Builders' supplier admits error over accounts auditing
Listed building materials distributor E. Bon Holdings says its final results were mistakenly termed 'audited' despite its auditors not signing off on its books.
E. Bon, which sells materials to building contractors working for some of the biggest property developers in Hong Kong, said in a statement yesterday that its auditors Grant Thornton had 'kindly pointed this error out'. The company was 'grateful for their professionalism', it said.
The company was now working closely with its auditors to finalise two outstanding issues and any other issues that may be raised by the firm, E. Bon added. Trading in it shares was suspended yesterday pending the statement.
The two outstanding issues were the estimated provision of inventory and the recoverability of unpaid customer bills, E. Bon said yesterday.
On June 22, E. Bon published its results for the 12 months to March 31, in which a section about the 'scope of work of the auditors' contained contradictory statements.
It said the 'preliminary' results announcement had been 'agreed' by Grant Thornton 'to the amounts set out in the group's audited consolidated financial statements.'
This was followed by: 'The work performed by the auditors in this respect did not constitute an assurance engagement in accordance with Hong Kong Standards on Auditing.' No explanation was given.
According to Hong Kong Institute of Certified Public Accountants executive director Chris Joy, 'assurance engagement' means an auditing assignment. 'There is nothing to indicate professional standards have not been complied with, but looking at the sequence of announcements, it appears the company has issued the annual results without the auditor feeling comfortable with the content of the results announcement, and the two parties subsequently seem to have discussed how to resolve their differences,' he said.
Company secretary Benthony Ip Fu-wa told the South China Morning Post that the disagreement stemmed from Grant Thornton's change of managing partner after its merger with a mainland practice.
'We have been in the business for many years with pretty much the same customers and are comfortable with our accounting practice, but they wanted to obtain more information,' he said. Grant Thornton declined to comment.
A Hong Kong Exchanges and Clearing spokesman declined to comment on the case. According to listing rules, the content of a preliminary announcement of results published by a listed firm should be 'agreed with its auditors'. Where the auditors' report on a listed firm's annual financial statements is 'likely to be qualified or modified', details should be provided.
E. Bon's row with its auditors follows accounting problems in the past year at various mainland private enterprises listed in Hong Kong, many of which saw their auditors quit.