A public listed company and its two subsidiaries filed a multi-million ringgit suit against accounting giant Arthur Anderson & Co today for alleged negligence and breach of duties relating to the three companies' 1998 and 1999 audit reports.

CSM Corporation Bhd, CSM Capital Sdn Bhd and CSM Properties Sdn Bhd filed the suit at the Kuala Lumpur Civil High Court in Wisma Denmark, Kuala Lumpur, through their lawyer Edmund Bon of Messrs Chooi & Co.

The companies claimed the international public accounting firm had caused them huge financial losses by failing to exercise reasonable professional care, skill and diligence in performing the audit on their 1998 and 1999 accounts.

They added the firm, among others, had failed to adhere to the generally accepted auditing and accounting policies, practices and principles in Malaysia and also failed to form a proper opinion as to whether there had been any breach of the Companies Act 1965 in the companies' million-ringgit business transactions.

The companies are seeking damages amounting to RM347.5 million for the alleged breaches of contract, fiduciary duties and statutory duties; and negligence committed by the accounting firm.

In a 92-page affidavit, the companies claimed due to the defendant's negligence, CSM Corporation (formerly known as Cold Storage (M) Bhd) was constrained to undertake an asset write down exercise of RM347.5 million in the year 2000 which resulted in a shareholders' deficit of RM135.86 million and recorded a net loss of RM360.55 million for that year.

They added the defendant's negligent acts had also led CSM Capital (formerly known as Inanam Credit Sdn Bhd) to undertake an asset write down of RM153.3 million resulting in a shareholders' deficits of RM143.15 million and recorded a net loss of RM153.7 million for the year 2000.

"While the third plaintiff had to undertake an asset write down of RM1.6 million resulting in shareholder's deficit of RM1.6 million and recorded a net loss of similar amount for the year 2000," read the affidavit.

Cover-up

The companies claimed the losses and damages incurred could have been avoided, reduced or recovered if the defendant exercised reasonable professional care, skill and diligence expected of a firm with such high standing and reputation.

"Had the impugned transactions and irregularities been immediately and properly reported by the defendant in the annual reports, immediate safeguards would have been taken to avoid incurring further loss," they said.

They also accused the firm of attempting to cover up or justify their negligence and breaches committed in the previous annual reports by producing the 2000 Audit Report.

In reliance of the 1998 and 1999 reports, the first plaintiff had paid RM 2.96 million of dividends to its shareholders in 1998 which would not have been done if the irregularities in the business transactions were stated in the reports.

The alleged misreporting also led the second plaintiff to recognise pre-tax profits of RM5.6 million for the year which and had to part with RM1.5 million income tax on the said profits.