The South African Board of Independent Regulatory Board for Auditors (IRBA) has said it will recommence its investigation into the auditors of retail holding company Steinhoff after it publishes its restated financial figures.
The IRBA launched its investigation into the company’s auditors, Deloitte South Africa, in 2017 following a share price collapse of Steinhoff and allegations of accounting irregularities.
PwC launched a report into the company in December 2017 and has reportedly found an accounting gap totalling $7.4bn, through recorded false transactions between 2009 and 2017.
The regulator noted its concern with the allegations contained in the PwC forensic investigation report regarding the nature and extent of the corporate fraud allegedly perpetrated by a small group of executives and related parties, potential accounting irregularities and potential non-compliance with laws and regulations.
The IRBA is investigating whether auditors complied with international audit standards and the IRBA code of ethics such as the exercise of professional scepticism by the auditor.
IRBA CEO Bernard Agulhas said: “For clarity, our investigation is not into the company or the directors implicated in the allegations in the PwC report. Our investigation, which commenced in December 2017, is into Deloitte South Africa who had signed off on the group consolidated financial statements up to 2015.
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“We have received the audit files for 2014, 2015 and 2016. Being able to conclude our investigation into the audits is reliant on the publication of the restated figures for the 2015 and 2016 financial years.”
However, the IRBA will be requesting the full report and annexures where these relate to the audit of Steinhoff and to accounting irregularities.
It will identify the areas of the report which it wishes to pursue for further investigation, bearing in mind that certain allegations may pertain to off-shore acquisitions and transactions, which may have been audited by a foreign audit firm over which IRBA does not have jurisdiction.
Agulhas added: “We are pleased with Steinhoff’s commitment to work with regulators and trust that we will be provided with access to the PwC report.”
Agulhas also said that the IRBA is undertaking a number of initiatives to strengthen oversight, equip audit committees and close gaps in enforcement. These include:
- Comprehensive Regulation over other role players in the financial reporting chain
- Strengthening of audit committees through Audit Quality Indicators and Transparency Reporting
- Strengthening independence and professional scepticism through mandatory audit firm rotation
- Engaging with the JSE Ltd on regulation around secondary listings
- Concluding memoranda of understanding and adequacy assessments with the US regulator and EU, which includes sharing of information
- Amendments to the Auditing Profession Act to close gaps in enforcement
- Continued engagement with National Treasury to provide the IRBA with more capacity and funding.