Auditor denies to validate Fu-Wang Ceramic's purchases, inventories

After its sister concern SS Steel, publicly-traded tiles manufacturer Fu-Wang Ceramic Industry has also been embroiled in audit issues in fiscal 2021-22.

The Taiwanese venture – taken over by Bangladeshi entrepreneur Javed Opgenhaffen and his family five years back – showed over Tk183 crore in inventories and Tk86 crore of purchases in fiscal 2021-22.

But after the year-end audit process, its auditor Mabs and J Partners denied confirming the figures, which are in manifolds of the company's annual turnover, due to a lack of documentary evidence and the haphazard situation of physical goods.

The company posted Tk84 crore in annual sales and a net profit of Tk3.14 crore for FY22, which is the lowest in eight years.

According to the auditor's qualified opinion published by the Dhaka Stock Exchange (DSE), the auditor could not verify the inventories the company showed in its latest annual financial statement "due to a lack of proper schedule, documents, reports and haphazard position of inventories."

Contacted, Fu-Wang Ceramic Managing Director Javed Opgenhaffen denied any shady financial disclosure.

"What has been disclosed in the financial statement is completely true," he claimed.

"Inventories included our raw material clay stored over a wide 15 bigha area and it was the auditors' job to measure and verify. We do not know why they did not do it."

His team failed to show the auditor the documentary evidence against the disclosed purchases of raw material worth Tk77.9 crore, spare parts worth Tk4.5 crore and the packaging material of Tk3.99 crore over the one fiscal year, said the auditor in its qualified opinion that is considered as auditors red flag for the users of financial statements.

Fu-Wang Ceramic Chief Financial Officer Ahmed Monabbi claimed due to the short-lasting audit inspections every document was not callable at once. Still, subsequently, they would manage to provide everything to the regulators.

SS Steel, the sister concern of Fu-Wang Ceramic, failed to authenticate its 2020-21 fiscal year's Tk419 crore sales, Tk306 crore purchases, and nearly Tk18 crore payments as no document against the transactions were presented before the auditor that resulted in a qualified opinion last year.

SS Steel Company Secretary Md Mostafizur Rahman then, in a similar fashion, claimed that due to the pandemic situation they could not produce all the documents at once and would fill the documentary gaps later.

However, SS Steel is yet to announce its FY22 financials as the board meeting scheduled to be held on 23 November has been postponed.

Javed Opgenhaffen, also the chairman of SS Steel, still claimed that both his companies are professionally run and their disclosures are authentic.