Sunday, May 26, 2024

Former Choppies external Auditors disown retailer’s freshly “baked” 2018 results

The local unit of the international audit firm – PriceWaterhouseCoopers (PwC), which was until recently the external auditors of troubled retailer – Choppies Enterprises Limited has distanced itself from the retailer’s financial results for the year ended June 2018.

Choppies released its much anticipated 2018 financials late Friday after keeping the capital markets waiting for over a year. While the troubled retailer on one hand expected to “excite” the markets with the release of the results, its former auditors – PWC issued a disclaimer of opinion on the same results effectively causing further confusion on the company’s true value. 

PWC, which was first appointed as external auditors in January 2018 and quit in September 2019, said it could not substantiate the authenticity of the Choppies consolidated and separate financial statements because it has not been able to obtain sufficient audit evidence to provide a basis for an audit opinion.

In an independent Auditor’s Report to Choppies Enterprises shareholders released this week, PWC said there were a number of matters which prevented it from obtaining sufficient and appropriate audit evidence as required by international Standards on Auditing.

Following PwC’s appointment in January 2018, the firm raised audit concerns and queries pertaining to the Ramachandran Ottapathu led retailer’s compliance with International Financial Reporting Results (IFRS). Consequently, Choppies failed to publish its audited financial results for the year ended June 2018, blaming the delay on change of auditors. Before the arrival of PWC, Choppies was audited by another member of the big four – KPMG which has been at the helm for several years.

Six months into the replacement of KPMG with PWC, Choppies made various announcements through Botswana Stock Exchange on a number of matters which were identified as the cause of delay to the release of the financials for the year ended June 2018.

The failure to release the results on the set date of September 2018 also marked the beginning of the days in which the dirty laundry of the retailer was up for viewing by the public. The company was then suspended from the local bourse – Botswana Stock exchange and by Johannesburg Stock Exchange where it has a secondary listing.

At the time, the Choppies board said that it’s then newly appointed auditors – PWC was reassessing a number of past accounting practices and policies, adding that the auditors had identified numerous issues relating to current and earlier financial periods, which require independent verification and expert legal advice before disclosures could be made.

As a result of concerns from PwC, the budget grocer appointed Desai Law Group to undertake and provide legal analysis and advice. The law firm later submitted a damning report on the raised matters before the company’s board, which resulted in the suspension of Choppies co-founder Ram as the chief executive officer (CEO). The fallout between Ottapathu and the board, then led by former President Festus Mogae was immediate.

Ram then swiftly mobilised support from other shareholders to call an extraordinary general meeting in September 2019, in which he prevailed to replace some board members including Mogae who were trying to get him dismissed from the company.

Fast forward to September 2019, a few weeks after the EGM, PWC made a shocking announcement – it quit as the external auditor of Choppies further complicating matters for a company that has been under pressure to clear its name from allegations of impropriety.

By close of markets on Friday, after Choppies released its much awaited 2018 results, PWC said that while it partly audited the results, it cannot express an opinion on them. Meanwhile Choppies remains suspended at both the BSE and JSE for non-compliance with the listing requirements. At the time of suspension in September 2018 its stock price had fall to P0.60 way below its IPO price of P1.00.

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