SINGAPORE (April 3): SBI Offshore is appointing an independent auditor to investigate the unauthorised write-off of tax-related expenses payable by subsidiary Jiangyin SBI Offshore Equipment Co. (JSBI) to the parent company.

The independent auditor will also determine if there were breaches in rules, laws and regulations as well as lapses in control.

SBI Offshore called for an independent review it its filing on Monday night which sought to clarify the discrepancy between certain numbers in its unaudited and audited results for FY17 ended Dec which were flagged by external auditors BDO LLP.

SBI Offshore revealed that the variance of US$373,000 was solely due to the provision of the tax-related expenses amounted to approximately RMB2.5 million.

The tax-related expenses was related to an amount of RMB17.3 million (US$2.65 million) payable by Jiangyin SBI Offshore Equipment Co. to the company that was written off in the audited financial statements of JSBI for the year ended Dec 31 2015 for the purposes of statutory and tax filing in China without the authorisation of SBI Offshore's board.

"While the write-off was made in JSBI’s audited PRC financial statements, the write-off was not made or adjusted for in JSBI’s accounting records to date," says SBI Offshore.

SBI Offshore's board has determined that the write-off was unauthorised and is seeking to reverse the written-off amount in JSBI’s financial statements in China.

On the advice of its China tax advisors, the group has also recorded a provision of US$373,000 for potential tax-related liabilities linked to write-off in the group’s audited financial statements for FY17.

In FY17, SBI Offshore reported a loss of US$4.7 million on the back of US$488,000 in sales. The company is diversifying into solar energy amid the tough offshore business environment.

Shares in SBI Offshore last traded at 6.2 cents.