PwC’s probe could miss target
Auditors unsure whether forensic audit will be in time for end-January deadline for JSE
PwC has no idea how long its forensic investigation of Steinhoff’s accounts will take, says the audit firm’s southern Africa CEO, Dion Shango. “It’s simply not clear at this time what we are dealing with and how long it will take; we just don’t know. The investigation is ongoing,” Shango said on Wednesday on the sidelines of the launch of PwC’s 21st annual global CEO survey.
PwC has no idea how long its forensic investigation of Steinhoff’s accounts will take, says the audit firm’s southern Africa CEO, Dion Shango.
“It’s simply not clear at this time what we are dealing with and how long it will take; we just don’t know. The investigation is ongoing,” Shango said on Wednesday on the sidelines of the launch of PwC’s 21st annual global CEO survey.
Shango’s comments spell trouble for the ailing retail giant, which is racing against time to finalise its 2017 financial statements by the end of January. Failure to do so could lead to the suspension of its JSE-listed bonds and a hefty fine from the Frankfurt Stock Exchange.
Its external auditor, Deloitte, which refused to sign off on its financial statements in 2017 due to “accounting irregularities”, has said it could finalise Steinhoff’s 2017 accounts only after the findings of PwC’s investigation. Shango’s comments suggest that its investigation will not be finalised soon.
Steinhoff could face a fine of up to €1m from the sanctions committee of the Frankfurt Stock Exchange, where its primary listing lies. Failure to fulfil its issuer obligations in the long term could lead to a delisting on the Frankfurt exchange, a spokesman for Deutsche Börse recently told Business Day. The JSE will give Steinhoff Services, the entity through which Steinhoff lists debt securities on the local bourse, one month’s grace from the end of January to publish financial statements before suspending 11 bonds worth R6.8bn. Financial statements were paramount to investors making informed decisions, said Andre Visser, GM of issuer regulation at the JSE.
Regulators needed to act decisively against those who engaged in any “misconduct or wrongful behaviour” when it came to the auditing profession, said Bernard Agulhas, CEO of the Independent Regulatory Board for Auditors (Irba). “This is the only way that the public can have the confidence that any assurances they receive are sufficiently reliable to protect their hard-earned investment.”
The audit regulator announced in December it was investigating Deloitte’s conduct during the audits of Steinhoff’s 2014, 2015 and 2016 financial years.
This is the second investigation that Irba has launched into a big four audit firm in six months. In June 2017, it announced that it would investigate KPMG’s audits of Gupta family-owned Linkway Trading and a controversial report done for the South African Revenue Service.
Deloitte is facing a disciplinary hearing for its work on African Bank, while the regulator fined PwC in October for overlooking procurement failures at South African Airways.
Sentiment among the big four audit firms was that “all of us as a profession need to do more to restore our reputation and to restore the trust that society had in us”, said Shango. “We weren’t jumping up and down in elation when all of this happened to KPMG because, rightly or wrongly, society sees us [the big four] as being the same.”
PwC had conducted an internal review of clients following the KPMG debacle, but had not let go of any clients. The firm had picked up fewer than five clients as a direct consequence of a termination of their relationships with KPMG, he said.