KUALA LUMPUR (June 2): Independent directors of Serba Dinamik Holdings Bhd may hold the clue on the audit issues raised in the company recently, which could help minority shareholders make an informed decision amid a heavy sell-off in the counter this week.

This comes after Serba Dinamik's external auditor KPMG directed its concerns over the company's audit issues to the independent directors, which was lauded as the right move among the investing fraternity.

In a statement yesterday, the Malaysian Institute of Corporate Governance (MICG) said the silence of Serba Dinamik's independent directors and audit committee raised further questions on the audit fiasco.

"More light is needed on the audit committee's findings and its recommendation to the board. These should be revealed to shareholders at the EGM (extraordinary general meeting)," said MICG.

The institution also pointed to the suggestion by the company's executive that the independent directors were not able to explain the audit findings raised by KPMG.

"For the executive to suggest that the independent directors are unqualified to understand the accounting issues appears to attack the competence of the company's audit committee, which is composed of independent directors.

"Criticising the auditors for addressing their concerns to the company's independent directors is perverse, therefore, when that is exactly to whom the auditor is expected to direct any concerns," said MICG.

Serba Dinamik's independent directors include KPMG Malaysia's former partner Hasman Yusri Yusoff, Nationwide Express Holdings Bhd's former managing director Rozilawati Basir, as well as accountant Sharifah Irina Syed Ahmad Razi and lawyer Tengku Datuk Seri Hasmuddin Tengku Othman.

Rozilawati and Sharifah Irina are members of the company's audit committee alongside non-independent non-executive director Datuk Abdul Kadier Sahib and senior independent non-executive director Hasman Yusri.

Serba Dinamik's market capitalisation has shrunk by neary 48% or RM2.89 billion since its shares resumed trading on Monday as its share price has plummeted to 83.5 sen from RM1.61, no thanks to the issues pertaining to its statutory audit.

A week ago, Serba Dinamik announced it wanted to commence an independent review on the audit findings that were flagged by KPMG without revealing details.

The company broke its silence three days later. First it announced that its second largest substantial shareholder Abdul Kadier, who holds a 15.96% stake, had called for an EGM and proposed to remove KPMG as the auditor.

Subsequently, Serba Dinamik announced the audit issues and its response to those queries to its external auditor.

The audit issues were related to several sales transactions, receivables and payables, including its IT contract abroad to the tune of over RM3 billion.

At the press conference last Saturday, the company said the board had requested for KPMG's resignation prior to Abdul Kadier's request. Its group managing director and chief executive officer Datuk Dr Mohd Abdul Karim Abdullah also questioned KPMG's decision to go to the independent directors first instead of the management.

Mohd Abdul Karim is the company's largest shareholder, holding a 27.06% stake. He bought five million shares on Monday. The other substantial shareholders, including Employees Provident Fund (10.18%), Amanah Saham Nasional Bhd (6.15%), Kumpulan Wang Persaraan Diperbadankan (5.25%), and The State Financial Secretary Sarawak (3.4%).

When asked about the reaction of independent directors to KPMG's findings, Serba Dinamik executive director Datuk Syed Nazim Syed Faisal said those discussions were "technically private" and that the executives were not able to present what transpired during the meeting.

Touching on the matter, MICG said: "The fact that an EGM was called for this purpose by a non-independent director (albeit non-executive) who appears to be in agreement with the managing director's (the executive) position, raises conflict concerns.

"It is MICG's view that in this scenario, none of the directors who are shareholders, should vote in the matter, irrespective of whether they are executive or non-executive, independent or non-independent," it said.

All said, in order for minorities to make an informed decision, the independent directors should step forward to let the minorities know what transpired during the meeting with the auditor, and whether they agree with the clarification by the company on May 28.

The Minority Shareholders Watch Group has also urged the company's minority shareholders to vote against the resolution to remove KPMG as its auditor in the upcoming EGM.

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