Guidance Note 3 (GN3) company, Lambo Group Bhd, has encountered a qualified opinion from its auditor in relation to the financial statements for the fiscal year ending September 30, 2023 (FY2023). The primary concern revolves around the material uncertainty surrounding the company's ability to continue as a going concern.
The qualified opinion is rooted in significant issues, including the winding up of its subsidiary, Fujian Accsoft, and the misclassification of investments.
According to a filing by Lambo, its external auditor, Messrs. ChengCo PLT, highlighted that Fujian Accsoft was deregistered (wound up) on May 16, 2022.
This led to the unavailability of financial statements from June 1, 2021, until the deregistration date, resulting in the deconsolidation of Fujian Accsoft in the group's financial statement.
A loss on deregistration, totaling RM3.96 million, was incurred.
The absence of comprehensive financial statements during this period poses challenges for auditors to verify the accuracy, completeness, and validity of the comparative figures on Fujian Accsoft's statement of profit or loss and other comprehensive income.
Additionally, the auditor highlighted the misclassification of the group's acquisition of 212.95 million units in cumulative quoted shares of a public-listed company.
This acquisition, representing 23.27% of the company's share capital, was inaccurately labeled as "other investment" instead of being treated as an investment in associate as per MFRS 128.
This misclassification raises uncertainties regarding the classification and measurement of the other investment.
The auditors identified two key audit matters of significant importance in their evaluation of the financial statements for the current fiscal year.
The group's right-of-use assets and lease liabilities, amounting to RM7.3 million and RM7.6 million, respectively, represented a substantial portion of the group's total assets and liabilities.
The assessment of these assets and liabilities involved judgments and estimation uncertainty, particularly in determining lease periods and the discount rate used.
Due to the inherent risk of fraud in revenue recognition, the auditors focused on evaluating the accounting policy, including the performance obligations stipulated in sales.
In response to these concerns, Lambo acknowledges the issues raised and is taking proactive steps to address them.
The board plans to seek professional advice to delve into the matters highlighted in the qualified opinion section of the auditors' report.
Barring unforeseen circumstances, the company anticipates addressing the aforementioned issues related to the qualified opinion in the upcoming financial year.
As of the latest trading session, Lambo's shares increased to 3 sen from 2.5 sen, resulting in a market capitalization of RM46 million.