Sample Disclosure – Auditors’ Report With Qualified Opinion (16 December 2010)


(Incorporated in Malaysia)


Report on the Financial Statements

We have audited the financial statements of ABC SDN. BHD., which comprise the balance sheets as at 30 September 2010 of the Group and of the Company, and the income statements, statements of changes in equity and cash flow statements of the Group and of the Company for the year then ended, and a summary of significant accounting policies and other explanatory notes, as set out on pages X to XX.

Directors’ Responsibility for the Financial Statements

The directors of the Company are responsible for the preparation and fair presentation of these financial statements in accordance with Financial Reporting Standards and the Companies Act 1965 in Malaysia. This responsibility includes: designing, implementing and maintaining internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances.

Auditors’ Responsibility

Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with approved standards on auditing in Malaysia. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on our judgment, including the assessment of risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the Company’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the directors, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Basis for Qualified Opinion

Included in trade receivables is an amount of RM203,876,431 in relation to a construction contract which has been completed on 2 March 2010. The customer disputed this sum claimed by the Company and agreed that an independent project consulting firm be appointed to ascertain the appropriate claim amount. As at the date of this report, the appointed project consultanting firm has yet to provide its final certification of the related claims. No allowance for doubtful debt has been made in respect of this amount as the directors, after seeking the relevant legal advice they deem fits, the Company has a high chance of recovering the entire amount owing by the customer.

In the absence of final certification of the related claims by the appointed project consulting firm and other audit evidence to substantiate the recoverability of this outstanding amount, we are unable to ascertain the extent of recoverability of this RM203,876,431 amount owing to the Company and therefore unable to comment as to whether the trade receivables stated in the balance sheet as at 30 September 2010 is fairly stated. We are therefore unable to comment as to whether the relevant affected  items in the current year financial statements by the amount of allowance for doubtful debts that is necessary (including the relevant effect of income tax amount, be it current year income tax and/or deferred taxation), upon final determination of the agreed sum to be settled, are fairly stated.

Qualified Opinion

In our opinion, except for the effect of the adjustment that may be required to be made on the financial statements due to the matters described in the Basis for Qualified Opinion paragraphs above, the financial statements have been properly drawn up in accordance with Financial Reporting Standards and the Companies Act, 1965 in Malaysia so as to give a true and fair view of the financial position of the Group and of the Company as at 30 September 2010, and the financial performance and cash flows of the Group and of the Company for the year then ended.

Report on Other Legal and Regulatory Requirements

In accordance with the requirements of the Companies Act, 1965 in Malaysia, we also report that in our opinion:

a)       the accounting and other records and the registers required by the Act to be kept by the Company have been properly kept in accordance with the provisions of the Act.

b)       we have considered the audited financial statements of all the subsidiaries of which we have not acted as auditors, which are indicated in Note XX to the financial statements.

c)       we are satisfied that the financial statements of the subsidiary companies that have been consolidated with Company’s financial statements are in the form and content appropriate and proper for the purposes of the preparation of the consolidated financial statements and we have received satisfactory information and explanations as required by us for those purposes.

Other Matters

This report is made solely to the members of the Company, as a body, in accordance with Section 174 of the Companies Act 1965 in Malaysia and for no other purpose. We do not assume responsibility to any other person for the content of this report.

[ AF : 0012345 ] [ 123/01/13(J) ]
Chartered Accountants Chartered Accountant



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