KUALA LUMPUR: Serba Dinamik Holdings Bhd has sued its special auditor Ernst & Young Consulting Sdn Bhd (EY).
In its filing to the stock exchange today, Serba Dinamik said it had filed an originating summons against EY at the High Court here on Nov 5.
This came a few days after Serba Dinamik announced that it had brought Bursa Malaysia to the High Court for acting "in excess of power".
EY is the special auditor chosen by Bursa to be appointed by Serba Dinamik.
Bursa had reportedly in June and July this year issued a directive to Serba Dinamik to appoint EY as a special auditor to conduct a "special independent review" for the auditing issues raised by the company's previous auditor.
Subsequently in October, Serba Dinamik was issued another directive by Bursa, demanding it to announce a "Factual Findings Update" which is understood as material that had been prepared by EY.
Both instructions were allegedly made on the justification that Bursa has the authority to do so under the Main Market Listing Requirements (MMLR).
Pursuant to the second directive on Oct 22, Bursa suspended trading of the Serba Dinamik securities listed on the Main Market, pending the announcement of the said "Factual Findings Update"
Serba Dinamik alleged that Bursa had acted grossly in excess of authority and that there was an underlying theme that the regulator had interfered in the company's audit process.
In response, Bursa had on Nov 8 said it was entitled to exercise its power against Serba Dinamik being the frontline regulator of the country's capital market.
Such action was pursuant to the listing requirements in the interest of maintaining an orderly and fair market, it added.
In its suit agains EY, Serba Dinamik said it was seeking declarations that the former is not an "auditor" within the meaning of MMLR and that its appointment by Serba Dinamik, pursuant to MMLR, was based on misrepresentation and therefore, the appointment and letter of engagement executed between them was "void ab initio".
Serba Dinamik challenges EY's status as an auditor as defined under the MMLR and Companies Act 2016 and the fact that it was not registered with the Audit Oversight Board.
The consulting firm's independence is also being questioned as its affiliate is the auditor of Bursa.
Serba Dinamik said EY had not yet provided an answer to the company concerning the question of whether it was in fact an "auditor".
Market observers said Serba Dinamik had taken steps in recent days to defend its rights, as well as protect its reputation and shareholders' interests.
They said the stock trading suspension against Serba Dinamik was a suspension based not on a specified event in the MMLR e.g. failure to issue audited accounts. Rather, this was a suspension because "Bursa says so".
The episode concerning Serba Dinamik would be instructive for everyone as the investing public should also understand whether Bursa can suspend a counter at will, they added.
A market observer had raised the question: "Even if Bursa is right, do you give the directors a show cause or do you punish all the shareholders by a suspension? As it stands, there is no show cause and Bursa should ask itself, who are they punishing and why so?
Transpiring from that, the observer said Serba Dinamik was now calling into question the entire basis for the need of the special independent review.
Meanwhile, according to Serba Dinamik's originating summons, EY had acted contrary to its undertakings in the letter of engagement when it provided a "Factual Finding Update" to the Securities Commission without Serba Dinamik's consent and without even notifying it in the first place.
Serba Dinamik is also praying for an order that EY is restrained from releasing and publishing any form of opinions on the company.
Together with order for restitution and claim for damages, Serba Dinamik is also seeking for interim injunctive relief pending the full and final disposal of the originating summons.
The court has set the hearing of the interim injunctive relief on Nov 11 while the originating summons is fixed for case management on Nov 17.