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TMCNet:  Cracks emerge over Deloitte audit probe [Nation (Kenya)]

[February 24, 2014]

Cracks emerge over Deloitte audit probe [Nation (Kenya)]

(Nation (Kenya) Via Acquire Media NewsEdge) Cracks have emerged in the accounting professional body with a member of the Institute of Certified Public Accountants of Kenya (ICPAK) council accusing the committee set up to investigate audit firm Deloitte on its dealings at the troubled CMC Motors of being a letdown to the profession.


Mr Rashid Mohammed said the seven-member team chaired by Uchumi Supermarkets chief executive Jonathan Ciano has been negligent by delaying the release of the CMC Motors audit report.

"Investigations into the CMC matter by the committee have taken two good years," noted Mr Mohammed, a member of ICPAK.

"The public and listed companies are tired of waiting. They want valid audits tied to international financial reporting standards." RIDICULE PROFESSION Delay in releasing the report, Mr Mohammed said is causing public anxiety and exposing the accounting profession to ridicule.

"The committee is indecisive. It reached a point where they were wavering on the matter," he said.

"They might be afraid of prosecuting Deloitte." He said the committee should decide on the accusations levelled against Deloitte by the Capital Markets Authority (CMA). "This is very important for the integrity of ICPAK," Mr Mohammed said.

Delays by the committee to conclude investigations on the Deloitte case are said to have informed a new push by the CMA and the Treasury to initiate a plan to set up an audit watchdog, which is independent of the accounting body. The plan for an oversight authority came after constant pressure on ICPAK to investigate the auditors yielded no fruit.

However, committee chair Ciano said there was no hurry to close the case. "There was no timeline dictating how long the case was to take," he said, adding that he was not aware that a team had been reconstituted after the first term ended in December 2013.

"We had evidence collected against Deloitte, including evidence against accusers of Deloitte, when the committee's term ended. But we are yet to conclude the report," said Mr Ciano.

WHISTLEBLOWER In 2012, CMA wrote to ICPAK asking the professional body to investigate Deloitte and take disciplinary action if the audit firm was found culpable on the CMC saga.

The audit firm was accused of misstating CMC's accounts by abetting the booking of undelivered vehicle sales as revenues and not capturing interest payments for cars sold on credit, thereby inflating its earnings.

Deloitte is also accused of failure to disclose CMC's subsidiary in South Sudan in the annual report.Deloitte has, however, defended itself against the claims, arguing that the said malpractices could only have been detected by investigations or a whistleblower. "It is very weird that CMC had offshore accounts during the Deloitte audit yet ICPAK did not find Deloitte culpable," said Mr Mohammed.

"ICPAK is now looked at as a powerless regulator, hence the need to formulate a new oversight board that will take over its mandate," said Mr Mohammed.

ICPAK chair Benson Okundi, however, said delay in concluding the case had been caused by reconstitution of the committee as per January 17, 2014 Gazette notice.

"The Cabinet secretary for the National Treasury appoints: Jonathan Ciano, Charity Muya, John Mudany, Eric Odongo, Hannah Wendot Cheptumo, Scolastica Mbilo and Susan Mudhune, to be members of the disciplinary committee of the council of the Institute of Certified Public Accountants of Kenya, for a period of three years," stated the Gazette notice.

The committee is still chaired by Mr Ciano and it comprises the same members as the previous team.

Mr Okundi said a committee had to be reset to enable it discipline Deloitte. He said that amid all the talk of setting up a new board that will enforce disciplinary measures, accountants should be the majority in the board.

EXPOSE INVESTORS TO RISK "We've been slow to make conclusions on the CMC case because it is still under discussions by the disciplinary committee," said Mr Okundi, adding: "Stakeholders have mixed feelings about the handling of CMC and other small cases. That is why they want an oversight board over ICPAK." According to CMA acting chief executive Paul Muthaura, there is an increase in inaccurate financial statements that expose investors to risks that can dent confidence in the bourse.

"Companies involved could collapse along with billions of shillings in public investments, if rogue auditors are left to release misguided reports," he said, adding that "there is urgent need for an oversight board." (c) 2014 Nation Media Group. All Rights Reserved. Provided by Syndigate.info, an Albawaba.com company

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