Irba wraps up evidence into audit of Gupta's Linkway

Ajay and Atul Gupta. (Muntu Vilakazi, Gallo Images, City Press, file)
Ajay and Atul Gupta. (Muntu Vilakazi, Gallo Images, City Press, file)

The Independent Regulatory Board of Auditors (Irba) held two days of disciplinary hearings this week into the audit of Linkway –the company alleged to have been involved in the Gupta wedding scandal – by former KPMG auditor Jacques Wessels.

Irba filed six charges of improper conduct against Wessels related to the audit of Linkway, for the year ended February 2014.

Linkway is alleged to have been used by the Guptas to divert funds earmarked for the Vrede dairy project to foot a multimillion-rand bill for a family wedding at Sun City.

The auditing watchdog concluded its evidence in chief from its witness investigator Janica Boshoff in support of all six charges, Irba said. Wessels did not pursue cross-examination of Boshoff. He did not lead any witnesses and closed his case, Irba said.

Chairperson of the hearing Alan Dodson, who is the chair of the Irba disciplinary committee, directed Irba to file heads of argument by July 20 and Wessels to file heads of argument by July 30, Irba said.

“The hearing … will reconvene on Saturday August 4 to hear oral arguments from the parties. Judgment is expected within 30 days thereafter,” Irba said.

Irba contended in its charge sheet that Wessels failed to obtain sufficient appropriate audit evidence to reduce an audit risk to an acceptably low level.

On the topic of fraud, Irba said Wessels’ “audit file didn’t contain documented analytical procedures performed to identify unusual or unexpected relationships that might indicate risks of material misstatements due to fraud”.

“It is evident that the [Gupta] wedding- [at Sun City] related transaction was not in the ordinary course of business … There were no documented considerations with regards to any fraud indicators on the file,” Irba said.

Linkway was officially involved in the construction industry. “The company does not have any employees … It lacks an apparent commercial purpose,” Irba said.

The sample selected in the revenue working papers amounted to R42.4 million, including R26.3 million for a wedding function, R12 million related to work done by ANN7 and a number of other Gupta-related transactions.

Irba said Wessels failed to investigate these “unusual transactions”. Wessels failed to evaluate the business rationale for the transactions that were outside the normal course of business to identify whether there might be fraudulent financial reporting.

“The number and nature of transactions between Linkway and Islandsite Investments and the amounts involved lack commercial logic as they do not appear to be for business purposes. A further indicator of fraud relative to these transactions is that most transactions were ‘rounded amounts’. The working paper did not include any detailed descriptions of the nature of these transactions.

“KPMG confirmed that no members of the audit team on the Islandsite group received the required training,” Irba said.

Irba contended that Wessels didn’t comply with its money laundering guide of January 2011.

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