The saga of the fraud/financial irregularities has not ended as the final report by Moores Rowland Risk Management Sdn.Bhd (MRRM) has been completed and submitted by the submitting merchant bank, CIMB Investment Bank Berhad on 16/6/2007 on behalf of Transmile Group.
To simply sum it up, the report seems to indicate a massive cover up of
“ overstatement of fictitious revenues and attempting to cover up the trade receivables by “ concocting” the repayment vide
 
(a)     transferring part of trade receivables to fixed assets ( being purchase of fixed assets)
(b)     made as if the trade receivables have paid the Transmile but in reality the monies are actually from the Transmile itself. “ and
“to a small extent overstating the valuation of investment in related companies where due to impairment should be written down to its actual value.”
Read on the actual details extracted directly and completely from Bursa Saham’s website :

Contents:
On 30 May 2007, the Company announced the findings of the special audit by Moores Rowland Risk Management Sdn Bhd (”MRRM“) as set out in the interim report issued on 25 May 2007. On 14 June 2007, MRRM released the final report on the special audit (”Final Report“), a copy of which was submitted to the Securities Commission on the same day.

In line with the objective of the Board of Directors of Company (”Board“) to be transparent in respect of the findings by MRRM, the Board wishes to announce the findings of MRRM as set out in the Final Report.

1. FINDINGS OF SPECIAL AUDIT

(a) Overstatement of revenue
As announced on 30 May 2007, in the interim report MRRM reported that:

• In the financial year ended 31 December 2006, invoices were issued and recorded for purported services to 20 companies totalling RM333 million and representing 30% of the consolidated revenue for the financial year ended 31 December 2006 as stated in the unaudited consolidated results announced on 15 February 2007; and

• In the financial year ended 31 December 2005, invoices were issued and recorded for purported services to 19 companies totalling RM197 million and representing 36% of the audited consolidated revenue of the Company for the financial year ended 31 December 2005.

MRRM extended its audit to the financial year ended 31 December 2004, where revenue has been recorded for purported services to the same companies mentioned above (”Identified Companies“) totalling RM95 million, representing 27% of the audited consolidated revenue of the Company for the financial year ended 31 December 2004, for which there was an absence of documentation for MRRM to carry out further tests.

In addition, in the Final Report, MRRM highlighted that the amount of revenue misstatement of RM197 million for the financial year ended 31 December 2005 is reduced by approximately RM3 million to RM194 million.

(b) Settlement of trade receivables
MRRM has reported that the amounts owing by the Identified Companies to TGB and its subsidiaries (”TGB Group“) arising from these invoices were recorded under trade receivables and were subsequently reduced primarily in the following manner:

(i) Property, plant and equipment
Transfer from trade receivables as additions to property, plant and equipment pursuant to, amongst others, purported purchases of property, plant and equipment paid on behalf of the TGB Group, by the Identified Companies as follows (”PPE Additions“):

Financial year ended 31 December	Rm million
2004	66
2005	214
2006	61
Total	341

Further investigation into the PPE Additions revealed that the suppliers’ invoices relating to the payments purportedly made on behalf of TGB Group by the Identified Companies appear to have been fabricated and/or the PPE Additions are not substantiated with documentation. Therefore there appears to be no basis for the addition of RM341 million to the property, plant and equipment of the TGB Group.
(ii) Cash receipts
Receipt of monies from the Identified Companies (”Cash Receipts“) as
follows:

Financial year ended 31 December	Rm million
2004	0
2005	6
2006	49
Total	55

In respect of the Cash Receipts, MRRM reported that the monies were paid into TGB Group’s bank account maintained with a specific Kuala Lumpur bank branch (”Identified Bank Branch“), out of the accounts of the Identified Companies maintained with the same Identified Bank Branch.

In 2006, whilst the TGB Group has received RM49 million from the Identified Companies, MRRM further noted that in October, November and December 2006, TGB Group made 92 payments totalling RM55 million to the Identified Companies and 6 other companies, from TGB’s account maintained with the Identified Bank Branch to the accounts of the Identified Companies and 6 other companies maintained with the Identified Bank Branch. These payments by TGB Group of RM55 million do not appear to be supported by payment vouchers.

After the reduction in the trade receivables as set out in (i) and (ii) above, the amount owing by the Identified Companies as at 31 December 2006 following the additional findings of MRRM is RM234 million, inclusive of other sundry adjustments.

(c) Cash Receipts in 2007
In respect of the trade receivables outstanding as at 31 December 2006, between February 2007 and 30 April 2007, the Identified Companies paid the TGB Group RM174 million. Of this amount, RM163 million can be traced as payments to TGB Group’s bank account maintained with the Identified Bank Branch.

However, MRRM also noted that between March and April 2007, there were payments by TGB Group totaling RM134 million to 1 company (which is one of the 6 other companies mentioned in (b)(ii) above). The payments by TGB Group to the aforesaid company were made to a bank account maintained with the Identified Bank Branch. The above payments by TGB Group of RM134 million do not appear to be supported by payment vouchers.

