Watchdog starts probe into Deloitte's Steinhoff audits

Cape Town - The Independent Regulatory Board for Auditors (IRBA) said it has flagged several "lines of further investigation" in its ongoing review of Deloitte South Africa’s conduct during its audits of embattled furniture conglomerate Steinhoff [JSE:SNH]. 

Deloitte SA has been the long-time auditors of the Stellenbosch-headquartered company, whose share price has plunged by over 85% since accounting irregularities in its books were flagged by Deloitte in early December 2017, causing its then CEO Markus Jooste to step down. 

But the IRBA said in a media statement on Sunday evening that it would need to wait for Steinhoff's restated 2017 audit, as well the results of an independent forensic review into the company by PwC, before it can conclude its investigation. It is not yet known when PwC will conclude its forensic review of the company’s finances.

The IRBA is a statutory body that oversees public accountancy in South Africa, verifies that only qualified auditors are admitted to the profession, and investigates if registered auditors adhere to ethical standards.

The board's investigation into Steinhoff, first announced in December 2017, will review audits by Deloitte SA of Steinhoff’s parent company for the years 2014 and 2015, and of Steinhoff’s SA subsidiaries for the year 2016. 

As IRBA CEO Bernard Agulhas previously told a Parliamentary briefing, the board's investigation into Deloitte and Steinhoff would cover whether the auditor missed any accounting irregularities, or broke the board’s code of ethics.

Case of high public interest 

The auditing oversight body said it started investigating Deloitte SA earlier in February and would “continue to prioritise high public interest cases” such as Steinhoff. 

“While the recent ruling in the Dutch court which ordered Steinhoff to amend its 2016 accounts has confirmed some elements which we will review, the Steinhoff case is a multifaceted one which will require significant investigation," said Agulhas.

"Nevertheless, our initial review of the audit files has identified some lines of further investigation which we are pursuing."

Agulhas said the board is reviewing the 2014 and 2015 audits of Steinhoff’s parent holding company, as at the time it still had its primary listing on the JSE. 

Steinhoff International Holdings moved its primary listing to the Frankfurt Stock exchange in late 2015. For this reason, the board is only reviewing the 2016 audits of Steinhoff’s South African subsidiaries. 

The IRBA said it has about 150 open investigations at any given time, which means it has to “carefully balance its limited resources to prioritise high public interest investigations”. 

It is also investigating KPMG for its audits of Gupta-linked companies, among other matters. 

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