Ernst & Young LLP, the auditor of Westech Electronics, has released an exception of opinion report on the company’s financial statements for the year ending Dec 31, 2008 in which it cast doubts on the group’s ability to continue as a going concern.

The auditor said it noted inconsistencies and discrepancies relating to the transactions in the Display Division (discontinued operations) entered into by the company during the financial year.

“There were no practicable audit procedures available to us to determine the validity of these transactions,” Ernst & Young said. It added that it was unable to determine whether any balance should be recorded as non-current assets, current assets and current liabilities of the discontinued operation on the balance sheets of the group and the company as at 31 December 2008.

The auditors were also unable to assess the appropriateness of the loss from discontinued operation, net of tax, recorded in the consolidated income statement and the information relating to Discontinued operation.

Westech Electronics had incurred a loss of US$1,081,000 ($1.5 million) for the financial year ended Dec 31, 2009 and as at Dec 31, 2009, the group and the company were in net shareholders’ deficit position of US$13,937,000 and US$14,282,000 respectively.

On Sept 9, Westech Electronics announced a proposed scheme of arrangement with certain of its creditors to restructure its liabilities including a capital reduction exercise which requires shareholders’ approval so that it can raise $10 million in funds to acquire the entire issued and paid-up share capital of Plexus Components.

Ernst and Yong concluded that the ability of the group to continue as going concern and to meet their liabilities as and when they are due is dependent on the completion of the scheme of arrangement and the proposed acquisition.