It said if Nam Cheong continues operations, they could be unable to discharge their liabilities.
Nam Cheong’s auditors Foo Kon Tan said they were unable to conclude whether the use of the going concern basis in the preparation of financial statements is appropriate, an announcement revealed.
Foo Kon Tan said they couldn’t get sufficient appropriate audit evidence to satisfy key assumptions supporting the cash flow forecast related to the 15 shipbuilding contracts worth $226.5m that Nam Cheong had suspended.
As of 31 December 2018, payments worth US$30.4m had been made, and an amount of US$42.6m had been recorded in liabilities based on contractual payment milestones.
Foo Kon Tan said, “No information was available to corroborate management’s representation that all liabilities related to the contracts had been accounted for as at 31 December 2018. We were unable to assess the financial impact of any provision for onerous contracts and/or contingent liabilities that may arise from the default on contractual obligations.”
Thus, the auditor was unable to find alternative means concerning the liabilities in respect of the contracts as at 31 December 2018, and its consequential effect on the cash flow forecast.
According to Foo Kon Tan, if the group and the company were unable to continue in operational existence for the foreseeable future, they may be unable to discharge their liabilities in the normal course of business. Adjustments could also be made to reflect the situation that assets may need to be realised other than in the normal course of business and at amounts which could differ significantly from the amounts at which they are currently recorded in the statement of financial position.
“In addition, the group and the company may need to reclassify non-current assets and non-current liabilities as current assets and current liabilities, respectively. No such adjustments have been made to the financial statements,” the auditor said.
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