CORRECTED-Malaysia's Serba Dinamik says to take legal action against auditor KPMG

(Corrects third paragraph to say audit issues were first raised in May, not June)

KUALA LUMPUR, June 22 (Reuters) - Malaysia’s Serba Dinamik Holdings Bhd will take legal action against its auditor KPMG for negligence and breach of contract, its chairman Mohamed Ilyas Pakeer Mohamed said on Tuesday.

KPMG has “negligently red flagged some issues”, he said at a news conference.

In May, Serba said KPMG had not been able to verify contracts and transactions worth 3.5 billion ringgit ($842.97 million) with 11 customers. Serba has said it saw no issues with the existence or legitimacy of the contracts. ($1 = 4.1520 ringgit) (Reporting by Liz Lee and Joseph Sipalan; Editing by Martin Petty)