Independent auditor unable to provide opinion on GSL’s 2009 financial statements

The independent auditors engag-ed by Guyana Stores Limited (GSL) to audit its 2009 financial statements were unable to express an opinion on them because of the absence of adequate documentation and procedures.

The year 2009 is the last that GSL has produced an annual report for. GSL had been divested by the Guyana Government in 2000 to businessman Tony Yassin but the company remains of public interest as the National Insurance Scheme (NIS) has a substantial shareholding while employees also have shares as a result of an employee share ownership plan.

Tony Yassin
Tony Yassin

According to the report seen by Stabroek News,  the independent auditors Ram and McRae in the January 5, 2012 report found that the company was unable to present sufficient documentation to substantiate the amount and valuation of inventories.

“There were no satisfactory  alternative audit procedures which we could have used to satisfy ourselves as to the reasonableness of inventories which is shown in the financial statements at $403,314,000”, the report said.

Further, GSL did not define the provision for unearned interest in relation to hire purchase receivables.

“There were no satisfactory alternative audit procedures which we could have used to satisfy ourselves as to the reasonableness of accounts receivables which is shown in the financial statements at $241,073,000”, the report stated.

Adequate supporting documents were also not provided for audit verification of the accounts payable which is listed in the financial statements at $644,727,000.

Ram and McRae also found that no fixed assets register was maintained by the company in relation to property, plant and equipment  of $38,880,000.

The GSL group was also found by Ram and McRae to be in breach of the Companies Act 1991, the Securities Industry Act 1998 and the Corporation Tax Act: 81:03.

“Because of the significance of the matters discussed in the preceding paragraphs we do not express an opinion on the financial statements…”, Ram and McRae said.

Such a ruling by the auditors would call into question the basis of the financial statements submitted for audit.

According to the company’s financial statements for the year ended 2009,  the loss after taxation for the year 2009 was $192.3M compared to another loss of $148.9M in the preceding year. Sales for the group in 2009 were $721.9M compared to $786.1M in the previous year. Expenses for 2009 totalled $303.9M compared to $274.9M in the previous year.

Of this amount, $20.9M  was listed as a financial charge. Taxation for the group was $15.8M for 2009 compared to $17.4M in the previous period.

The report listed the directors of GSL as M. Yassin, M. Lall, S. Kassim, C. Annand Persaud, H. Rodney and K. Narine.

The report of the directors said that the directors hold no interest in the company in their personal capacity.  It said that Director Yassin is the principal shareholder of Royal Investments Inc., the parent company.

Under the heading Directors’ contract, the report of the directors said that the company received an unsecured loan from Yassin on January 1st, 2002 for $122,813,616 repayable by December 31, 2003 with interest of 19.25% per annum which was applied to settle balances due to suppliers of $107,319,378 and interest thereon of $15,494,238. The Directors’ Report said that at the end of the period, the loan amount and the interest on it remain unpaid.

Under the heading, Share-holders’ Contract, the Directors’ Report stated that the company had also entered into an agreement with Royal Investments Inc. (Yassin’s company) for the provision of management and consultancy services. Under this agreement, the fee payable is as follows: 3% on sales of $100m and less, 4% on sales above $100m and up to $150m, 5% on sales above $150m and up to $200m, 0.5% on every $50m above $200m on incremental sales.

 

The substantial shareholders were listed as Royal Investments with 70% and the National Insurance Scheme with 10%. The remainder would be held by employees and others.

No dividends were proposed for the year 2009 by the company.

GSL was incorporated in 1976 following the nationsalisation of the sugar industry. It had previously been the pre-eminent department store in Guyana, Bookers.

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