City Housing & Real Estate Company PLC   City Housing & Real Estate Company PLC had;
  • Recognized Available for Sale (AFS) investments amounting to Rs. 23 million in the absence of evidence to establish the ownership and existence of such financial assets in the financial statements for the year ended 31 March 2017.
  • Recognized the amounts payable to related parties by the company amounting to Rs. 30.5 million and by the subsidiary, Trillium Residencies Ltd amounting to Rs. 144.6 million without establishing the existence and completeness of the said balances.
  • Failed to assess the impairment of the amounts due from related parties for the year ended 31 March 2017 in accordance with the requirements of LKAS 39.
The auditor had qualified their opinion on these issues. Subsequent to inquiries made by SLAASMB, the entity undertook to;
  • Reflect the AFS investments at the amounts for which the company could establish the ownership and the existence, in the financial statements for the year ended 31 March 2019.
  • Reflect the amounts payable to related parties at amounts of their present obligation in the financial statements for the year ended 31 March 2019.
  • Reflect the amounts due from related parties at their recoverable values by recognising an allowance for impairment in the financial statements for the year ended 31 March 2019.
 
Sarvodaya Economic Enterprises Development Services (GTE) Limited  

Sarvodaya Economic Enterprises Development Services (GTE) Limited had failed to classify the teak plantation as biological assets and to measure such assets at fair value in accordance with the requirements of LKAS 41. Accordingly, the biological assets were understated in the financial statements for the year ended 31 March 2017.

The auditors had qualified their opinion on this issue.

Subsequent to the inquiries made by SLAASMB, the entity undertook to carry out a valuation of the teak plantation, and to recognize a gain/loss in the financial statements in accordance with LKAS 41 for the year ended 31 March 2018, based on such valuation. As a result, the net assets of the entity has increased by Rs 20.7million in the financial statements for the year ended 31 March 2018.

 
Asia Capital PLC  

Asia Capital PLC had overstated the net assets in the consolidated financial statements for the year ended 31 March 2016 by Rs. 502 million, resulting from failure to reflect the inventory of a subsidiary, a film stock, at the lower of its cost and net realizable value (NRV) when its NRV was below its cost.

Resulting from this non-moving film stock, the Company had failed to reflect the receivable from the subsidiary (which owned the said inventory) at recoverable amounts.

The auditors had qualified their opinion on these issues.

Subsequent to the inquiries made by SLAASMB, the Company undertook to reduce the carrying value of inventory in the consolidated financial statements for the year ended 31 March 2017 and to recognize the loss on impairment of receivables from the said subsidiary in the separate financial statements.

  Sinhaputhra Finance PLC  

Sinhaputhra Finance PLC had failed to assess the impairment allowance of loans and receivables for the year ended 31 March 2016 in accordance with the requirements of LKAS 39. Accordingly the loans and receivables balance was overstated in the financial statements for the year ended 31 March 2016.

The auditors had disclaimed their opinion on this issue.

Subsequent to the inquiries made by SLAASMB, the entity undertook to recognize the allowance for impairment on loans and receivables in accordance with LKAS 39 and to write off facilities amounting to Rs. 362 million in the financial statements for the year ended 31 March 2017 and write off a further amount subsequent to quantification.

  3. Sri Lanka Transport Board  

Sri Lanka Transport Board (SLTB) had not maintained proper books of accounts for the year ended 31 December 2013 and as a result, the SLTB had failed to prepare its audited financial statements in a true and fair manner.

The auditor had expressed an adverse opinion on these financial statements.

Due to the significance of the issues identified during the financial statements review, SLAASMB issued a Direction to SLTB to take all necessary measures to ensure that proper books of accounts are maintained with the object of presenting a true and fair view of the financial performance and financial position of such enterprise.

 
Sierra Construction (Private) Ltd  

Sierra Construction (Private) Ltd had not reduced the carrying value of receivables from a related party to its recoverable amount in the financial statements for the year ended 31 March 2014.The auditors had qualified their opinion on this issue.

