KUALA LUMPUR: Sports shoe manufacturer Maxwell International Holdings Bhd’s management has been urged to undertake an investigative audit on the issues relating to the 2015 financial year audit that were raised by external auditors Baker Tilly Monteiro Heng.
The Fujian, China-based company told Bursa Malaysia that the audit firm as well as its independent directors had recommended to the management that such an audit be carried out.
Maxwell said one of the issues was the advertising expenses incurred in the retail business during the third quarter ended Sept 30, 2015, which led to the significant net losses of RM46.253mil during the quarter.
This issue was made public on Wednesday, when Maxwell announced the resignation of independent director Lee Chong Hoe effective Feb 5.
Lee, who cited “personal commitment” as the reason for his resignation, pointed out that one matter that shareholders should know about was “there is concern on the advertisement expenditure which was disclosed in the third quarter 2015 results which management has yet to provide satisfactory justification.”
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The company had announced to Bursa on Nov 30, 2015 that the net loss for Q3 2015 was mainly due to the increase in “selling and distribution expenses”. These expenses rose by RM40.9mil, attributed to advertisement expenses incurred in the retail business.
Maxwell said on the recommendation of its audit committee, it had on Dec 18 last year engaged audit firm Ferrier Hodgson MH Sdn Bhd to do an extended scope of audit on the said advertisement expenditure in addition to the normal audit.
According to Maxwell, Ferrier Hodgson is finalising its report on the issue and the company will make further announcements on the findings in due course.
Maxwell also said there were additional issues highlighted by its external auditors Baker Tilly Monteiro Heng on Feb 5, 2016, which required further clarification,
The company did not reveal what the issues were, but said the auditors as well as its independent directors advised that an investigative audit on these issues be carried out.
The company, which was among the first China companies to be listed on Bursa Malaysia, said the directors were “seeking further clarification and response from the executive director of the company in China.” It did not say what matter needed to be clarified.
Neither did Maxwell say whether it would later commission an investigative audit as per the recommendations made.
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