Workers load cement at East African Portland Cement plant in Athi River. PHOTO | FILE
What you need to know:
The State and the NSSF had in 2013 claimed that the cement maker’s financial statements had been doctored.
The allegations put E&Y, who were auditors of the company, on the spot over their possible involvement in covering up accounting irregularities.
E&Y had been hired by Kenao to audit the cement manufacturer’s books on its behalf.
The Capital Markets Authority (CMA) has said Ernst & Young was not involved in alleged manipulation of accounts at East African Portland Cement (EAPCC).
The government and the National Social Security Fund, whose combined stake at the Nairobi Securities Exchange-listed EAPCC make them majority shareholders, had in 2013 claimed that the cement maker’s financial statements had been doctored.
The allegations put E&Y, who were auditors of the company, on the spot over their possible involvement in covering up accounting irregularities.
“The authority (CMA) engaged the Kenya National Audit Office (Kenao) and management of the company following allegations on the accounts. Kenao has since confirmed that the accounts of EAPCC as at June 30, 2013 present a fair view of the affairs of the company within that financial year,” said CMA in a response to the Business Daily queries.
The joint 52 per cent shareholding by the Treasury and NSSF at Portland make the institution a State corporation that is audited by Kenao, a government agency.
E&Y had been hired by Kenao to audit the cement manufacturer’s books on its behalf.
“The authority has nonetheless continued to engage the company on how all issues raised on the financial statements can be addressed,” said CMA.
The Kenyan arm of international financial consulting firm Deloitte has been on the spot over similar allegations of past accounting irregularities at sugar miller Mumias, car dealer CMC Holdings, Dubai Bank and Tuskys supermarkets.
Deloitte was appointed EAPCC’s external auditor in the financial year ended June last year.
The findings by Kenao, which is headed by Auditor General Edward Ouko, mark the second time one of the Big Four audit firms has been cleared in recent months after accusations of involvement in covering up accounting fraud.
The Institute of Certified Public Accountants of Kenya (ICPAK) cleared Deloitte against claims of abetting fraud at Mumias Sugar and CMC Holdings. Deloitte is yet to be cleared of allegations of abetting accounting fraud at Tuskys supermarkets.
The boardroom fights at Portland spilled into the public domain in December 2013 when Industrialisation PS Wilson Songa and National Social Security Fund (NSSF) executive Gideon Kyengo stormed out of the company’s AGM and fired a letter to the CMA highlighting alleged multiple improprieties at the cement firm.
The State and NSSF alleged that EAPCC was “in the red” and that the company’s management had cooked the statement of accounts.
CMA consequently suspended all the resolutions passed at Portland’s chaotic 2013 AGM — including payment of dividends, election of directors and confirmation of the cement maker’s financial accounts.
Lafarge — which has a 41.7 per cent stake at EAPCC — challenged in court CMA’s decision to freeze the AGM decisions but lost the case.
The High Court in July last year ruled that CMA had acted within its powers when it suspended the shareholders’ decisions and also instituted investigations on matters raised.
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