KUALA LUMPUR: It is most unusual for a public listed company such as Serba Dinamik Holdings Bhd to take action against its external auditor before the audit is complete and the company's independent review has commenced.
Malaysian Institute of Corporate Governance (MICG) deputy president David W Berry said the action is regarded as a regrettable decision – a view that the institute believes will be shared by the regulators.
"As Serba Dinamik has formally commenced legal proceedings against KPMG PLT, which has said it will vigorously defend, we cannot comment on the facts or the virtues of the case.
"It is to be hoped a way forward is agreed soon, and the outcome embellishes Malaysia's reputation as a financial market which exemplifies best practices in corporate governance," he said in a statement today.
Berry said KPMG's resignation as Serba Dinamik's external auditor is not surprising given the latter's decision to commence legal proceedings against KPMG.
"It is clear the relationship which should exist between client and auditor has broken down.
"KPMG cannot complete its audit work to an acceptable professional standard in this climate, nor can Serba Dinamik entertain a continued relationship," he said.
Serba Dinamik initially announced that it would appoint BDO PLT to conduct an independent review of the audit matters raised by KPMG.
Subsequently, Serba Dinamik named Ernst & Young Advisory Services (EY) and said it agreed to terms.
Most recently, Serba Dinamik has said it was reviewing the need to appoint EY.
"Whatever choice is made, a reputable audit firm with established international affiliations will be needed to complete the statutory audit for the 2020 financial year.
"In this process, the audit matters raised by KPMG will have to be addressed," Berry added.