KPMG in their filed statement of defence walked right into Serba Dinamik’s claim  

SHAH ALAM 30 August - In response to the legal action brought by Serba Dinamik, KPMG has filed a defence to Serba Dinamik’s claim seeking to strike it as frivolous and scandalous as well as an abuse of the court’s process.

Serba Dinamik had filed a legal action against the auditor firm in June 2021 after KPMG raised issues with their inability to verify a number of Serba’s contracts and transactions. KPMG subsequently demanded an independent third-party auditor be appointed to resolve the issue. However, despite not being able to conclude their audit findings, a report was filed to the Securities Commision against Serba Dinamik.

The suit brought by Serba Dinamik is mainly based on KPMG’s negligence, breach of contractual and statutory duty owed to Serba Dinamik as their appointed auditor.

In their defence, KPMG claimed that the legal suit and the press conference set up by Serba Dinamik earlier to announce the legal action against them were done in bad faith and intended to vilify and compromise KPMG’s liability to continue the statutory audit independently which purported to force KPMG’s resignation.

In addition, KPMG refuted the claim that they require the appointment for third-party independent auditor for the ongoing statutory financial audit to resume and stated that they have dutifully discharged their role according to Malaysia’s auditing standard.

Nevertheless, KPMG admits, in their defence statement, that they were unable to complete the audit and subsequently resigned without completing due to the action brought against them.

Serba Dinamik is now facing allegations that their negligence suit against KPMG was misconceived and unfounded on the contention that Serba Dinamik had themselves acknowledged that further independent investigations were necessary to determine the issues brought up by KPMG.

“What they flagged as issues was being dealt with. They had our full cooperation and an independent third-party auditor was already appointed, in accordance to what was proposed by them” said Tan Sri Muhammad Shafee Abdullah, Serba Dinamik’s lawyer.

He added that KPMG’s demand for the appointment of independent auditor to validate their discovery was contentious in the first place as if KPMG is not certain of their own audit process and findings. Serba, in their eagerness to reconcile the issues, had numerous meetings on it with KPMG in attendance and subsequently agreed to KPMG’s request.

“Despite that, KPMG admits to lodging the Section 320 report in their defence and even went to opine that the audit issues may adversely affect Serba Dinamik’s financial position to a material extent. This contradicts their claim that they did not conclude their audits and are awaiting the result of the third-party independent audits. Their report was, therefore, premature and questionable. Their honesty and good faith are debatable.”

As a result, Serba Dinamik faces the threat of adverse speculations drawn against them that could cause lasting consequences on their market and reputation.

Further, Serba Dinamik’s claim for loss and damage is refuted by KPMG by stating that the alleged loss and damage, if there was any, was due to the adverse market reaction to Serba Dinamik’s failure to discharge their duties and responsibilities.

KPMG also claims that they are entitled for protection under Section 320(2) Capital Market and Services Act 2007. Ironically however, Serba Dinamik is also basing a large part of their claim on Section 320 of the same Act where its alleged KPMG acted prematurely in reporting their incomplete findings to the Securities Commission in breach of the requirements of Section 320(1) that requires them to first form a professional opinion that a breach has occurred prior to filing a report.

In the circumstances where KPMG themselves demanded for an independent review to complete the audit, Serba Dinamik maintained that it was impossible for KPMG to have formed ant professional opinion prior to the independent review taking place and have accordingly breached their professional standards and duty of confidentiality which overrides any protection under the act.

On July 26, former Independent Non-Executive Director of Serba Dinamik , Hasman Yusoff  who was also part of the 44 KPMG partners involved in 1Malaysia Development Berhad (1MDB) legal suit filed by the Ministry of Finance Inc (MOF Inc) and the Malaysian government, being investigated by the police for a criminal offence of threatening Serba’s Chief Executive Officer. Hasman was the Audit and Risk Committee Chairman of Serba when KPMG raised the audit issue. He has since resigned.

However, regardless of their allegations of bad faith and KPMG’s being disparaged and put in a compromising position, KPMG did not file any counter claim and only seek for the action to be dismissed with cost. - DagangNews.com