Shareholders of Choppies Enterprise Limited and capital markets players in Botswana will have to dig a little deeper for information on the true value of the company.
This come after at least two auditing firms linked to Choppies – one former and another current said they could not obtain sufficient appropriate evidence that could at least give a hint of the true value of Choppies.
The Choppies Group has been serving suspension at both the Botswana Stock Exchange and Johannesburg Stock Exchange after it failed to publish its audited financial statements for 2018 and 2019 respectively.
On Friday, the same day in which Choppies suspension at BSE was lifted, the newly appointed auditors – Mazars said they were unable to express an opinion on some of the financial statements of the troubled local retailer.
The independent audit firm was appointed Choppies external auditors in February 2020, five months after the mass grocery retailer was ditched by a member of the top four international auditors – PwC.
At the time of departure, the former auditors – PwC said that while auditing Choppies financials they had picked up certain transactions and business relationships which were not made fully apparent by the directors, therefore not sufficiently considered in preparation of historical annual financial statements.
Following a painstaking 20 months long audit process, PwC in September 2019 made it public that it was parting ways with the troubled grocer as a client. PwC said at the time that it had since realised that Choppies was a ‘risky client’ thus making it a quit.
Following the sudden departure of PwC, the then newly appointed Choppies board approached leading external auditors, amongst them former auditors – KPMG and another member of the top four Deloitte as well as Ernst & Young and BDO to assume the vacant role. For various reasons undisclosed to the public and shareholders all the approached firms shunned the appointment but the retailer was saved by Mazars – a firm with strong links to its Chief Executive – Ramachandran Ottapathu.
Fast forward to July 2020, the newly appointed auditors now say they are also unable to express a conclusion on Choppies’ financial statements as at December 2018 which were released last week.
“We were not appointed as auditors of Choppies Enterprise Limited in the prior year. The predecessor auditor issued a disclaimer of opinion on the prior year consolidated and separate financial statements. Due to the effect of the matter noted above, we were unable to obtain sufficient appropriate evidence to form a conclusion whether the opening balances are free from material misstatements”, said Mazars.
Mazars auditors also revealed that they were unable to satisfy themselves by alternative means concerning the opening balances and comparative figures.
“Since these figures form the basis for our analytical review procedures and inquiries we would normally perform during our review, we are unable to express a conclusion on these interim financial statements”, Mazars said.
Choppies on Friday also admitted that its recently published abridged financial information has not been reviewed by Mazars and that it has been extracted from the audited annual financial statements.
Meanwhile the latest financials for the year ended June 2019 show that following the mishaps, Choppies has for the first time recorded a negative equity of P80.1 Million (2018: P576.2mn – positive). This translate to decline in equity of P656.3 million. The Choppies board has since declared the retailer a ’going concern’. See story on page 13.