Thursday, July 2, 2020

Choppies bosses sue PwC auditors

Choppies founding directors Ramachandran Ottapathu and Farouk Ismail are suing the company’s erstwhile auditors PriceWaterhouseCoopers (PwC) for more than P800 million in damages.

The two directors blame the audit firm for the suspension of Choppies shares from trading on the Botswana Stock exchange (BSEL) and the Johannesburg Stock exchange (JSE)

According to a document dated 19th March 2020 circulated among Choppies shareholders, Ram and Ismail are suing PwC for an “unjustifiable delay in the completion of auditor’s report of the company in respect of the financial year ended June 2018.”

The duo also accuses PwC of failing “to act on actual or perceived threat to its independence.” Ram and Ismail also cite “breach by PwC Botswana and/or Mr. Rudi Bindell, audit partner, or rules of the relevant code of ethics in respect of independence.”

The circular states that PwC Botswana, signed off Choppies Group and holding company audit report and annual financial statements for the year ended 3oth June 2018 without signing off the audit reports of the Botswana and South African subsidiary companies for the same period.

The two Choppies directors point out that, “ it should be noted that by virtue of the fact that PwC signed the auditor’s report in respect of the financial statements of the company and consolidated group financial statements for the financial year ended 2018 on 13th December 2019, PwC must have considered the financial statements of the subsidiaries of the company.”

The Choppies circular states that this “allegedly resulted in the suspension of and a prolonged period of suspension of the shares of the company trading on BSEL and JSE”.

Choppies has reported the issue to Botswana Accounting Oversight Authority, The Companies and Intellectual Property Authority, Botswana Unified Revenue Services and South African regulatory and tax authorities.

It has further emerged that PwC resigned last week – 16th March 2020 – as Choppies Botswana auditors, “ on the basis of regulations published by the independent Ethics Standards Board for Accountants (IESBA) as adopted by the Botswana Institute of Chartered Accountants (BICA) in respect of actual and threatened litigation by an audit client or shareholders or management of an audit client which may constitute a threat to its independence. “

PwC cited threatened litigation in an action of damages “by significant shareholders of the Company, Messrs. Ramachandran Ottapathu and Farouk Ismail who are also directors of the Botswana subsidiaries.”

Following the resignation of PwC as Choppies auditors, “ the audit committee of the board set about achieving the appointment of a replacement, of PwC Botswana as auditors to the company, in an effort to comply with the provisions of Section 191 of the Companies Act, and communicated with firms of certified public accountants in Botswana, BDO, Deloitte, Ernst & young and KPMG. Each of those firms, for various reasons, declined the appointment.”


Read this week's paper

Sunday Standard June 28 – 4 July

Digital copy of Sunday Standard issue of June 28 - 4 July, 2020.