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Posts Tagged ‘ACRA’

Hyflux: Sue those with money

In Accounting, Corporate governance on 16/04/2019 at 10:47 am

This means going after the directors and mgrs (Remember MD Oliver Lum has a Dalvey Rd house and her motorcycles), the auditors, and the valuers of Tuaspring.

I was inspired to suggest this after reading the very droll Mr Lombard

Get claws in to auditors

A probe into Grant Thornton’s audit of collapsed contractor Interserve suggests a scandalous anomaly, and a possible deterrent. Advisers to the company were paid more in fees than its market value before administration. It happened at Carillion and Patisserie Valerie, too. If fees could be clawed back in the event of shareholders being wiped out, it might improve the quality of both audits and advice.

Here’s why the directors, mgrs and auditors could be liable:

So in the light of the loss in 2017, it’s reasonable to ask why the book value of Tuaspring was not looked at again before the auditors blessed the 2017 accounts in March 2018,

Hyflux directors, mgt & auditors kooning from 2016 onwards?

Here’s why the valuers are worth shaking down.

When Hyflux was first awarded the Tuaspring project in 2011, based on the financial model which modeled the cashflow projections from the project, the power plant was expected to generate profits from day one. This financial model was audited by an external financial model auditor and furnished to the offtaker. In 2013 when Tuaspring was able to secure a non-recourse project financing loan, the lender commissioned an independent market study of the project which arrived at similar conclusions supporting the book value of approximately SGD1.4 billion.

Hyflux fiasco shows why “book value” is BS

But

“This valuation [Done in 2018 which showed that the book value was BS: my comment]  is based on the most recent market study conducted by K4K Training & Advisory SL, the same consultant who did a similar market study in 2016 (which supported the valuation then). The view taken in this most recent market study is significantly different from that in 2016 due to . . . the losses in the electricity market in the recent years and the projected lower spark spreads for the remaining concession period.”

Noting that the current valuation is “significantly lower” than that adopted in 2016, Hyflux said that it intends to commission a further valuation to be undertaken by a different valuer for the purposes of finalising the 2018 full-year financial results.

“As the carrying value is a reflection of the current depressed market, in the event that the Singapore power market recovers to provide generation companies with sufficient spark spread margins, the valuation might then be revised.”

Hyflux as reported by BT

Hopefully, ACRA do more than watching (but don’t hold yr breath): Hyflux: “going concern” BS/ KPMG again and again.

 

Hyflux: “going concern” BS/ KPMG again and again

In Accounting, Corporate governance, Financial competency on 08/04/2019 at 10:46 am

The constructive, nation-building media report that the Accounting and Corporate Regulatory Authority (Acra) is watching the Hyflux fiasco closely. And this is newsworthy? It’s ACRA job to investigate, not watch, cock-ups like these.

But then being a regulatory bureaucrat is one good way of getting a very expensive free lunch. The other is being a minister.

ACRA is watching because Hyflux investors (who never bothered to read the issue documents or Hyflux’s financials) are asking why Hyflux’s auditor KPMG failed to flag the risks of Hyflux earlier. Like real given they didn’t bother to read: Hyflux: Don’t cry for the investors. So even if accounts were qualified, what could the investors? Only KPKB earlier because the shares etc would have been suspended on a haram certification.

Seriously, this “news” reminded me that UK’s accounting watchdog Financial Reporting Council (FRC) made public, several weeks ago, plans to make auditors apply more robust checks when reviewing whether a company was likely to continue operating in response to several high-profile corporate failures that have undermined confidence in business.

Two recent UK corporate failures were similar in nature to what happened at Hyflux.

To recap: KPMG on 22 Match 2018, said the 2017 accounts were halal, but on 22 May 2018, the company sought court protection from its creditors: Did Hyflux’s auditors mislead? and Hyflux directors, mgt & auditors kooning from 2016 onwards?.

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Hyflux’s BS explanation:

“When KPMG issued an unqualified opinion on the full year results for the Hyflux Group in March 2018, there were no events or conditions that individually or collectively, cast significant doubt on the going concern assumption as at the balance sheet date of 31 December 2017, or at the audit report date of 22 March 2018.”

Then according to Hyflux, everything went wrong when in May, there was a run on Hyflux by its banksters. Because of its bad (and unexpected?) Q12018 results announced on 9 May: “certain financiers expressed concerns over their ability to continue with existing credit exposures to the group.”* They tot halal Hyflux had transmuted into haram Hyflux.

Hyflux on investor losses: “Not our fault, banksters at work”

Hyflux should have remembered

A Banker Lends You His Umbrella When It’s Sunny and Wants It Back When It Rains

(Often attributed to Mark Twain)

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Coming back to the FRC: it wants auditors to do more when reviewing whether a company was a “going concern” and likely to remain in business for another year, highlighting the collapses of construction group Carillion (auditor KPMG) and retailer BHS as key factors behind the decision.

It said auditors should challenge corporate management teams “more robustly” and “thoroughly test” the adequacy of the evidence put forward by company directors. It also wants auditors to say whether they believed management assessments with respect to going concern judgments were appropriate, and to explain how they came to that conclusion.

It said the collapse of BHS, Carillion, and failed UK bank HBOS during the financial crisis, had “brought into question why such companies had clean auditor’s opinions, which included no warnings that the companies were at risk of collapse”. Sounds like Hyflux?

Mike Suffield, the FRC’s acting executive director of audit regulation

Recent corporate failures and the FRC’s own enforcement work has shown the existing [going concern requirements] needs to be strengthened.

Our proposals will significantly expand the work required of auditors — however, we believe this to be an important investment in the quality of the work that underpins what is a cornerstone of audit.”

Karthik Ramanna, professor of business and public policy at the University of Oxford’s Blavatnik School of Government

The implication of these proposals is that auditors missed key red flags due to weak auditing standards. The real issue isn’t that the auditors need more technical guidance but rather that they are conflicted in their dual roles as watchdog and consultant.

(Emphasis mine)

Hyflux shareholders should be angry to learn that KPMG (their auditor which audited Carillion and HBOS), said it had (in the UK) already increased how much information it provided in audit reports this year by highlighting the key risks the firm considered when “carrying out work on the going concern basis of accounting”.

KPMG added: “It is vital that as a profession, we examine all possible avenues to improve public trust both in audit, and the wider corporate landscape. We welcome the FRC’s consultation into the standards governing our work around going concern, and how we report on that work to shareholders.”

Will KPMG also provide this info for us natives for SGX listcos?

Btw, KPMG is the forensic auditor whose report the Aljunied Town Council is relying on in take the Wankers Three to the cleaners: “Peanuts”: WP MPs’ liability. KPMG is also Temasek’s auditor: TOC misrepresents facts yet again.