Subsequent to the inquiries made by SLAASMB,the entity undertook to recognize the loss on impairment of receivables from the said related party in the financial statements for the year ended 31 March 2016. This resulted in a decrease in the net assets of the entity by Rs. 117 million.

  Akbar Brothers (Private) Ltd  

Akbar Brothers (Private) Ltd had not presented consolidated financial statements by consolidating the financial statements of its subsidiaries for the year ended 31 March 2015.The auditors had qualified their opinion on this issue.

Subsequent to the inquiries made by SLAASMB,the entity undertook to present consolidated financial statements for the year ended 31 March 2016.

  Adamjee Lukmangee & Sons (Private) Ltd  

Adamjee Lukmangee & Sons (Private) Ltd had not presented consolidated financial statements by consolidating the financial statements of its subsidiaries for the year ended 31 March 2015.The auditors had qualified their opinion on this issue.

Subsequent to the inquiries made by SLAASMB,the entity undertook to present consolidated financial statements for the year ended 31 March 2016.

 
Lanka Cement PLC  

Lanka Cement PLC had not recognized the loss on impairment of its factory buildings and plant and machinery to reflect its carrying value at recoverable amounts in the financial statements for the year ended 31 December 2011. The auditors had qualified their opinion on this issue.

Subsequent to the inquiries made by SLAASMB, the entity undertook to recognize the loss on impairment of the buildings and plant and machinery in the financial statements for the year ended 31 December 2012. This resulted in a decrease in the net assets of the entity by Rs.186 million.

  Austin Gloves (Ceylon) Limited  

Austin Gloves (Ceylon) Limited had not depreciated its buildings and plant and machinery for the year ended 31 March 2013. The auditors had qualified their opinion on this issue.

Subsequent to the inquiries made by SLAASMB, the entity undertook to depreciate buildings and plant and machinery in the financial statements for the year ended 31 March 2014. This resulted in a decrease in net assets of the entity by Rs.101.98 million.

  Almar Trading Company (Pvt) Ltd  

Almar Trading Company (Pvt) Ltd had not presented consolidated financial statements by consolidating the results of its subsidiaries, had not recognized its interest in jointly controlled entity using the proportionate consolidation method or the equity method and had not reduced the carrying value of its current investments to their fair value in the financial statements for the year ended 31 March 2012. The auditors had qualified their opinion on these issues.

Subsequent to the inquiries made by SLAASMB, the entity undertook to present consolidated financial statements, to recognize its interest in jointly controlled entity using the proportionate consolidation method or the equity method and to record its current investments at fair value in the financial statements for the year ended 31 March 2014. Reflecting current investments at fair value resulted in a decrease in net assets of the entity by Rs. 324 million.

  Sri Lanka Cement Corporation  

Sri Lanka Cement Corporation had not presented consolidated financial statements by consolidating the financial statements of its subsidiary, Lanka Cement PLC for the year ended 31 December 2011. Further, the Corporation had not recognized the impairment of the carrying value of the investment in and the long outstanding receivable from the subsidiary to their recoverable amounts in its separate financial statements.The Corporation had also failed to recognize its land held to earn rentals as investment property in the said financial statements. The auditors opinion had been qualified only in respect of the failure to present consolidated financial statements.

Subsequent to the inquiries made by SLAASMB, the Corporation undertook to present the consolidated financial statements and to make the required adjustments in the financial statements for the year ended 31 December 2013. This resulted in a decrease in net assets of the entity by Rs.1.76 billion in the separate financial statements.

 
Shaw Wallace & Hedges PLC

Shaw Wallace & Hedges PLC had not recognised the loss on impairment of the carrying value of investment in its fully-owned subsidiary and had not reduced the carrying value of related party receivables to reflect its recoverable amount in the financial statements for the year ended 31 March 2012. The Auditors had qualified their opinion on this issue.

