Audit firm sacked, Hunters response

We refer to the article appearing in the above paper on page 1 of The Daily News Business Section regarding the resignation of Auditors at Hunter & Company Limited, cheque of Rs. 2.5 million drawn in favour of the former chief accountant and news items regarding the remuneration of Directors.

We give below the company version which led to the resignation of Auditors at Hunter & Company Limited, forwarded by Human Resource and Legal Manager Kanishka Palihakkara.

(1) The Board of Directors of Hunter & Company Limited did not "sack" the Auditors. The reason for their resignation was over a dispute relating to a disclosure pertaining to the occupation of a company bungalow owned by a subsidiary company of Hunter & Company Limited by a Director in the Annual Accounts of the company for the year ended March 31, 2007.

The Company has obtained an opinion in writing from the Sri Lanka Accounting and Auditing Standards Monitoring Board (SLAASMB) that a separate and specific disclosure was not required regarding the occupation of a company bungalow by a Director and that it should be disclosed under short term employee benefits according to Paragraph 16 of SLAS 30.

This is the same practice followed by other Companies owning company bungalows e.g. James Finlay & Company.

Ernst & Young did not agree with the opining given by the Sri Lanka Accounting and Auditing Standards Monitoring Board (SLAASMB) and offered to resign as Auditors of the Company which we accepted.

We enclose herewith a copy of the letter given by the Sri Lanka Accounting and Auditing Standards Monitoring Board (SLAASMB) for your information.

(2) With regard to the cheque of Rs. 2.5 million drawn in favour of the former Chief Accountant, the correct position is given below:-

(a) Shareholder by the name of Mr. T.T. Al Nakib has apparently wrongfully obtained a copy of the cheque dated 07/04/2006 (incorrectly stated as 07/04/2004 by him) for Rs. 2.5 million.

The company has reported the theft of this company document to the Pettah Police Station and the matter is currently under investigation.

(b) The cheque of Rs. 2.5 million was issued in favour of the then Chief Accountant, Mr. Mahesh Gajanayake who is a fully qualified Chartered Accountant.

The cheque was signed by the company's then Legal/ Personnel Manager an Attorney-at-Law and our Senior Accountant who is a fully qualified member of the Chartered Institute of Management Accountants.

(c) There is no disappearance of Rs. 2.5 million as alleged by Mr. T.T.Al Nakib in his letter dated 16/06/2008. This cheque was cashed and paid in settlements as an ex-gratia payment to a tenant to obtain vacant possession of a company property which he was in occupation since 1947.

This expenditure was audited and has been included in our administration expenses of Rs. 65,304,009 for the financial year ended 31st March 2007. The accounts were adopted and approved last year during the AGM. There were no questions raised then regarding this matter.

(d) This payment of Rs. 2.5 million is already included in the audited accounts under administration expenses of Rs. 65,304,009 for the financial year ended 31st March 2008.

(3) With regard to the remuneration of Directors the correct position is given below:-

(a) In page 42 of our Annual Report for the year ended 31st March 2007 the company has paid Rs. 40,000 to the Directors, which is a decrease of Rs. 5,000 from the previous year of Rs. 45,000.

You will agree that this is an extremely reasonable amount.

(b) Article 107 of the Company's Articles of Association allows the company to pay much more according to the services provided by the Director and our Directors perform many valuable services to the company.