KUALA LUMPUR (Apr 25): Messrs Afrizan Tarmili Khairul Azhar, the independent external auditor of Lebtech Bhd, has highlighted the group’s focus on related party activities as a material uncertainty related to going concern in its audit of the group’s financial statement for the year ended Dec 31, 2018 (FY18).

“The group conducts its activities during the year mainly with related parties and these have been approved during the group's annual general meeting. This has inadvertently increased the exposure to credit risk and going concern risk.

“For the financial year ended at Dec 31, 2018, the group through its subsidiary company, derived 100% of its revenue from related parties and at the balance sheet date, 98% of group's trade receivables are due from related parties. Our opinion is not qualified in respect of this matter,” it said in a report the group filed to the stock exchange today.

The auditor said the recoverability of receivables from related parties, impairment and allowance for doubtful debts are considered to be a significant risk due to the pervasive nature of these balances to the financial statements and how they can affect the group’s working capital management.

In response, Lebtech’s board said the group has commenced the process to address the issue and is continuously seeking avenues for other projects that are outside the related party transactions.

Lebtech said it is also continuously easing the reliability on related party transactions which includes the settlement of transactions which includes the settlement of transactions between related parties and ensuring that the impact to the company and the group is minimal.

The trading of Lebtech's shares were halted by Bursa Malaysia at 4.07pm today to make way for the announcement. The trading of its shares will resume today. Lebtech shares last settled at 87 sen per share on April 5.