Subsequent to the inquiries made by SLAASMB, the entity undertook to recognise the loss on impairment of the investment in the subsidiary and to make allowances for doubtful debts from the subsidiary in the financial statements for the year ended 31 March 2013. This resulted in a decrease in the net assets of the entity by Rs. 1.2 Billion.

  Lanka Valliant Developers (Pvt) Ltd.

Lanka Valliant Developers (Pvt) Ltd. had not classified their building held to earn rentals as investment property and had not depreciated property, plant and equipment for the year ended 31 March 2012 and in certain prior years. The Auditors had qualified their opinion only on the issue of non-depreciation of property, plant and equipment.

Subsequent to the inquiries made by SLAASMB, the entity undertook to classify the building held to earn rentals as investment property and to depreciate property plant and equipment in the financial statements for the year ended 31 March 2013. This resulted in a decrease in net assets of the entity by Rs. 56 Million.

  Huejay International Investments PLC

Huejay International Investments PLC had not reduced the carrying value of related party receivables to reflect the recoverable amounts in the financial statements for the year ended 31 March 2012. The Auditors had qualified their opinion on this issue.

Subsequent to the inquiries made by SLAASMB, the entity undertook to reduce the carrying value of the receivables from related parties to its recoverable values in the financial statements for the year ended 31 March 2013. This resulted in a decrease in net assets of the entity by Rs. 30 Million.

 
Entrust Limited

Entrust Limited had not reduced the carrying value of trade receivables to the recoverable amounts in the financial statements for the year ended 31 March 2010. The auditors had qualified their opinion on this issue.

Subsequent to the inquiries made by SLAASMB, the entity undertook and made allowances for doubtful debts in the financial statements for the year ended 31 March 2011. This resulted in a decrease in the net assets of the entity by Rs. 1 Billion.

Samson Rubber Industries (Pvt) Limited

Samson Rubber Industries (Pvt) Limited had not recognised the loss on impairment of the carrying values of investments in subsidiaries in the financial statements for the year ended 31 March 2011. The auditors had qualified their opinion on this issue.

Subsequent to the inquiries made by SLAASMB, the entity undertook to make allowances for impairment of investments in subsidiaries in the financial statements for the year ended 31 March 2012. Impact in the said financial statements was a decrease of net assets by Rs. 34 Million.

Ceylinco Leasing Corporation Limited

Ceylinco Leasing Corporation Limited had not prepared consolidated financial statements consolidating the financial statements of its subsidiary in the financial statements for the year ended 31 March 2010. Further, the Company’s financial statements contained unreconciled differences in the financial statements amounting to Rs. 68 Million. The Auditors had qualified their opinion on these issues.

Subsequent to the inquiries made by SLAASMB, the entity undertook to prepare consolidated financial statements and to reconcile the differences when preparing financial statements for the year ended 31 March 2012.

Somerville Stock Brokers Limited

Somerville Stock Brokers Limited had no evidence for the existence of fixed deposits held in Pan Asia Bank. The auditors had qualified their opinion on this issue.

As a result of the inquiry made by SLAASMB, the entity undertook to make allowance for investments that are doubtful of recovery in the financial statements for the year ended 31 March 2012. This resulted in a decrease in net assets of the Company by Rs. 10 Million.

 

Access Engineering PLC

Access Engineering PLC had failed to recognize a deferred tax asset/ liability in relation to buildings classified as investment property in accordance with the requirements of LKAS 12, in the financial statements for the year ended 31 March 2018.

The auditor had not qualified their opinion on this issue.

Subsequent to inquiries made by SLAASMB, the Company undertook to recognize a deferred tax asset/ liability in relation to buildings classified as investment property in the financial statements for the quarter ended 31 March 2019. As a result, the net assets of the entity has reduced by Rs. 988 million.

Kalpitiya Beach Resorts PLC

Kalpitiya Beach Resorts PLC had failed to recognise impairment of the investment in its associate, Colombo Land & Development Company PLC as required by LKAS 36. Accordingly, the net assets of the entity were overstated in the financial statements for the year ended 31 March 2017.

