KPMG set to replace Ernst & Young as Uchumi auditors

KPMG is set to take over from Ernst & Young the auditing of troubled retailer Uchumi Supermarkets, which has accused its former top management of manipulating its last year’s financial statements.

The consultancy, classified as one of the “big four” global accounting and auditing firms, will take over the role if Uchumi shareholders approve the change at its forthcoming annual general meeting slated for January 20.

“To appoint Messrs KPMG Kenya as the company’s auditors for the next financial year,” reads one of the agenda items for the upcoming shareholders’ meet.

KPMG had been hired to carry out a forensic audit at Uchumi, with preliminary findings revealing that the former management had manipulated books and concealed losses in the retail chain’s financial statements.

Ernst & Young, which trades as EY, raked in Sh19.5 million in audit fees from Uchumi for the year to June 2014, a 41 per cent increase from the Sh13.7 million earned a year earlier.

Julius Kipng’etich, who was hired in August as Uchumi CEO to turn around the fortunes of the struggling retailer, said the accounting fraud resulted in the firm plunging into the red financially.

“Sh1.04 billion for write-off, which relates to items arising from management misrepresentation and manipulation of the system by the previous management,” Uchumi said when it made public the allegations of accounting irregularities by the former management.

The imminent appointment adds to a growing list of changes in auditors at both listed and non-listed firms at a time there is increased focus on the role and quality of work done by accountants.

Mumias Sugar last month hired RSM Eastern Africa as its auditor, taking over from Deloitte & Touche, which was accused of professional misconduct in handling the books of the loss-making sugar miller.

Parker Randall Eastern Africa — led by former Mumias Sugar boss Coutts Otolo — bagged Olympia Capital as its audit client from Crowe Horwath, a firm where he was previously a partner but fell out with his associates.

READ: Former Mumias boss Otolo forms own audit company

The fourth-placed Uchumi —after Nakumatt, Tuskys, and Naivas supermarkets in revenues — posted an after-tax loss of Sh3.4 billion in the year to June 2015 following a decline in its sales volumes.

This is the second time Uchumi is being caught in a maze of accounting fraud, putting its auditors on the spot. PwC was investigated in the wake of Uchumi Supermarkets’ near-collapse in 2006 on whether its audit opinions were up to professional standards.

Ernst & Young was earlier last year probed by the Commissioner for Co-operative Development over its role in Mwalimu Sacco’s acquisition of a majority stake in Equatorial Commercial Bank from billionaire businessman Naushad Merali.

EY, as auditors of East African Portland Cement (EAPCC) in the year to June 2013, was also caught up in allegations made by the government of financial irregularities at the Athi River-based firm.