Cape Town - State-owned arms manufacturer Denel has hit back at claims that it tabled an incorrect annual report, despite being told that the initial audit opinion had been amended.
In Parliament on Wednesday, the office of the auditor general told members of the portfolio committee on public enterprises that it had requested auditing firm SizweNtsalubaGobodo (SNG) to change its clean audit opinion on Denel after irregular expenditure had come to light.
The auditor general also wrote a letter to Parliament, informing the institution of Denel's move to table an incorrect audit report, despite being informed that the audit opinion had been amended.
"Denel's clean audit opinion was not supported by evidence and SNG's interpretation of the criteria to evaluate irregular expenditure might have been incorrect," the letter read. "We suggested that SNG reconsider their opinion which they duly did and the audit report has been amended.
"The amended report was sent to Denel for consideration, but Denel resisted the amended report and went on to table the initial report which is incorrect."
The audit’s fine
But in a statement on Wednesday evening, Denel said there was nothing wrong with its audit, as it did include details of irregular expenditure as the office of the auditor general has asked for.
“Denel would like to state that all matters relating to the irregular expenditure incurred in the 2017 financial year have been fully disclosed in note 35 on page 202 of the integrated report,” it said. “This report was thoroughly reviewed by SNG prior to them signing off their audit report on the 31st July 2017.”
Indeed, two pages relating to irregular expenditure are included in the arms manufacturer’s 2016-page report.
They note 139 instances of various forms of irregular expenditure. These include 106 cases where deviations from the procurement process not adequately approved, 8 cases where bids were not adequately approved, and 7 cases where contract extensions were not adequately approved.
Denel said that its auditing firm SNG had “extensive knowledge of the business and the key risk areas requiring focus within Denel which irregular expenditure is one of them”.
“In the 2017 financial year, SNG conducted an independent audit taking into account their standard operating procedures without interference from Denel management,” it said.
“All information and accounting records were made available to SNG in order to conduct the audit during the period starting in February 2017 to July 2017.”
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