Hyflux: ‘going concern’ BS/ KPMG again and again

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.

 

Cynical Investor

Cynical Investor blogs at Thoughts of a Cynical Investor

 

 

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3 Responses to “Hyflux: ‘going concern’ BS/ KPMG again and again”

  • another 100 years:

    //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.//

    alamak. not so easy lar. some white jokers in sinkie land could argue long-term horizons leh – for going concern to stay true perhaps for another 100 years to 1000 years leh ??

    got people lend money, still going concern lor ? got no ah kong funds to support and finance, then not going concern if businesses bad lor ???

    not true meh, most businesses run on being financed by debts lar ??? even banks borrow from deposits and issuing debt papers lar. that’s the reason for the existence of legal ah longs and financing institutions lar and so-called investors ???

    again caveat hor : opinion lar not fact lar.

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  • LIONS:

    PLS SEND KPMG TO THE AGO?

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  • Harder Truths:

    None of these so-called bullshitters are for real. They are just there to rubber stamp for a big fee so you – the ultimate loser – can believe someone has actually done the work properly.

    Moody’s ratings for financial houses is fake. So were the audits for Freddy and Fernie Mac before they collapsed. Boeing’s testing certification is faked. Who does the audits for TH/GIC then?

    Never believe these highly-paid gangsters. If you want to keep what you earn do your homework and never trust what they tell you.

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