CarrierNet Global fails to satisfy Ernst & Young auditors

The auditing firm cites insufficient support for the company's assumption that it is financially healthy despite incurring a net loss of $2.62 mln in FY10.

Ernst & Young issued a disclaimer of opinion due to lack of evidence that the company can still remain a going concern.

As of 31 December 2010, CarrierNet’s current liabilities exceeded their current assets by $11.82mln and $1.25mln, respectively.

The company also recorded a net cash outflow from operating activities of $2.70 mln for the previous financial year.

Ernst and Young earlier declared CarrierNet a going concern based partly on a cash flow forecast for 2011 developed “primarily based on the assumption that the Group and the Company are able to secure additional funding through share placements to sustain their operations.”

Consequently, however, the auditing firm has been unable to obtain support for this assumption.

In 2009, Ernst and Young also did not express an audit opinion on the consolidated financial statements of CarrierNet due to concerns about the audit of two of its subsidiaries.

The audit of the financial statements of CarrierNet Corporation Limited and Memphis Telecom Pty Ltd. for FY09 was not completed on time, making them unqualified for inclusion in the company’s comprehensive audit report for the year.

“We were unable to carry out procedures necessary to satisfy ourselves as to whether the financial statements of the subsidiary companies are appropriate for the purpose of the preparation of the consolidated financial statements of the Group for the year ended 31 December 2009,” Ernst and Young said.

In a statement, the telecoms company said negotiations are ongoing with prospective investors to secure additional funding through share placements.

"Subject to the successful outcome of this process, there are reasonable grounds to believe that the Company will be able to pay its debts as and when they fall due," CarrierNet said.