Arabian Pipes says consultant ascertains SAR 240 mln financial differences in inventory item

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Arabian Pipes Co. announced that the consulting firm issued their report about the differences in inventory, confirming the book stock and physical stock matched both plants in Riyadh and Jubail.

The report also confirmed that there are financial differences in the inventory account amounting to SAR 239.6 million, the company said in a bourse statement.

The consulting company identified the most important reasons that might have caused these differences since the establishment of the factory, namely the opening balances of the inventory account in Jubail plant; scrap generation theoretical value is automatically accounted and is not based on actual scrap generation; incorrect entries into inventory account for previous periods; and re-evaluating the inventory at the fair price according to the evaluation of the consulting firm.

The report did not confirm the reasons for these differences and mentioned that there are potential possibilities that need to be reviewed more.

Regarding the financial impact, the external auditor reviewed the consulting report, and conducted his own auditing way for reviewing the inventory account, after completing the auditing work of the financial statements for 2020.

As a result, it became clear that there are financial differences estimated by SAR 210 million, and an additional provision was made for inventory by around SAR 59 million.

Due to that and to protect rights of the company and its shareholders, the board ordered to use the necessary financial and legal advisory services to review the report of the consulting firm and what is needed to ascertain and verify that there are no violations of the laws and regulations and to complete the necessary procedures.

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The board also emphasized to improve and develop the level of the internal controls of the company to avoid such matter in the future; review and develop the company's policies and procedures; and expedite the implementation of Internal Resource Management System (ERP) project.

According to data compiled by Argaam, Arabian Pipes Co. announced in March that it found financial differences in the inventory balances amounting to SAR 210.17 million, starting from previous annual financial statements since the company was established and until the end of 2020.