Deloitte fights back claims of abetting accounting fraud

Deloitte & Touche has come out fighting claims of abetting accounting fraud at companies it has audited, terming the string of accusations against it as the product of boardroom wrangles arising from shareholder fallouts or poor financial performance.

The accounting firm has been accused of professional misconduct in handling the books of four companies including Mumias Sugar, CMC, Tuskys Supermarkets and Dubai Bank.

READ: Deloitte on the spot over cooked books at Mumias

Deloitte claims that the disciplinary committee of the Institute of Certified Public Accountants of Kenya (ICPAK) has in all the cases established that the firm discharged its accounting responsibilities in a professional manner.

“ICPAK has cleared Deloitte of any wrong doing after a rigorous investigation. We are not aware of any incidences of professional misconduct on our part,” said Sammy Onyango, CEO Deloitte East & Central Africa, in an interview.

Mr Onyango says the scope of external auditors is limited to the information presented by a company’s management, who then make an opinion based on material provided as opposed to forensic auditors whose role is to investigate fraud, embezzlement or other financial theft.

“Board disagreements and poor financial performance are sometimes blamed on auditors. We only review the competency of the internal audit,” said Mr Onyango.

The Capital Markets Authority (CMA) in 2012 filed a complaint with ICPAK in relation to the conduct of Deloitte as the independent auditors of troubled CMC Holdings for failing to point out financial malpractices at the motor dealer, including the presence of a secret account held in the island of Jersey.

READ: CMA wants Deloitte penalised for ‘abetting’ fraud at CMC Holdings

Bill Lay, former CMC chief executive, blew the whistle on the slush fund and accused his predecessor Martin Forster and long-serving directors Jeremiah Kiereini and Charles Njonjo of illegally funnelling about Sh1.2 billon to the secret account.

The ICPAK disciplinary committee, chaired by Uchumi Supermarkets boss Jonathan Ciano, in November last year cleared Deloitte of any wrongdoing.

The CMA has appealed the ruling at the High Court.

A farmers’ association, Mumias Outgrowers Company (Moco) has accused Deloitte of abetting creative accounting at the sugar milling firm, which is accused of having declared false profits. Moco is contesting a Sh2.6 billion outstanding loan demand from the sugar miller, which it terms as a ‘false’ entry.

Deloitte was in July 2009 cleared in the Mumias case but the aggrieved farmers’ lobby filed a complaint with the Ethics and Anti-Corruption Commission.

“The allegations contained in the report regarding Deloitte working with top Mumias Sugar executives to conceal accounting flaws are false,” said Mr Onyango.

A director at Tuskys Supermarkets has petitioned the accountants’ watchdog to investigate Deloitte over claims of concealing information on registration of other companies without the mandate of the retailer’s board.

Yusuf Mugweru says in a sworn affidavit that the companies have been used by his siblings to swindle Tuskys of Sh1.6 billion.

ICPAK in August last year wrote to Mr Mugweru asking him to submit additional information that would help establish if the matter should proceed to the disciplinary committee.

READ: ICPAK urges Tuskys to back claim against Deloitte

In the matter of Dubai Bank, Deloitte said it was the one that alerted the Central Bank of Kenya of irregularities at the bank.

Deloitte sparked a major audit row with Dubai Bank after it offered a qualified opinion on the lender’s finances, citing incompleteness of records.

ICPAK chairman Benson Okundi said the current Accountants Act (2008) is being reviewed to establish an independent tribunal – with powers similar to those of the High Court – to police the profession.

“The lapses in the accounting profession are due to weak legislation,” said Mr Okundi.