NZAX-listed AFC Group's audit report attracts regulatory scrutiny for a second year

Staples Rodway tagged the accounts with a 'disclaimer of opinion' note.

NZAX-listed AFC Group, which owns food, health and cosmetic businesses, has attracted the attention of the Financial Markets Authority for a second year in a row after its auditor couldn't find enough evidence in the company's accounts to give it a clean bill of health.

Auckland-based AFC, which joined the small-cap exchange in 2015 via a reverse listing of the former Vetilot shell, today said it's received a letter from the market watchdog about statements by auditor Staples Rodway in the audit report for the firm's 2017 annual report.

Staples Rodway tagged the accounts with a 'disclaimer of opinion' note, saying there wasn't enough audit evidence for it to issue an opinion, with "a number of instances where the group's accounting records were inaccurate and incomplete" and "significant deficiencies" in the firm's internal controls. The auditor couldn't satisfy itself through alternative means as to whether the accounts were "free from material misstatements", it said.

"AFC has advised FMA that it is taking its enquiries seriously and will fully cooperate," director Hao Long said in a statement to the NZX. "AFC will advise the market as matters develop."

That's the second year in a row when AFC has attracted the FMA's glare after Staples Rodway issued a similar disclaimer on the 2016 accounts, AFC's first as a listed entity, citing the weak internal controls and use of a staffer's personal bank account to make transactions outside the group's records.

AFC reported a loss to shareholders of $896,704 on revenue of $12.7 million in the year ended March 31, compared to a profit of $474,106 on revenue of $1.6 million a year earlier. Its portfolio of businesses consists of the Longview Estate vineyard, National Dairy Group, a biotech unit producing face masks, and the GoGlobal ecommerce platform enabling Australasian goods to be sold into China.

The NZAX-listed shares last traded at 0.2 cents, valuing the company at $7.3 million.