What the hell are auditors up to? These watchdogs are no longer the shareholders’ eye when it comes to checking company’s accounts. Instead, they have become accomplices in the crime of manipulating figures and numbers to suit management’s desires. This is called cooking books in accounting lingo. It’s simply tweaking figures here and there to show a profit or a gain where there’s none or, in fact, a loss.
The latest in indictment on the accounting and auditing profession is the current accounting fraud scam at Haco Tiger Brands, majority owned by Tiger Brands of South Africa. Managers crafted a pre-invoicing scheme that helped them shore up profits and give the impression that they had met their targets last year. At the end, Managing Director Geoffrey Mwathi Kiarie and his team inflated operating profits for the full year ended on September 31, 2014 by Sh879 million!
Tiger Brands is listed in South Africa and so will have to face shareholder revolt there. But the spotlight is on its external auditors, PricewaterhouseCoopers (PwC), who had given the books a clean bill of health. The audit firm is becoming notorious for doing bad jobs. Forget not that is the audit firm that cleared Uchumi Supermarket’s books while it was experiencing financial strains that led to its collapse.
It has lots of company. Audit debacles have become all too common, costing investors fortunes, not to mention the mental anguish they endure seeing their money going down the drain and culprits walk the corridors of power in the corporate world. Deloitte & Touche blessed Mumias Sugar Company books only for the sugar miller to sink into huge losses.
Deloitte, again, was the external auditors for CMC Holdings, Dubai Bank and Tuskys Supermarkets. All these firms are having issues, financial or otherwise. Ernst & Young was accused of hiding financial irregularities at East African Portland Cement.
You name it. One thing in certain: There’s something unbecoming with audit firms and it must be stopped at whatever cost.
The Institute of Certified Public Accountants of Kenya (ICPAK), which is supposed to be the professional regulator, is a toothless bulldog when it comes to the big audit firms. It’s quick to roast small-time accountants but frets when the main audit firms are involved. This has created a culture of impunity in the profession.
ICPAK has to stop barking and begin to bite. It has proposed the creation of an independent tribunal to handle professional misconduct. This is good but before that materializes, shareholders need to see justice being done – auditors or accountants paying for their sins by being blacklisted. In the US, accounting fraud is a big crime that has had CEOs jailed.
The writer is managing editor of businesstoday.co.ke. Email: [email protected]
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