Watchdog calls for the banning of Deloitte boss from au…

In addition to African Bank, Deloitte was also the auditor of Steinhoff and Tongaat Hulett at the time when both companies engaged in the alleged fraud that cost investors hundreds of billions of rands.

The state auditing watchdog has called for the deputy CEO of Deloitte Africa to face the most severe sanction available – a banning from the auditing profession.

This call follows the decision by the Independent Regulatory Board for Auditors (Irba) disciplinary committee, which found Mgcinisihlalo Jordan guilty of five charges related to the audit of African Bank before it imploded in August 2014, causing investors to lose tens of billions of rands.

Irba reports to National Treasury and Minister of Finance Tito Mboweni.

The watchdog proposed that Jordan should be deregistered as an auditor, advocate Shem Symon, for Irba, said during Jordan’s sentencing hearing, which ran for three days up to Monday.

“It is very serious for a public company, and that justifies the deregistration,” he added.

The strongest protection

“The strongest protection of the audit profession and the public is required,” Symon said.

Lebogang Manganye, an Irba spokesperson, told Daily Maverick that since 2006 the watchdog had debarred 11 registered auditors for misconduct.

In March last year, Irba struck former KPMG auditor Jacques Wessels from its register for his six counts of misconduct related to the audit of Gupta-linked Linkway Trading.

Irba also called for Jordan to pay the maximum fine for each of the five charges. But the Irba disciplinary committee chairperson, advocate Alan Dodson, and another committee member resisted deregistering Jordan.

Symon later presented an alternative sanction, including that Irba suspend Jordan for three years.

Irba charged Jordan with 10 counts of misconduct related to the audit work he oversaw at African Bank and its holding company, African Bank Investments Limited (Abil), from 2009 to 2013.

Irba also charged Deloitte & Touche partner Daniel Crowther with one count related to dishonesty.

But the Irba disciplinary committee exonerated Crowther and Jordan on this charge.

Symon said Jordan had agreed to cover R31.2-million of Irba’s costs related to the disciplinary hearing.

Advocate Michael van der Nest, for Deloitte, said on Monday at the hearing that those costs were half of Irba’s legal fees in the matter.

‘Utterly inappropriate’

Van der Nest said that deregistration of Jordan as an auditor was “utterly inappropriate” and was an “offensive” proposal.

He suggested instead that the Irba disciplinary committee should issue Jordan with a “severe reprimand” and the maximum fine on four out of five guilty charges and 50% for the fifth charge.

Linda de Beer, a corporate governance specialist, backed Irba’s proposal that the watchdog deregister Jordan as an auditor. She said this was because of the extent of the “audit failure” at African Bank that was “pervasive”.

“Fundamental errors occurred throughout the audit,” she said. “It was a comedy of errors. 

“Should Mr Jordan be given another chance to audit? I think there is a huge risk that it goes wrong again.” 

Bam, Jordan accept failure findings

Lwazi Bam, Deloitte Africa CEO, and Jordan in their testimonies accepted the disciplinary committee’s findings and conceded that the company and the audit partner had failed in the bank’s audit.

Peter Chidgey, an accounting expert called by Deloitte, said that Deloitte should also shoulder responsibility for the shortfalls with the audit of African Bank as he felt the firm had failed to provide Jordan with adequate support.

Bam accepted Chidgey’s criticisms. Deloitte, with the benefit of hindsight, had failed to provide Jordan with adequate resources to complete the audit of African Bank, he added.

Symon said Jordan had experienced Deloitte banking auditors to call on,…