The auditors had not qualified their opinion on this issue.

Subsequent to inquiries made by SLAASMB, the entity undertook to make the impairment allowance in relation to the investment in its associate, to reflect the investment at its recoverable value in the financial statements for the year ended 31 March 2018. As a result, the net assets of the entity has reduced by Rs. 176 million.

Central Finance Company PLC

Central Finance Company PLC failed to assess the impairment allowance in accordance with the requirements of LKAS 39. Accordingly, the entity had overstated the loans and receivables as at 31 March 2017.

The auditors had not qualified their opinion on this issue.

Subsequent to the inquiries made by SLAASMB, the entity undertook to recognize the allowance for impairment on loans and receivables in accordance with LKAS 39 in the summarized quarterly financial statements for the 9 months ended 31 December 2017. As a result, the net assets of the entity as at 31 December 2017 reduced by Rs.895 million.

Commercial Credit and Finance PLC

Commercial Credit and Finance PLC had incorrectly recognized the income tax liability and corresponding deferred tax asset in relation to loans written-off which had been fully claimed in the company`s tax returns. Accordingly, the current tax liabilities and deferred tax assets were overstated as at 31 March 2017 and 31 March 2018.

The auditors had not qualified their opinion on this issue.

.

Subsequent to the inquiries made by SLAASMB, the entity undertook to make the adjustments in the summarised financial statements for the quarter ended 30th September 2018 in accordance with LKAS 37 and LKAS 12. As a result the current tax liability and the corresponding deferred tax asset of the entity has been reduced by Rs. 1,905 million as at 30 September 2018.

The Finance Company PLC

The Finance Company PLC had failed to measure its investment properties by considering restrictions/characteristics specific to such investment properties in the financial statements for the year ended 31 March 2017.

The auditors had not qualified their opinion on this issue.

Subsequent to the inquiries made by SLAASMB, the entity undertook to reflect the investment properties at appropriate fair values in the financial statements for the year ended 31 March 2019 in accordance with LKAS 40.

Union Bank of Colombo PLC

Union Bank of Colombo PLC had failed to use appropriate loss given default (LGD) rates when estimating the collective impairment allowance for all incurred losses for the loan portfolios in accordance with the requirements of LKAS 39 in the financial statements for the year ended 31 December 2016.

Entity had not recognised financial assets on the basis of similar risk characteristics and had used a common loss given default (LGD) rate for the entire loan portfolio. Further, by using a five year observation period to monitor all default customers, the entity has not used recent observable data of historical loss experience to reflect current circumstances/conditions.

The auditors had not qualified their opinion on this issue.

Subsequent to the direction issued by SLAASMB, the entity agreed to make the required adjustments in the financial statements with the implementation of SLFRS 9 and to disclose the said fact in the interim financial statements for the quarters ending 30 June 2018 and 30 September 2018. As a result of changing the practices in accordance with the standards, the net assets will reduce.

Dankotuwa Porcelain PLC

Dankotuwa Porcelain PLC had recognized a notional asset on a related party arrangement between the Company and its parent, as a financial derivative asset in the financial statements for the years ended 31 March 2014 and 31 March 2015 resulting in overstating its assets and equity.

The auditors had not qualified their opinion on this issue.

Subsequent to the inquiries made by SLAASMB, the entity undertook to reverse the financial derivative asset recognised amounting Rs. 260 million and the corresponding entry made in the equity in the financial statements for the year ended 31 March 2017.

Janashakthi PLC i. Investment Property

Janashakthi PLC had recognised a teak plantation and its land as investment property by measuring at cost in the financial statements for the year ended 31 March 2016.

The auditors had not qualified their opinion on this issue.

