by Paul McBeth
The auditor warned Lombard Group may have been optimistic in valuing its $2 million holding in Lombard Finance & Investments, the group's primary subsidiary that owes some 4,400 investors around $127 million, at $340,000, as the investment is "contingent on future indeterminable events." It was unable to "verify and substantiate" the company's opening balances due to the lack of information for Lombard Finance.
In a heading entitled "Fundamental uncertainty", the auditor said if any of the identified risks occurred, "the validity of the financial report having been prepared on a going concern basis will be brought into question, as assets may need to be realised for other than in the amounts at which they are currently recorded.
"In addition, the group and the company may have to provide for further liabilities as they arise."
Like previous auditor KPMG, Auditors on London was unable to secure access to records for Lombard Finance. In the 2008 audit, KPMG said the validity of Lombard continuing as a going concern depended on the "successful conclusion" of extending its payment terms, resolving legal claims, and meeting its target performance levels.
The finance company was put into receivership by its trustee Perpetual Trustee in April last year.
Last week, Lombard entered into a conditional agreement with Australian Consolidated Insurance Ltd. to give the insurer 90% ownership, and allow it to use it as a shell to list on the New Zealand stock exchange.
The reverse takeover is subject to regulatory and shareholder approvals, and the mortgage book for Lombard will be put into a special purpose subsidiary which will take responsibility for any outstanding liabilities.
Lombard faced suspension from the NZX if it failed to provide its annual report by Tuesday.
ACIL is an insurance and underwriting agency that manages some $102 million of insurance premiums from offices in Perth, Sydney, Melbourne, Brisbane, Auckland and Hamilton, and is unlisted in Australia. It recently acquired Hamilton-based underwriter Classic Car Insurance.
Paul is a staff writer for Good Returns based in Wellington.
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