By Bonnie Modiakgotla
Sefalana Holding Company Limited – one of the top retailers in the country – has ended its long term relationship with its primary auditor – PWC.
The Botswana Stock Exchange listed group last Friday at its annual General Meeting (AGM) asked its shareholders to approve the appointment of Deloitte & Touche as auditors for the ensuing financial year, ending a 9 year old relationship with Pricewaterhousecoopers, which retires by rotation.
Following numerous financial scandals, auditors have come under scrutiny – with most observers calling for rotation of auditors to prevent cosy relationships between the company management and audit firms. Earlier this year the Financial Times quoted a report from the International Forum of Independent Audit Regulators which highlighted several shortcomings of auditing firms.
The report showed that global accounting watchdogs identified serious problems at 40 per cent of the audits they inspected last year involving companies in “riskier” situations. These included conflicts that compromised objectivity, and widespread failures to test the accuracy and reasonableness of companies’ data and assumptions.
Sefalana’s across town rival Choppies also dropped its long term auditor KPMG Botswana after 10 years of service. When Choppies dropped KPMG as auditors it cited King’s principle of good governance, which advocates for the rotation of auditors every 10 years.
However, the King IV report does not require mandatory audit firm rotation. Instead the King IV report on corporate governance discusses auditor independence as part of the foundation of corporate governance, and links this very strongly to the roles and responsibilities of the audit committee.
Curiously, after dropping KPMG, Choppies went for PwC, auditors to their rival. While PwC might have had 1 year left before falling under the King’s principle of good governance, Sefalana perhaps was anxious about being audited by the same firm that serves a competitor.
The specific issue of Mandatory Audit Firm Rotation (MAFR) is being considered by the regulator being the Botswana Accountancy Oversight Authority.
