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Friday April 6, 2012
By DANIEL KHOO email@example.com
PWC: RM85.7mil paid to contractors of Xian Leng made under questionable circumstances
KUALA LUMPUR: An audit into the financial irregularities of Xian Leng Holdings Bhd showed that RM85.7mil of the company's money were made to several contractors “under questionable circumstances”.
The audit revealed that out of the RM90.7mil which had supposedly been spent on capital expenditures (capex) for fish farm development, RM85.7mil recorded was shown to be paid to four contractors.
“The RM85.7mil paid to the four contractors were made under questionable circumstances. The bulk of payments were made via cash cheques and there was a lack of corroborative evidence shown that the amount was paid to and/or received by the four contractors,” said the audit report which was released to Bursa Malaysia yesterday.
The RM5mil balance of the capex was paid to 52 other contractors, it said.
The signatories to these questionable cheques were its previous executive director Chua Chong Seng, who resigned on Aug 31, 2008 and Lim Wan Hong who resigned on Dec 23, 2011 and is still a substantial shareholder of the company.
“The issuance of cash cheques for such large sums of money is a departure from the procedures prescribed in the Xian Leng group finance manual,” the audit findings showed.
The findings showed that a substantial amount of the cash cheques were drawn by Chua's 80%-owned money changer company.
The monies were paid in a related party transaction which was kept secret as Chua, who is a substantial shareholder of Xian Leng, “had at no point in time ever disclosed these transactions to the company which amount to related party transactions”, the audit which had been carried out by PriceWaterhouseCoopers Advisory Services Sdn Bhd (PWC) revealed.
“These transactions were therefore not captured in the company's audited financial statements,” it added.
These payments were authorised by Xian Leng's former managing director Ng Huan Tong who resigned a few days ago.
The board of directors which had appointed an independent party to carry out the audit and may lodge a police report and is currently deliberating on the next course of action to recover the RM85.7mil.
Due to the findings, the value of Xian Leng's property, plant and equipment as at Jan 31 would be adjusted and reduced by RM10.3mil to RM68.2mil from RM78.5mil.
“The board is of the view that given the fact that the irregularities have been fully provided for, no further material adjustments to capex will be required for the financial year ending Jan 31, 2013,” the report stated.
Due to this, the unaudited consolidated loss before taxation of Xian Leng for the fianancial year ended Jan 31, 2012 would also be adjusted and increased by RM10.3mil to a loss of RM78.4mil from RM68.1mil due to the impairment provided for the remaining value of the RM85.7mil capex.
“The board has upgraded internal control at the farms including implementing closer monitoring and control measures in fish production mortality, inventory, ensuring frequent farm inspections and tightening up the security system in the farms,” the report said.
Xian Leng is a Johor-based breeder and supplier of Asian Arowana and other ornamental fishes which was listed on the then Second Board in 2001 before being upgraded to the then Main Board in 2003.
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