Travel software company Datalex has revealed that its auditor EY has declined to give an audit opinion on the firm's 2018 accounts.
The highly unusual development follows the company’s reporting of a much bigger than expected loss of $50m for 2018, after what it described as the "most difficult year in the history of the group".
The company had reported profits of $7.1m the previous year.
It said that the events uncovered early this year, including the breakdown in internal controls which failed to detect accounting irregularities, were "unprecedented".
News of the failures in January had sent the company's shares tumbling by almost 60% in one day.
Acting chairman and interim chief executive Sean Corkery said today that the events of last year are a significant disappointment for the company.
Mr Corkery also said it was extremely disappointing the company's auditor has been unable to express an opinion on the financial statements, mainly because of the breakdown in Datalex's internal controls.
He said the delay in publishing accounts as a result of addressing the internal control breakdowns and adopting new accounting standards had resulted in the suspension of trading on Euronext Dublin.
"Once we have full confidence in the systems and procedures in place, we will seek to have our listing reinstated," he added.
The company has also decided not to pay out a dividend for 2018 and is taking legal advice in respect of a dividend paid last year.
That dividend was funded from a $4m payment from subsidiary Datalex Ireland to the holding company.
"Management subsequently identified that Datalex Ireland did not in fact have sufficient distributable profits to legally make the dividend payment to the Company under the relevant provisions of the Companies Act 2014," the company said in its annual report, published today.
"The amount of US$4.0m received by the Company by way of this unlawful distribution has, in accordance with legal advice received, been presented in its financial statements at 31 December 2018 as an intercompany balance repayable due to Datalex Ireland and has been derecognised as dividend income in the Company’s statement of profit or loss."
"The Group is considering with its legal advisers whether it would be in the best interests of the Group and its stakeholders to take actions against former executives to recover value and will take such action if advised that it is appropriate to do so."
Mr Corkery also said the company has made and is making further changes in the finance function and have appropriate resources in place to support this significant transformation.
"We recognise that confidence has been broken and that trust needs to be regained," he added.
In a statement, Datalex said that key to its future is the ongoing financial support of its largest shareholder - Dermot Desmond.
Mr Desmond has confirmed that he will obtain additional funding of $5.5m to meet the short-term cash flow needs of the group over the remainder of the calendar year.
The interim CEO said that Datalex's directors intend to arrange an equity fundraising to raise sufficient funds for the repayment of the company's loans and the funding of the working capital needs of the business in 2020 and beyond.
He said that Dermot Desmond has confirmed that he will support the equity fundraising.
Datalex also said that it had received a termination notification from a customer this week.
The company said it "strongly disputes" the legality of this notice and confirmed that it is engaged in talks with the customer with a view to resolve the issue.
Datalex's auditor EY earlier this week also told the Registrar of Companies that it has formed the opinion that the firm failed to comply with its obligations under the Companies Act to keep adequate accounting records last year.
Failure to keep adequate accounting records as required by the law is considered a serious matter.
EY has since told the company that they will not be seeking reappointment as its auditor.
Datalex undertook an audit of its 2018 accounts after a review discovered "significant accounting irregularities" at the firm.
The PWC report said the company's figures for the first six months of 2018 were "materially overstated", with some revenue recorded before it had actually been received.
The Office of the Director of Corporate Enforcement has asked for a copy of the report.
In its annual report, Datalex said the document was legally privileged, but the company has assured the ODCE of its full co-operation with it in its inquiries, subject to appropriate legal protection of its privileged material.
It added that it is engaging with the ODCE with respect to the requirement.
A delay to Datalex's publication of full year results led to the suspension of its Dublin-listed shares in April, while chairman Paschal Taggart and CEO Aidan Brogan also resigned.
Earlier this year the firm agreed to a €6m loan from the investment vehicle of Dermot Desmond, who also increased his stake in Datalex to 29.9%.
Datalex provides ecommerce software to the travel industry, including well-known airlines such as Lufthansa, Aer Lingus and Jet Blue.
Datalex is due to hold its AGM on September 17.
Mr Corkery said he would provide shareholders with more details about the in-depth transformation that has begun, the company's focus for the future and how it can restore the confidence of its employees, shareholders and customers.
Datalex also said its revenues for last year dropped to $44.3m from $63.9m with its services revenue falling to $16.7m from $34.6m