Subsequent to the inquiries made by SLAASMB, the entity undertook to separately classify the teak plantation and its land and to measure the teak plantation at fair value less cost to sell in the Company’s financial statements for year ended 31 March 2017.

ii. Disposal of a subsidiary

Janashakthi PLC had recognized the change in parent’s ownership interest in a subsidiary as a result of another subsidiary acquiring the entire shareholding of the aforesaid subsidiary, as profit on disposal of a subsidiary amounting to Rs. 524 million and goodwill amounting to Rs.564 million in the consolidated financial statements for the year ended 31 March 2016.

The auditors had not qualified their opinion on these issues.

Subsequent to the inquiries made by SLAASMB, the entity undertook to recognise the change in parent’s ownership interest in the subsidiary, directly in equity and to reverse the profit on disposal and the goodwill amounting to Rs.564 million recognised, in the consolidated financial statements for the year ended 31 March 2017.

State Printing Corporation

State Printing Corporation had failed to use the projected unit credit method to arrive at the retirement benefit obligation and to provide the retirement benefit obligation for the employees who had less than 5 years of service at the Corporation as at 31 December 2015.

Further, the Corporation had failed to recognize a deferred tax asset/liability for all deductible/ taxable temporary differences as at 31 December 2015.

The auditors had not qualified their opinion on these issues.

Subsequent to the inquiries made by SLAASMB, the entity undertook to use the projected unit credit method to determine the retirement benefit obligation and to recognize the retirement benefit obligation in respect of all employees for the year ended 31 December 2016 and to recognise a deferred tax asset/liability for all deductible/ taxable temporary differences for the year ended 31 December 2016.

Sri Lanka Export Credit Insurance Corporation

Sri Lanka Export Credit Insurance Corporation had failed to account for export credit insurance contracts as either insurance contracts or as financial guarantee contracts in the financial statements for the year ended 31 December 2016.

The auditors had not qualified their opinion on these issues.

Subsequent to the inquiries made by SLAASMB, the entity undertook to recognise the export credit insurance contracts as insurance contracts and to perform liability adequacy test in the financial statements for the year ending 31 December 2018

Span Engineering (Pvt) Ltd

Span Engineering (Pvt) Ltd had not recognised revenue, cost of sales and inventory on construction of apartments based on the percentage of completion method in the financial statements for the year ended 31 March 2016.

The Company had also failed to recognise a provision in relation to the retirement benefit obligation for employees who had less than 5 years of service as at 31 March 2016 and had failed to present the minimum disclosures in relation to the related party transactions entered during the year ended 31 March 2016.

The auditors had not qualified their opinion on these issues.

Subsequent to the inquiries made by SLAASMB, the entity undertook to use the percentage of completion method to recognize revenue, cost of sales and inventory on construction of apartments, to recognize the retirement benefit obligation in respect of all employees, and to provide disclosures in relation to the related party transactions in the financial statements for the year ended 31 March 2017.

Development Lotteries Board

Development Lotteries Board had not recognized a liability of Rs. 1.8 billion in respect of taxes in default in the financial statements for the year ended 31 December 2014. The auditors had not qualified their opinion on this issue.

Subsequent to the inquiries made by SLAASMB,the entity undertook to recognize a financial liability in respect of the taxes in default in the financial statements for the year ended 31 December 2015.

 
Pradeshiya Sanwardena Bank

Pradeshiya Sanwardena Bank had recognized a sum of Rs. 62.8 million as other liabilities by transferring such amounts from retained earnings as staff welfare and staff medical fund without having a present obligation to make such payments to employees. The auditors had not qualified their opinion on this issue.

Subsequent to the inquiries made by SLAASMB, the Bank undertook to reverse this amount from other liabilities by transferring to the general reserve.

 
The Finance Company PLC

The Finance Company PLC had not reflected the investment properties at fair values in the financial statements for the years ended 31 March 2011 and 2012 when the Company’s accounting policy is to use the fair value model. The Auditors had not qualified their opinion on this issue.

As a result of the inquiries made by SLAASMB, the Company undertook to reflect the investment property at its fair value and to provide impairment losses in the financial statements for the year ended 31 March 2013. This resulted in a decrease in net assets of the entity by Rs. 293 Million.

