Kosmo's Directors Shocking Fine!!

Fact 1.

Company said it made 109 thousand in its unaudited account for its fiscal year.
Company actually LOST 141 million according to its audited accounts.

Source: here
Blogged here: Kosmo Technology Shocking Deviation Of Accounts

See also : Unaudited and Audited Accounts: UnReal or Real?

What's the major cause of the massive deviation in the accounts? According to the company's own reasoning: here, two major items were 'Impairment Loss of 55.6 million and 'Provision for doubtful debt of 75.9 million' (ps: see the importance not to discount the trade receivables issue?)

Fact 2.

Company had problems in submitting its financial statements: KOSMO TECHNOLOGY INDUSTRIAL BERHAD ("KOSMO" or "the Company") Delay in issuance of 2007 Annual Report

Fact 3.

Back in 2006, it traded as high as 8.50. See chart here.
It last traded at 1 sen

Fact 4.

Kosmo is now delisted!

On today's Edge Financial Daily: Bursa fines Energreen, Kosmo directors over RM900,000

• KUALA LUMPUR: Former Bursa Malaysia Securities-listed Energreen Corporation Bhd’s directors have been publicly reprimanded and fined a total of nearly RM650,000 for failure to submit its financial statements by the stipulated deadlines and failure to provide accurate information to investors.
  
  In a statement on Oct 29, Bursa Securities said it had found Energreen and 12 directors to be in breach of several listing requirements (LRs) while the company was listed on Bursa Securities.
  
  They are former chairman Datuk Seri Prof Dr Ibrahim Saad, who was fined RM2,250, former managing director Ang Sun Beng (a total of RM240,000), Choong Khoong Beng (RM4,500), Ong Wee Meng (RM4,500), Datuk Wira Jamaludin Abd Rahim (RM5,000), former audit committee chairman Badrul Hassan Mohamed Kassim (RM16,000), group managing director Datuk Abd Ghani Ali Kadir (RM274,000), Chin Kuet Lee (RM55,200), former chairman Datuk Seri Mohd Shariff Omar (RM9,050), Datuk Chee Hong Leong (RM13,300), Soh Yew Aun (RM17,000) and Dr Roslan A Ghaffar (RM8,500).
  
  Bursa Securities also publicly reprimanded and fined two directors of another delisted company, KOSMO TECHNOLOGY [] INDUSTRIAL [] Bhd, a total of RM257,300 for similar breaches of LRs. Bursa Securities said the breaches were also committed when the company was still listed.

A fine of a mere 257 thousand??????

Of course the deviation of Kosmo's account equated to 'failure to provide accurate information to investors' and hence it should be fined.

But then... look at the SIZE of the deviation!

It went from a profit of 109 thousand to a loss of 141 million!

A deviaton of 100 times! oO

And the company failed to submit its financial statements.

And the company is now delisted.

And the company went from 8.50 to no more! (Kosmo is now delisted!!!!)

And what do we get?

A fine of 257,300???????

Here's the full text of the announcement on Bursa website.

• Paragraph 9.16(1)(a) of the LR requires a listed issuer to ensure that its announcement is factual, clear, unambiguous, accurate, succinct and contains sufficient information to enable investors to make informed investment decisions.
  Pursuant to paragraph 9.22(1) of the LR, a listed issuer must give Bursa Securities for public release, an interim financial report that is prepared on a quarterly basis, as soon as the figures have been approved by the board of directors of the listed issuer, and in any event not later than 2 months after the end of each quarter of a financial year.
  
  Paragraph 9.23 of the LR states that a listed issuer must ensure that the issuance of the annual audited accounts and annual report by a listed issuer shall be as follows :-
  (a) the annual report shall be issued to the listed issuer’s shareholders and given to Bursa Securities within a period not exceeding 6 months from the close of the financial year of the listed issuer; and
  (b) the annual audited accounts together with the auditors’ and directors’ reports shall, in any case, be given to Bursa Securities for public release, within a period not exceeding 4 months from the close of the financial year of the listed issuer unless the annual report is issued within a period of 4 months from the close of the financial year of the listed issuer.
  
  Paragraph 16.11(b) of the LR states that a director of a listed issuer must not permit, either knowingly or where he had reasonable means of obtaining such knowledge, a listed issuer to commit a breach of the LR.
  
  KOSMO had breached :-
  
  (a) paragraph 9.23(b) of the LR for failing to submit the Company’s annual audited accounts for the financial year ended 31 December 2007
  ("AAA 2007") on or before 30 April 2008. The AAA 2007 was only submitted on 30 June 2008;
  
  (b) paragraph 9.23(a) of the LR for failing to submit the Company’s annual report for the financial year ended 31 December 2007 ("AR 2007") on or before 30 June 2008. The AR 2007 was only submitted on 6 August 2008;
  
  (c) paragraph 9.22(1) of the LR for failing to submit the Company’s quarterly report for the financial period ended 31 March 2008 ("QR 1/2008") on or before 31 May 2008. The QR 1/2008 was only submitted on 30 June 2008;
  
  (d) paragraph 9.16(1)(a) of the LR for failing to ensure the Company’s announcement dated 29 February 2008 on the fourth quarterly report for the financial year ended 31 December 2007 ("QR 4/2007") took into account the adjustments as stated in the Company’s announcement dated 30 June 2008, in particular the adjustments pertaining to additional provision for doubtful debts and impairment loss for development cost.
  KOSMO had reported an unaudited profit after taxation and minority interest of RM109,000 for the financial year ended 31 December 2007 in the QR 4/2007. However, the Company had on 30 June 2008 reported an audited loss after taxation and minority interest of RM141,715,814 in the AAA 2007. The difference of RM141.824 million between the unaudited and audited results for the financial year ended 31 December 2007 represents a deviation of more than 100 times.
  
  Dato’ Norhamzah bin Nordin and Encik Mohamad Nassir bin Mohd Kassim who were the directors of KOSMO at the material time were found to be in breach of paragraph 16.11(b) of the LR for permitting either knowingly or where they had reasonable means of obtaining such knowledge the Company to commit the aforesaid breaches.
  
  They were informed of the audit concerns / issues to make provision for doubtful debt and possibility of impairment of development costs since August 2007 but have failed to demonstrate adequate efforts taken to discharge their duties to :-
  
  (i) address the audit issues pertaining to impairment loss of development costs to enable timely submission of the financial statements in accordance with the LR; and
  
  (ii) ensure that the QR 4/2007 made the necessary provision for doubtful debts and impairment loss on development cost to give a true and fair view of the state of affairs of the Company as at the financial year ended 31 December 2007 and in compliance with paragraph 9.16(1)(a) of the LR.
  
  The finding of breach and imposition of the above penalties on KOSMO and the directors are made pursuant to paragraph 16.17 of the LR upon completion of due process and after taking into consideration all facts and circumstances of the matter including in relation to the directors, the roles and responsibilities of the directors in the Company particularly pertaining to the maintenance and preparation of financial statements.