KUALA LUMPUR: Serba Dinamik Holdings Bhd's decision to use the process of removing its external auditor KPMG when the former's executive is unhappy with the audit findings is not appropriate, Malaysian Institute of Corporate Governance (MICG) said.
MICG deputy president David William Berry said for the executive to suggest that the independent directors were unqualified to understand the accounting issues appeared to attack the competence of the company's audit committee, which was composed of independent directors.
Berry said the central purpose of the external audit was its independent adoption of the relevant professional and ethical accounting standards and reporting accordingly on the findings.
"That independence should not be undermined," he said in a statement today.
He added that the external auditor was obliged to ascertain whether the company's accounts represent, in its opinion, a true and fair view of the concern's financial status.
He said in this case, the financial values were significant, adding extra weight to the need for the auditor's independent opinion.
"Criticising the auditors for addressing their concerns to the company's independent directors is perverse, therefore, when that is exactly to whom the auditor is expected to direct any concerns.
"Against that background, the silence of the audit committee and the company's independent directors raises questions.
"More light is needed on the audit committee's findings and its recommendation to the board. These should be revealed to shareholders at the EGM (extraordinary general meeting," he said in a statement today.
On Monday, Serba Dinamik said the group had received a special notice from its non-independent and non-executive director Datuk Abdul Kadier Sahib and member of the audit and risk committee to remove KPMG as its external auditor.
Earlier, KPMG announced that it had stopped its audit process on Serba Dinamik and flagged audit issues totalling RM3 billion.
Berry said the fact that an EGM was being called for this purpose by a non-independent director (albeit non-executive director) who appeared to be in agreement with the managing director's (the executive) position, had raised conflict concerns.
"It is MICG's view that in this scenario, none of the directors who are shareholders, should vote in the matter, irrespective of whether they are executive or non-executive, independent or non-independent.
"It should be for other shareholders to hear both viewpoints and vote accordingly," he said.