An auditor has expressed concerns about Legacy Footwear Limited, a prominent player in the tannery sector of the capital market, allegedly evading income tax through a series of cash transactions.
The auditor's qualified opinion, disclosed on the Dhaka Stock Exchange's (DSE) website, highlights potential non-compliance with the Income Tax Act 2023.
According to the auditor, as of June 30, 2023, it remains challenging to ascertain the precise amount of income tax owed to the government by Legacy Footwear Limited. A qualified opinion, typical after a professional audit, indicates that the information provided may be limited in scope, or the company's adherence to generally accepted accounting principles might be questionable.
The auditor explicitly notes that Legacy Footwear Limited has conducted nearly all its transactions in cash, encompassing payments, capital investments, finance-related dealings, and all sales and purchases.
This practice, deemed a violation of the Income Tax Act 2023, may potentially result in increased Income Tax liability in the future, pending assessments by the National Board of Revenue.
"Due to the lack of information provided, we are unable to quantify the impact of this contravention of the Income Tax Ordinance on the financial statements," states the auditor.
Furthermore, the auditor brings attention to the company's unclaimed dividends amounting to Tk 27.80 lakh as of June 30, 2023. These dividends, left unpaid for more than three years, are required by the Bangladesh Securities & Exchange Commission (BSEC) Notification to be transferred to the Capital Market Stabilisation Fund established by the BSEC. The failure to make this transfer constitutes a violation of BSEC rules and regulations.
While Legacy Footwear Limited claims to have cash deposits of Tk 4.68 crore at its head office and factory premises, the auditor expresses scepticism about the accuracy of this information.
The report states, "We were unable to obtain reliable and sufficient information to determine the existence of this liquid asset, concluding that the asset balance is overstated on the financial statements."
The auditor also highlighted a lack of documentation regarding temporary loans with various companies, amounting to Tk 49 lakh, further complicating the verification process. The company's inability to present the agreement or deed copy with another company, party-wise breakup, and supporting documents for the temporary loan raises doubts about its financial transparency.
Legacy Footwear Limited recently secured an interest exemption of approximately Tk 19.94 crore from Rupali Bank, with an outstanding repayment obligation of Tk 11.66 crore.
Established in 1996 as a 100 per cent export-oriented company, Legacy Footwear Limited entered the Dhaka Stock Exchange (DSE) in 2000. However, despite its long-standing presence, the company faces scrutiny over its financial practices and compliance with regulatory frameworks.
