KUALA LUMPUR: KPMG has filed a defence to Serba Dinamik Holdings Bhd's civil claim, seeking to strike it as frivolous, scandalous as well as an abuse of the court's process.
Serba Dinamik had earlier in June filed a legal action against KPMG after the auditor raised issues with its inability to verify a number of the former's contracts and transactions.
Subsequently, KPMG allegedly asked for a third-party auditor be appointed to resolve the issue.
Despite not being able to conclude its audit findings, KPMG also allegedly filed a report to the Securities Commision against Serba Dinamik.
The suit brought by Serba Dinamik is mainly based on KPMG's alleged negligence, breach of contractual and statutory duty as its appointed auditor.
In its defence, KPMG claimed that the legal suit and press conference by Serba Dinamik earlier to announce the legal action against it were done in bad faith.
KPMG also claimed that they were also intended to vilify and compromise its liability to continue the statutory audit independently which purported to force its resignation.
In addition, KPMG refuted the claim that it required the appointment of a third-party auditor for the ongoing statutory financial audit to resume and stated that it had dutifully discharged its role according Malaysia's auditing standard.
Serba Dinamik, in a statement, said KPMG had allegedly admitted in its defence statement that it was unable to complete the audit and subsequently resigned without completing due to the action brought against it.
Serba Dinamik is now facing allegations that its negligence suit against KPMG was misconceived and unfounded.
This was on the contention that Serba Dinamik had acknowledged that further independent investigations were necessary to determine the issues brought up by KPMG.
"What they (KPMG) flagged as issues was being dealt with. They had our full cooperation and an independent third-party auditor was already appointed, in accordance to what was proposed by them," said Serba Dinamik's lawyer Tan Sri Muhammad Shafee Abdullah.
He added that KPMG's request for the appointment of an independent auditor to validate its discovery was contentious in the first place as if KPMG was not certain of its own audit process and findings.
Serba Dinamik, he said, had numerous meetings on it with KPMG in attendance and subsequently agreed to KPMG's request.
"Despite that, KPMG admits to lodging the Section 320 report in their defence and even went to opine that the audit issues may adversely affect Serba Dinamik's financial position to a material extent.
"This contradicts their claim that they did not conclude their audits and are awaiting the result of the third-party independent audits. Their report was, therefore, premature and questionable. Their honesty and good faith are debatable," Shafee said in the Serba Dinamik statement.
As a result, Serba Dinamik said it had faced the threat of adverse speculations that could cause lasting consequences on its market and reputation.
Further, Serba Dinamik's claim for loss and damage is refuted by KPMG.
KPMG stated that the alleged loss and damage, if there was any, was due to the adverse market reaction to Serba Dinamik's failure to discharge its duties and responsibilities.
KPMG also claimed that it was entitled for protection under Section 320(2) of the Capital Market and Services Act 2007.
Ironically, Serba Dinamik said it had based a large part of its claim on Section 320 of the same act, alleging that KPMG had acted prematurely in reporting its incomplete findings to the SC in breach of the requirements of Section 320(1) that requires KPMG to first form a professional opinion that a breach has occurred prior to filing a report.
In the circumstances where KPMG demanded for an independent review to complete the audit, Serba Dinamik maintained that it was impossible for KPMG to have formed a professional opinion prior to the independent review taking place.
Serba Dinamik also maintained that KPMG had accordingly breached its professional standards and duty of confidentiality which overrides any protection under the act.
Regardless of allegations of bad faith and KPMG being disparaged and put in a compromising position, Serba Dinamik said KPMG did not file any counter claim and only seek for the action to be dismissed with cost.