2. FOLLOW UP ACTIONS
MRRM in its report dated 14 June 2007, highlighted that the Board should consider the possibility of under-billing or non-billing of genuine sales to other customers, including a major customer, namely CEN Worldwide Sdn Bhd (”CEN“), a 37.5% indirect associated company of the Company. The total sales to CEN in 2004, 2005 and 2006 were RM604 million.

MRRM further recommended a review covering trade receivables with major customers, particularly, CEN, which has been loss-making and has negative shareholders’ funds as at 31 December 2004, 2005 and 2006. The audited shareholders’ funds of CEN as at 31 December 2005, were in deficit, RM22.5 million. As at 31 December 2005, CEN has net current liabilities of RM34 million. As at 31 December 2006, the amount owing by CEN to the TGB Group was RM91 million. Nonetheless, as at 14 June 2007, TGB has received payments in respect of the amount owing by CEN to TGB Group amounting to RM81 million. As a result of the additional invoices issued to CEN after 31 December 2006, the amount owing by CEN to the TGB Group as at 14 June 2007 is RM103 million.

Based on the above, the Board has on 15 June 2007 resolved to propose a special audit to be carried out on its associated company, CEN Sdn Bhd and its subisidiaries (which includes CEN), subject to the approval of the shareholders of CEN Sdn Bhd.

3. IMPLICATIONS TO FINANCIAL STATEMENTS

(a) Balance sheet
The findings indicate that the consolidated net assets of TGB Group are likely to be adjusted downwards as a consequence of the misstatements in revenue, subject to the completion of the statutory audit for the financial year ended 31 December 2006.

For the purposes of illustration, following the proposed adjustments set out in the Final Report, and a provision of RM11 million in respect of the amount owing by CEN, the unaudited consolidated retained earnings as announced on 15 February 2007 of RM268 million will be adjusted downwards by approximately RM628 million resulting in accumulated losses of RM360 million. It should be noted that, the above proposed adjustments have not incorporated the tax effects of the adjustments and possible further provisioning that may be required in respect of the receivables from CEN.
Additionally, the Company proposes to make provision of RM21 million in respect of impairment of its investment in Cyber Generation Sdn Bhd, a 37.8% associated company and property, plant and equipment. With the provision, the consolidated retained earnings as announced on 15 February 2007 will be further reduced by RM21 million, thereby increasing the accumulated losses to RM381 million. It should be noted that this adjustment has not incorporated the tax effects of the adjustments.

Following from the above, the assets of the company will be adjusted downwards with the adjustments primarily in property, plant and equipment, investment in associated company and trade receivables. The illustration of the proforma effects of adjustments to the unaudited property, plant and equipment, investment in associated company and trade receivables balances as at 31 December 2006 are as set out below:

Assets	Unaudited as at 31 Dec 2006 (Rm million)	Adjustment ( Rm million)	Adjusted unaudited as at 31 Dec 2006 ( Rm million)
Property, plant and equipment	1,548	386	1,162
Investment in associated co	14	12	2
Trade Receivables	381	245 (1)	136

Note:

(1) Comprising RM234 million from the misstatements in revenue and RM11 million from the amount owing by CEN to the TGB Group.
(b) Income statement
For the purpose of illustration, based on the above findings, on the assumption that TGB makes full provisions relating to, amongst others, the revenue recorded in respect of the Identified Companies and incidental adjustments and impairments to certain of its assets, the consolidated profit before taxation of the Company will be reduced as follows:
(i) For the financial year ended 31 December 2006, the unaudited consolidated profit before taxation of the Company will be reduced by RM347 million, from a profit before taxation of RM207 million to a loss before taxation of RM140 million.
On the basis of a provision of RM11 million in respect of the amount owing by CEN and the RM21 million in respect of impairment of its investment in Cyber Generation Sdn Bhd and property, plant and equipment, the unaudited consolidated profit before taxation of the Company will be further reduced by RM32 million to a loss before taxation of RM172 million. It should be noted that, the above proposed adjustments have not incorporated the effects of the possible further provisioning that may be required in respect of the receivables from CEN.
(ii) For the financial year ended 31 December 2005 the audited consolidated profit before taxation of the Company will be reduced by RM187 million, from a profit before taxation of RM120 million to a loss before taxation of RM67 million.
(iii) For the financial year ended 31 December 2004, the audited consolidated profit before taxation of the Company will be reduced by RM79 million, from a profit before taxation of RM87 million to a profit before taxation of RM8 million.
The above illustration of the impact to profit is subject to changes that may arise from the on-going statutory audit for the financial year ended 31 December 2006.

4. STATUTORY AUDIT FOR FINANCIAL YEAR ENDED 31 DECEMBER 2006
The Final Report has provided for material adjustments for the finalisation of the financial statements for the year ended 31 December 2006. The Board is hopeful, given the circumstances, that the financial statements for the financial year ended 31 December 2006 will be issued shortly with no further material adjustments, save and except for a further review for possible further doubtful debts in respect of the amount owing by CEN.