The accounting regulator scoping out the goings on inside Choppies Supermarket and its former auditors, pricewaterhousecoopers Botswana and KPMG.
While he did not want to describe the enquiry as an investigation, the Botswana Accountancy Oversight Authority (BAOA) chief executive officer Duncan Majinda confirmed that the trio have fallen under the radar of the Authority.
He explained that BAOA took a decision to conduct a review of Choppies after financial results for the year ended June 2018 which were conducted by pricewaterhousecoopers raised some red flags over the previous audited financial statements.
At the time, the auditor was KPMG.
According to Majinda, his organisation could have conducted the enquiry late last year but was unable to do so because a number of stakeholders had already closed for the festive season.
Describing the financial results for the year ended June 2018 as confusing, Majinda said the disclaimer issued by pricewaterhousecoopers which accompanied the 2018 financial results prompted them to look into Choppies and its former auditors.
It is understood that though BAOA was scheduled to conduct an investigation into Choppies relating to issues of corporate governance and financial standards at a later stage, the confusion surrounding the financial resulted compelled them to spring into action and launch the investigation against the chain store and its former auditors.
“We picked a number of confusing issues from the report among them being that the auditor issued a disclaimer which accompanied the report; this basically means that the auditor was unable to give an opinion,” said Majinda. He added that “here we have financial statements that the auditor does not have an opinion on.”
“The auditor has not given an assurance that they are not materially misstated. The expectation is that when the auditor gives an opinion he or she has to state whether they are materially misstated or not,” he said. Materially misstated means that they are not overstated or understated.
According to Majinda, one of the reasons why there was a disclaimer was that “maybe he (auditor) has not been able to obtain sufficient and appropriate audit evidence in order to reach an opinion and normally they would give a list of why they were unable to do that.”
He said to them that is a serious issue going forward.
“When an auditor says he or she is unable to give an opinion, there are two questions; we have to find out whether it was the right opinion by reviewing the file and whether that opinion was correct,” he said.
He further stated that “So we will be reviewing Choppies itself; they are supposed to prepare the statements and also whether there was compliance with audit standards. Regarding the auditors, we will have to find if they did a good job.”
Majinda revealed that they have since issued three engagements letters and filed them with KPMG, Pricewaterhousecoopers and Choppies.
“KPMG has since signed the engagement letter and I met with the Chairperson of Choppies yesterday (Wednesday). I’m meeting the Chief Executive Officer to start the review. We are not going to investigate him but only coming up with facts to see who was responsible,” he said
Majinda said pricewaterhousecoopers have requested that they be accorded more time to prepare some of the information that might be required.
“It is going to be a very interesting case study for the country; we are now forced to face two auditors. It is also going to be an interesting case study because we have one auditor indicating that they might have problems with another auditor by issuing a disclaimer.
We are also looking at a company that has sorts of problems; not complying with issuing financial statements and its leadership blaming one another in the newspapers,” he said.
Majinda said “there are issues of corporate governance; board members not doing their job, auditors not doing their job, so it is going to be interesting for us and our report is going to look at all that; for instance what was the board doing; it will be detailed in our report.”
He said the report will then be shared with stakeholders among them Botswana Stock Exchange, Companies and Intellectual Property Authority (CIPA), Botswana Institute of Chartered Accountants (BICA) and Non-Bank Financial Institutions Regulatory Authority (NBFIRA).