Ire-Tex Corp Bhd auditors give qualified opinion due to impairment of related-party receivables and advances

http://www.thestar.com.my/Business/Business-News/2015/05/06/IreTex-auditors-give-qualified-opinion/?style=biz

Ire-Tex auditors give qualified opinion

Wednesday, 6 May 2015

By: WONG WEI-SHEN

UPETALING JAYA: The external auditors of Ire-Tex Corp Bhd have expressed a qualified opinion on the company’s financial statements for the year ended Dec 31, 2014. The light-emitting diode (LED) manufacturer’s auditors UHY said the basis for its qualified opinion was due to trade receivables from sales, which were subsequently impaired as of Ire-Tex’s financial year end.

During the year, UHY noted that Ire-Tex’s unit Zoomic Automation (M) Sdn Bhd sold goods to two related parties amounting to RM5mil. The trade receivables amounting to RM5mil and advances of RM800,000 were subsequently impaired by the management as of financial year end.

“Due to insufficient appropriate audit evidence, we are unable to satisfy ourselves as to the validity and existence of these sales and whether there were other consequential adjustments to be made to the accompanying financial statements including cost of sales and gross profit,” said UHY in a statement.

UHY added that except for the basis of its qualified opinion on Ire-Tex’s accounts, the 2014 financial statements gave a true and fair view of the financial position, financial performance and cash flows of the group and the company as of Dec 31, 2014.

The auditors also drew attention to Zoomic Automation’s agreement with a supplier to purchase machinery worth RM16.5mil.

“Included in other receivables of the group is an amount of RM11.5mil which represents payment made to the supplier,” UHY said.

However, the agreement was terminated due to unsatisfied performance obligation of the supplier. Subsequently, Ire-Tex entered an agreement with a separate supplier to revamp and upgrade the existing machines for RM16mil.

It also entered into a tripartite agreement to assign the debt of RM10.7mil owing from the initial supplier to the new supplier.

“The debt of RM10.7mil is derived from RM11.5mil less a cancellation penalty of RM800,000. As of the date of this report, the new supplier has yet to fulfil its performance obligations under the agreement,” it said.

During the financial year, Ire-Tex entered into an agreement with a supplier with no specified timeline for the implementation of a lean manufacturing programme amounting to RM2mil to improve its production efficiency.

It made a RM1mil advanced payment to the supplier, which has yet to complete its performance obligations.

UHY said the directors of the company are confident that the suppliers will fulfil the performance obligations and hence no allowance of impaired loss is required. UHY highlighted that the recoverability of “such significant amounts” would depend on satisfaction of performance obligations by the suppliers.

It noted that the company’s 2013 accounts were audited by another auditor who expressed an unqualified opinion on those statements on April 25, 2014.

Last June, Ire-Tex bought Zoomic Automation and Zoomic Technology Sdn Bhd for RM16mil to penetrate into the LED market.

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