DSE finds Oimex Electrode’s financial reports ‘fabricated’

Mostafizur Rahman | Published: 21:59, Jan 24,2021

 
 

The Dhaka Stock Exchange has found a number of irregularities, including falsification of financial statements, poor recordings, mismanagement and auditors’ negligence in Oimex Electrode Limited.

A DSE inspection team visited the Oimex’s factory on December 7, 2020 and its head office on December 27 following a Bangladesh Securities and Exchange Commission’s instruction to conduct an inspection in the affairs of the company.

The team submitted its report to the BSEC on January 6.

‘After visiting both the factory and the head office of Oimax Electrode, the inspection team said that the total financial statements prepared by the company are materially misstated,’ said the DSE inspection report.

The DSE team found that the company overstated its sales, inventories, value of PPE and purchase of raw materials significantly, which is a violation of the International Accounting Standards and the Securities and Exchange Ordinance, 1969.

The company did not provide information or documents as required by the inspection team, the report said.

‘In this circumstance, prompt and strict regulatory measure should be taken by the BSEC against the directors and management of the company for the greater interest of the capital market,’ the report suggested.

Earlier in July 2017, the BSEC approved the company’s initial public offering worth Tk 15 crore despite DSE reservations.

Oimex Electrode chief financial officer Faruk Hossain said that the company provided all documents the DSE team asked for.

He rejected the allegation of falsifying financial reports and said that they did not overstate anything in the reports.

Faruk said that the company applied for raising Tk 12.5 crore through issuing preference shares but later withdrew the application.

The DSE inspection report said that as per the company employees’ statements, no auditor of the company had ever visited the factory after its IPO.

So, the auditors had completed their audit on the basis of documents received from the head office, it said.

‘Despite financial statements of the company are materially misstated, the auditor did not give any qualified opinion for falsifying financial statements, which is a violation of accounting standards and securities rules,’ it said.

Chartered accountant ARTISAN was the statutory auditor of the company for the last two financial years.

The DSE in the inspection report said that the company had recognised sales of Tk 43.43 crore, inventories of Tk 28.36 crore and purchase of raw material of Tk 21.77 crore for the year ended on June 30, 2020.

After assessing ledger on sample basis for the month of January and November 2020, the DSE team found that the company overstated inventories by 310.22 per cent, sales by 66 per cent and raw materials by 40.59.

The company overstated the value of property, plant and equipment as the addition of the PPE as on June 30, 2019 was Tk 9.13 crore, but the company officials said that they did not purchase any fixed asset from external sources while internal purchase was not Tk 9.13 crore, the DSE report said.

The company also overstated financial expenses and wastage hugely.

MA Maleque, managing director of the company, confirmed the DSE that they did not maintain any record or registered book in the factory offices, which could lead to the misstating in the reports.

BSEC executive director and spokesperson Rezaul Karim told New Age that the commission was assessing the matter and would take action accordingly.

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