Auditors label CFS future “uncertain”
Independent auditors of Consolidated Financial Services (CFS) have expressed concerns about the company’s future due to legal action currently being taken against three proposed directors.
PricewaterhouseCoopers states in CFS's annual report that there is "inherent uncertainty regarding the continuation as a going concern".
"As a result of the matters described in Note 9(d), there is significant uncertainty whether the entity will be able to continue as a going concern and therefore whether it will realise its assets and extinguish its liabilities in the normal course of business and at the amounts stated in its financial report," PricewaterhouseCoopers says.
Note 9(d) refers to the legal action in the Victorian Supreme Court against prominent financial planners Kevin Bailey of Money Managers, John Randle of Hattersley Maxwell Investment Services and Deborah Rognlien of Rognlien Clark Financial Services.
The action stems from the withdrawal by the three proposed directors of their consent to CFS listing on the ASX. The existing CFS directors, David Craig, Richard Green and Kenneth Russell, are claiming damages from the three.
In light of this court action, the company has written off its non-current assets, valued at $800,731, which were mainly in discretionary trusts.
CFS chairman David Craig told Money Management he was not concerned about the auditors' qualification of the accounts and the legal action was still being pursued.
"We are still an operating company and we are having discussions with various parties about the company," he says.
Craig would not be drawn as to what these discussions were, however, he did say some advisers are still putting money into the company's master trust.
According to the annual report, CFS has paid legal fees of $62,676 during the 2000 financial year and has written off $166,000 of costs connected with the proposed float.
Despite the problems facing CFS, it made a $46,460 operating profit in 2000, which was a considerable turnaround on 1999's $733,940 loss.
Revenue for the last financial year was $558,042, down from the $769,892 achieved in the 1999 financial year.
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