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THONG GUAN INDUSTRIES BERHAD

15

  • iii.

    Other processes

    • a)

      Procurement of insurance policies to ensure that the Group is sufficiently covered against any mishap that

will result in material losses to the Group. Weaknesses in Internal Controls That Result in Material Losses

On 30 April 2008,the Board of Directors announced to the Bursa Malaysia that there was a deviation of RM 8.8 millions (42.4%) between the goup’s profit after taxation as announced in the un-audited fourth quarter results ended 31 December 2007 compared to the audited results for the financial year ended 31 December 2007 as summarised below:

Description

RM’000

%

a)

Correction of accounting error – The amount was due to a foreign currency translation error recorded in November 2007 which was subsequently discovered when payment was received for the invoice in March 2008.

4,965

23.8

b)

Under provision for taxation - The increase in provision for taxation of RM 0.947 million was due to the advice of the Company’s tax agent that certain tax incentives initially thought to be available to a subsidiary of the Company could not be claimed.

947

4.5

c)

Overstatement of inventory – The adjustment is in respect of an overstatement of inventory in one of its subsidiaries in China.This was determined after an independent and detailed physical count which was carried out on 28 March 2008.

2,851

13.7

Others

79

0.4

8,842

42.4

The Board recognises the need to improve the Group’s internal controls and plan to take measures to strengthen the Internal Audit function course. A structured Risk Management update shall also be initiated and more concerted effort will be undertaken to mitigate the financial and operational risks that may have resulted in the above deviation of financial results announced.

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