The Vanishing Act: When Profits Disappear Post-Audit

Total JSC Investment Development

Construction

– DIC Corp (code DIG) has just published

its reviewed semi-annual financial statement for 2024, which shows significant discrepancies compared to the previously self-prepared report.

After the audit, sales revenue decreased by VND 186.5 billion to VND 833 billion, mainly due to differences in the real estate and construction segments. Accordingly,

DIC Corp’s gross profit also decreased by VND 43.9 billion to VND 108.9 billion.

After deducting expenses and tax deductions, DIC Corp recorded a post-tax profit of VND 21.5 billion in the first half of this year, a decrease of more than 55% compared to the self-prepared report.

Before the holiday, DIG shares experienced a “stormy” trading period, falling for all 5 recent sessions, with strong selling pressure after the market received the conclusion of the Government Inspectorate’s inspection of the process

of equity

and state capital divestment at DIC Corp. After 1 week, DIG’s market price decreased by more than 7%.

Saigon Telecommunications Technology JSC – Saigontel (code SGT) “evaporated” nearly 28% of its post-reviewed profit. The audited semi-annual profit for 2024 decreased to VND 13.41 billion, thus the enterprise has only completed 4.9% of its yearly plan.

A notable change lies in the 12.6% increase in financial expenses, according to Saigontel, this change is due to the additional provision for investment in accordance with regulations. Saigontel is an enterprise within the ecosystem of

Mr. Dang Thanh Tam

, Chairman of the Board of Directors of Kinh Bac City Urban Development Corporation.

Trung An High-Tech Agriculture JSC (code TAR) had its financial statements unqualified by the auditor, with post-tax losses increasing sharply from VND 772 million to over VND 8.2 billion.

Trung An Company stated that the difference before and after

the review

is mainly due to the auditor’s adjustment of accrued interest on fixed-term bank deposits and the adjustment of exchange rate differences in the revaluation of foreign currency-denominated bank loans.

Notably, Southern Financial Accounting and Auditing Advisory Services Co., Ltd. (AASCS) has refused to give a conclusion. AASCS stated that TAR is awaiting the results of verification by competent authorities on the issues mentioned in the conclusion of the State Securities Commission’s inspection

dated September 13, 2023

, including the ownership of 15 million TAR shares in the company’s private placement of shares; the establishment of a private placement registration dossier in 2021; information related to inventory data published in the 2022 financial statements audited with a value of over VND 1,255 billion.

The auditing firm also noted that TAR did not conduct an inventory check as of December 31, 2023, and could not support the inventory check at the time of the audit.

The auditing firm

was unable to perform inventory data retrieval procedures for the inventory value of VND 965 billion as of the end of 2023.

Unlike the above cases, the reviewed semi-annual financial statement of Vietnam Engine and Agricultural Machinery Corporation – VEAM (code VEA) still recorded a profit of VND thousand billion, but was qualified by the foreign auditing firm and noted many issues regarding investments.

In the first half of this year, VEAM recorded a post-tax profit of VND 3,218 billion. Profits from joint venture and associate companies continue to keep VEAM afloat, despite

the core business

of manufacturing agricultural machinery has been inefficient for many years.

UHY Auditing and Consulting Company noted a number of issues regarding the business operations of this enterprise. Specifically, as of June 30, VEAM has not assessed the recoverability of receivables that have been overdue for payment with a value of nearly VND 46 billion (over VND 44 billion at the beginning of the year).

Also according to the

auditing firm

, VEAM has not assessed the net realizable value of stagnant and slow-moving inventory at the Corporation, amounting to nearly VND 72 billion.

Some suspended expenses pending treatment amount to VND 466 billion (including interest expense, depreciation,

land rent

of the foam factory that ceased operations in 2015 and the Bac Kan branch of Matexim JSC are reflected in the prepayment item and production-business-in-progress expense).

The auditing firm also emphasized to the reader

about

the investment project

in the production of medium-sized 4-wheel tractors, which is currently stagnant, and the value of unfinished basic construction may depend on the judgment of the competent authorities in the future.

In addition, VEAM has not completed the procedures for the extension of the project to relocate and build a new small tractor factory approved by the Board of Directors on July 31, while the implementation time is from Q4/2016 to Q1/2023.

The auditing firm noted that, as of the date of the financial statements, the competent authorities have not officially approved the equitization settlement of VEAM’s parent company.