM93,267,844, the details of which were disclosed in Note 22 to the audited financial statements (AFS 2021) announced on Dec 31, 2021. The external auditor had issued a Qualified Opinion on the AFS 2021 where the external auditor was unable to obtain sufficient appropriate audit evidence of the overseas construction contracts/projects and all the related adjustments,” Bursa said.

It also noted that there was a change of external auditor, with KPMG resigning on July 23, 2023, as SCIB had requested for its voluntary resignation.

The resignation of KPMG stemmed from concerns related to the perceived similarities between SCIB and its sister company Serba Dinamik Holdings Bhd, Bursa noted. The decision followed a legal dispute between KPMG and Serba Dinamik, where KPMG raised Serba Dinamik’s audit issue involving transactions of more than RM3.5 billion, it added.

“Further, despite being aware of the tight timeline and challenges to complete the audit and issue the AR 2021 by the due date of Oct 31, 2021, there was lack of expeditious steps by SCIB to source for and/or appoint a new auditor, who was only appointed on Sept 6, 2021, about 1.5 months after the previous external auditor’s resignation or two months before the due date (to submit the AR 2021),” said Bursa.

According to Bursa, Mohd Karim and Rosland were in a position to address SCIB’s audit issue to ensure timely submission of the AR 2021, in view of their roles and involvement in the overseas construction projects, but had failed to do so.

Further, it said Rosland had failed to ensure that SCIB appointed a new external auditor expeditiously after KPMG's resignation.

“Bursa views the breach seriously as timely submission of financial statements is a fundamental obligation of listed companies and is of paramount importance in ensuring an orderly and fair market for securities traded on Bursa Malaysia Securities and necessary to aid informed investment decisions. Bursa has also reminded SCIB and its board of directors of their responsibility to maintain the appropriate standards of corporate responsibility and accountability to its shareholders and the investing public,” it added.  

SCIB closed flat at 77 sen on Friday, with a market capitalisation of RM489.65 million. The counter has jumped over 413% year-to-date.

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