KUALA LUMPUR: Serba Dinamik Holdings Bhd has taken legal action against its external auditor KPMG, claiming for substantial damages for alleged negligence and breaching contractual and statutory duties.
Serba Dinamik legal consultant Tan Sri Muhammad Shafee Abdullah said a civil claim had been filed against KPMG this morning.
"The court documentation has not been officially sealed. We are not allowed to give a copy (of the court documents)," Muhammad Shafee told reporters at a 5.30pm virtual briefing by Serba Dinamik today.
KPMG recently flagged audit issues across more than RM3.5 billion in transactions and bills for the financial year ended December 31 2020 (FY20).
Serba Dinamik said it had been at an impasse with KPMG towards the completion of the statutory audit for FY20.
The impasse had resulted in a significant drop in its share price and overall market capitalisation, the oil and gas services company said in a statement.
After being on the receiving end for most times since the audit issues came out late last month, shares of Serba Dinamik gained some grounds today.
The stock rose 4.17 per cent or 2.5 sen to 62 sen, valuing it at RM2.31 billion.
Since the audit issues were announced on Bursa Malaysia on May 25, the company's share price has fallen by about 60 per cent, causing it to lose some RM3.70 billion in market capitalisation.
Serba Dinamik, in its statement, said: "SDHB (Serba Dinamik) has made the decision to file a civil claim for substantial damages against KPMG on the grounds of professional negligence, breach of contract and breach of statutory duty on broadly the following grounds, among others.
"KPMG, in the course of their audit, raised issues in obtaining various confirmations from SDHB's customers and vendors on various payables and receivables including establishing the existence of the said customers and suppliers."
These matters were raised in a special board of directors meeting on May 3 this year, where KPMG indicated that it was not willing to complete the audit until and unless a third-party independent review was conducted on the alleged findings by it.
Serba Dinamik contented that the findings were not substantive in nature that warranted an independent review.
The issues faced by KPMG were entirely attributable to its own negligence, among other breaches, in the course of the audit process, it added.
Serba Dinamik said it would still investigate the issues raised by KPMG and announce the findings, notwithstanding the filing of the civil suit.
KPMG had raised issues relating to sales, trade payables and material on site balances involving 11 parties which accounted for total sales transactions of RM2.32 billion, a trade receivables balance of RM652 million and materials on site balance of RM569 million.
The firm also raised issues around Serba Dinamik's customer and supplier in Bahrain, involving total sales transactions of US$101 million (RM417.48 million) and trade receivables balance of US$24 million (RM99.2 million).
Based on the unaudited accounts, Serba Dinamik's receivables had ballooned to RM1.86 billion as at end-2020 from RM880 million at end-2017.