 
Sri Lanka Institute of Textile and Apparel

Sri Lanka Institute of Textile and Apparel, a public corporation had not recognised government grants as income and matched with the related costs in the financial statements for the year ended 31 December 2010. The Auditors had not qualified their opinion on this issue.

As a result of the inquiry made by SLAASMB, the Corporation undertook to recognise the grant as income and to match with the related costs in the financial statements for the year ended 31 December 2012. This resulted in an increase in net assets by Rs. 298 Million.   Multi Finance PLC

Multi Finance PLC, a registered finance company had not recognised the diminution in value of investment securities in the financial statements for the year ended 31 March 2012. This has resulted in an overstatement of net assets of the entity by Rs. 22 Million. The auditors had not qualified their opinion on this issue.

As a result of the inquiry made by SLAASMB, the entity undertook to recognise investments in quoted shares at fair value in the financial statements for the year ended 31 March 2013.

  National Savings Bank

National Savings Bank had not recognised its obligation on defined benefit plan in the financial statements for the year ended 31 December 2011. The auditors had not qualified their opinion on this issue.

Consequent to inquiries made by SLAASMB, the entity undertook to make the adjustments in the financial statements for the year ended 31 December 2012. This resulted in a decrease in net assets of the entity by Rs. 2 Billion.

  Singalanka Standard Chemicals PLC

Singalanka Standard Chemicals PLC, a listed company, had incorrectly recognised the fair value gain on its investment property as a revaluation surplus in the financial statements for the year ended 31 March 2011. The auditors had not qualified their opinion on this issue.

Consequent to inquiries by SLAASMB, the entity undertook to make the adjustments in the financial statements for the year ended 31 March 2012.

 
Agricultural and Agrarian Insurance Board

Agricultural and Agrarian Insurance Board, a public corporation had not made a provision of Rs. 40 Billion in respect of the actuarial present value of pension and social security benefits of its Farmers’ Pension and Social Security Benefit Scheme in the financial statements for the year ended 31 December 2009. The Auditors had not qualified their report on this issue. Consequent to inquiries by the Board, the entity undertook to make the adjustments in the financial statements for the year ended 31 December 2011.

  Colombo Fort Land and Building PLC

Colombo Fort Land and Building PLC, a listed company, had chosen the revaluation model as its accounting policy for land and buildings in its consolidated financial statements for the year ended 31 March 2007. The land and buildings were carried at an amount based on a valuation carried out in 1980. Sri Lanka Accounting Standards require revaluations to be made with sufficient regularity to ensure that the carrying amount does not differ materially from that which would be determined using fair value at the Balance Sheet date. The auditors had not qualified their report on this issue.

As a result of the inquiry made by the Board, the Company undertook to incorporate a recent revaluation of the said property in the financial statements. This resulted in an increase in net assets by Rs. 652 Million.

  Pelwatte Sugar Industries PLC

Plant and machinery of the subsidiary, had been overvalued by Rs. 461 Million in the consolidated financial statements of Pelwatte Sugar Industries PLC for the year ended 31 March 2010. The Auditors had not modified their report in this regard.

Subsequent to inquiries made by the Board, the Company undertook to reverse the overstatement in the consolidated financial statements for the year ended 31 March 2011.

On reversal, the Group’s retained earnings were reduced by Rs. 230 Million and the minority interest was reduced by Rs. 230 Million.

  Coco Lanka PLC

Coco Lanka PLC, a listed company had recognised a gain from change in ownership of a subsidiary, based on an inappropriate computation in the financial statements for the year ended 31 March 2010. This had resulted in an overstatement of profit for the year by Rs. 47 Million. The auditors had not qualified the report in this regard.

Subsequent to inquiries made by the Board, the Company undertook to incorporate the adjustment in the comparative information in the financial statements for the year ended 31 March 2011.

 

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