Bursa Malaysia Securities Berhad (635998-W) (Bursa Malaysia Securities) has publicly reprimanded ETI Tech Corporation Berhad (ETITECH or the Company) and 4 directors for breaching the Bursa Malaysia Securities Main Market Listing Requirements (Main LR). In addition, the 4 directors of ETITECH were fined a total of RM22,800.
ETITECH was publicly reprimanded for breaching paragraph 9.23(2) of the Main LR where the Company had failed to announce its audited financial statements for the financial period from 1 September 2011 to 28 February 2013 (AFS 2013) on or before 30 June 2013. ETITECH only announced the AFS 2013 on 1 August 2013, after a delay of 24 market days.
ETITECH is also required to review and ensure the adequacy and effectiveness of its financial reporting function and ensure all its directors and relevant personnel attend a training programme in relation to compliance with the Main LR particularly pertaining to financial statements.
The following directors of ETITECH at the material time were found to have breached paragraph 16.13(b) of the Main LR for permitting knowingly, or where they had reasonable means of obtaining such knowledge, ETITECH to commit the breach of paragraph 9.23(2) of the Main LR. The penalties imposed on the directors are as follows:-
No. |
Director |
Penalty |
1. |
Dato’ Ahmad Shukri bin Tajuddin Independent Non-Executive Chairman Audit Committee Member (resigned on 9 July 2013)
|
Public Reprimand & Fine of RM1,200
|
2. |
Lee Kah Kheng Executive Director (retired on 23 September 2013)
|
Public Reprimand & Fine of RM12,000
|
3. |
Khor Yee Kwang Executive Director (resigned on 13 August 2013)
|
Public Reprimand & Fine of RM4,800
|
4. |
Nordin bin Mohamad Desa Independent Non-Executive Director Audit Committee Chairman (resigned on 28 February 2014)
|
Public Reprimand & Fine of RM4,800
|
Bursa Malaysia Securities views the contravention seriously as the requirement for listed companies to ensure timely submission of financial statements was of paramount importance to ensure a fair and orderly market of securities traded on Bursa Malaysia Securities.
BACKGROUND
The delay in the announcement of the AFS 2013 which was due on 30 June 2013 was mainly due to ETITECH’s delay / failure in addressing / resolving the following audit issues with the external auditors:-
- Failure to reclassify the assets in respect of the proposed disposal of an indirect wholly-owned subsidiary in accordance with the accounting standards (i.e. Financial Reporting Standard 5) which was approved and entered into prior to 30 June 2013;
- Failure to finalise and furnish the 3 years profit and cash flow forecast and projection of ETITECH Group to justify the carrying value of development expenditure amounting to approximately RM32 million which was requested by the external auditors including to the board and audit committee on 30 October 2012. However, the Company had only submitted to the external auditors the requested profit and cash flow forecast in July 2013; and
- Failure to conduct physical stock count in relation to ETITECH’s inventories as at the financial period ended 28 February 2013. The external auditors had in the board meeting on 29 April 2013 specifically requested the Company to arrange for inventory count. However, the Company had only conducted the physical stock count in the Kulim factory on 3 July 2013 and in Taiwan and China on 22 & 23 July 2013.
ETITECH had failed to demonstrate reasonable steps / efforts taken to ensure the outstanding audit issues were resolved expeditiously to enable timely announcement of the AFS 2013.
The finding of breach and imposition of the above penalties on ETITECH and its directors were made pursuant to paragraph 16.19(1) of the Main LR upon completion of due process and after taking into consideration all facts and circumstances of the matter including the materiality of the breach and the knowledge, role, responsibilities and conduct of the directors as follows:-
(a) Lee Kah Kheng was the executive director of ETITECH primarily responsible for the financial management of ETITECH. He was aware of the audit issues and was in a position to ensure all the audit issues were resolved expeditiously to enable timely announcement of the AFS 2013. In addition, he had given assurances to the board which had relied on him with regard to the finalisation of the audit issues;
(b) Khor Yee Kwang was an executive director of ETITECH and was or should be aware of the audit issues / request of the external auditors raised in the board meetings. He had failed to demonstrate reasonable efforts taken to discharge his duties including his failure to attend the subsequent board meetings after the board meeting on 26 February 2013 and upon being made aware of the delay in announcement of the AFS 2013; and
(c) Dato’ Ahmad Shukri bin Tajuddin and Nordin bin Mohamad Desa were members of audit committee who had the specific function under the Main LR to review financial statements. They were or should be aware of the audit issues / request of the external auditors raised in the audit committee / board meetings. They had failed to demonstrate reasonable efforts taken to discharge their duties including to monitor and ensure expeditious resolution of the profit and cash flow forecast requested by the external auditors which was material to enable the directors to assess and make informed decision on the financial position / prospect of the Company.