... The South African accounting watchdog has launched an investigation of Deloitte’s audit of Steinhoff International after the retailer disclosed accounting irregularities that have triggered a share price collapse.
The Independent Regulatory Board for Auditors said on Friday it was investigating audit work done by Deloitte South Africa for the South African-based retailer from 2014 to 2016. The watchdog plans to liaise with accounting regulators in Germany, where Steinhoff is listed, and the Netherlands, where the company is incorporated.
Deloitte has signed off on Steinhoff’s accounts for at least 18 years, according to the retailer’s annual reports.
The investigation is another blow for the Big Four accounting firm, which admitted in September it had suffered a cyber attack that undermined its reputation as an expert provider of security advice. The breach, which affected clients, also prompted an investigation of Deloitte by New York state’s attorney-general, which is ongoing.
Steinhoff’s announcements that it had discovered “accounting irregularities” and planned to restate its 2016 financial results have caused the company’s share price to plummet by more than 80 per cent.
The company’s former chief executive, Markus Jooste, stepped down last week and apologised in correspondence with close associates for making “some big mistakes” that have “caused financial loss to many innocent people”.
German prosecutors said they were investigating whether Steinhoff inflated its revenue and book value, and Steinhoff’s supervisory board has commissioned PwC to carry out an independent investigation into the accounts.
Bernard Agulhas, chief executive of the South African regulator, said: “While the auditing profession still mostly delivers high quality services, it is also time for regulators to act decisively, cohesively and firmly against those who engage in any misconduct or wrongful behaviour.
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“This is the only way that the public can have the confidence that any assurances they receive are sufficiently reliable to protect their hard-earned investment.”
The watchdog has come under pressure to take a tough stance on misconduct in the accounting profession following a separate scandal involving South Africa’s billionaire Gupta family and KPMG. The rival accounting firm audited businesses run by the Guptas — who have been accused of corrupting state contracts through ties to President Jacob Zuma — for 15 years. The family and Mr Zuma have denied wrongdoing
In response to the two accounting controversies, the IRBA this week proposed lifting a limit on the level of fines it can issue in an attempt to reinforce confidence in the country’s financial markets. At present the maximum fine it can impose is around $15,000.
Deloitte declined to comment....
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