Response to Report “YuuZoo appoints EY for review” (The Straits Times, October 20, 2017)


Published October 20, 2017

I refer to the Straits Times report titled “YuuZoo appoints EY for review” (October 20, 2017).

Since the company’s initial announcement in July about its intention to appoint an independent third party, it has received further queries from SGX, some of which prompted me to write a further commentary on October 6 in the Business Times. In that commentary, I questioned the company’s responses to SGX’s queries on its (restated) 1Q 2017 and 2Q 2017 results and YuuLog Europe. The terms of reference that have been announced were clearly drafted before the latest queries from SGX and the points I raised in the October 6 commentary. A full review ought to also look at these issues.

The ST report mentions that “YuuZoo in July refuted the various statements and claims in the [media] articles”.  According to the Merriam-Webster dictionary, one meaning of “refute” is “to prove wrong by argument or evidence” or “show to be false or erroneous”.  The Cambridge dictionary defines “refute” as “to say or prove that a person, statement, opinion, etc. is wrong or false”. To be clear, YuuZoo has so far not proven any claim or allegation to be wrong, false or erroneous. On the contrary, it has issued responses that have been contradictory. This is why an independent third party review is necessary.

YuuZoo also said that the latest review means that this is the third time that the same issues will be looked at. According to it, the first review was by its external auditor, RT LLP, on the “company’s business and financials” and it received a clean audit opinion for the financial year ended December 31, 2016. It should be pointed out that an external audit is largely limited to expressing an opinion on the annual financial statements, not on the various disclosures the company has made in SGX announcements, for instance. Further, while it is true that the audit opinion was not modified, there were two emphasis of matter issues and seven key audit matters identified by the auditors. I raised a number of questions about the conduct of the audit and the auditor’s report when I attended the AGM and I wouldn’t say that the answers clearly addressed my concerns about the audit and the company’s financial statements. Further, the previous auditor, Moore Stephens LLP, had issued a disclaimer of opinion on its FY2015 financial statements and it should be borne in mind that there has been three different auditors for three different financial years.

The second “review” is supposedly related to the company’s responses via SGX announcements “to queries over claims and allegations made in public by certain parties”. There is no indication that any external party was involved in this second “review” so this may be a self-review by the company of the claims and allegations.

In summary, this is by no means the third review by an independent third party – the first “review” was a financial audit focused on the financial statements and there is no indication that the second “review” involved any independent third party.

Given the appointment of a Big 4 accounting firm, the wheels have now been set in motion for a proper independent review. I am pleased that SGX has been involved in the appointment of the independent third party and in setting the terms of reference for the review. I hope that the independent third party will talk to former board members, management and employees as part of the review to ensure that the review does not only reflect the views of those who are currently in the company.

 

Mak Yuen Teen

October 20, 2017

 

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