Singapore-listed S i2i, which makes phone handsets and provides other services, finds accounting, stock problems at units; “There were also accounting matters identified relating to an inter-company transfer of asset”

Telco finds accounting, stock problems at units

A telecommunication company has found accounting discrepancies at one of its local units, including staff creating false evidence, and lapses regarding goods at an Indonesian unit.

S i2i, which makes phone handsets and provides other services, told the Singapore Exchange (SGX) yesterday that the problems had been detailed by consultants EY Advisory and BDO, which were engaged earlier this year after allegations surfaced.

EY Advisory focused on Singapore-based information technology firm Cavu Group, which was alleged to have “certain irregularities in the accounting records”. BDO looked at Selular Group in Indonesia, where certain quantities of cellphones marked as sold were supposedly not delivered.The findings of both consultants, released to the SGX yesterday, point to a number of irregularities.

The EY report found that an employee of Cavu Group admitted creating evidence to show that the group’s companies had a certain amount of software and stock when there was none.

The same employee also created documents of two lease-hire purchase agreements involving a third-party company.

S i2i noted: “There were also accounting matters identified relating to an inter-company transfer of asset and the cross allocation of a contingency or marketing reserve fund by a staff member of the Cavu Group.”

S i2i caters to the cheap handset market, mainly in Indonesia and India. The firm said it has undertaken an internal review, adding that it “has implemented appropriate disciplinary measures against the employees concerned, including the exit of certain employees”.

It has “clawed back” the variable pay component from those who violated the firm’s policies, given out warning letters and counselled employees. All employees must now declare their interest in any transactions they may have with third parties.

The BDO report did not find signs that quantities of mobile phones deemed sold by Selular Group were actually kept in the warehouse.

S i2i said it will tighten its return policy and minimise sales returns while Selular Group will conduct more frequent stocktaking in the Jakarta warehouse and regularly scrap unserviceable phones.

S i2i has also taken additional steps to address the findings by EY Advisory and BDO, such as creating a new position to ensure all new measures are well designed and carried out. The company will directly control the operation of the warehouse in Jakarta as well, instead of using a third-party vendor.

S i2i said: “The board… has taken, and continues to take, steps to address such findings, and it is committed to (main (maintaining) the appropriate standards of internal control.”


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