• DGL disclosed expected audit disclaimer in Appendix 4E in August 2025
• Inventory valuation and internal control issues led to auditor's inability to provide opinion
• DGL has implemented comprehensive remediation measures to enhance financial controls and reporting

DGL Group Ltd has provided a detailed response to an ASX query regarding the disclaimer of opinion in its FY2025 full-year report. The company explained that it had consistently disclosed the expected modified audit opinion relating to inventory existence and valuation in its Appendix 4E/Preliminary Final Report lodged in August 2025. The final audit report was received on the same day the full-year report was released, and DGL does not consider there was any delay in disclosing the disclaimer. Regarding the auditor's inability to obtain sufficient audit evidence on DGL's internal control and corporate governance processes, the company cited two primary reasons: inventory valuation issues at certain locations due to the implementation of a new inventory management system, and an incident of fraud by an individual that was not financially material but led to concerns about the control environment. DGL has outlined a range of remediation measures it has implemented or is in the process of implementing, including migrating to a new Group-wide ERP system, enhancing inventory processes, strengthening system access controls, and improving fraud detection capabilities. The Board has also undertaken comprehensive enquiries of management throughout the financial year and during the year-end reporting process to satisfy itself regarding the financial records, financial statements, and control environment. The Board is satisfied with the content and extent of these enquiries and believes its view on the adequacy of the control environment is supported by the absence of material audit adjustments identified by the auditor's substantive procedures, other than adjustments to lease accounting and a $400,000 inventory write-down.