Audit firm SizweNtsalubaGobo (SNG) has not been approached by anyone from the Gupta family or from the cabinet of president Jacob Zuma, says Victor Sekese, CEO of the firm that was announced this week as the new auditor of Oakbay Resources and Energy Limited, owned by the controversial Gupta-family. Sekese says SNG has consulted with Oakbay’s former auditor KPMG “and established that there are no professional and ethical reasons not to accept the client”.
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KPMG recently terminated its contract with Oakbay, with its CEO Trevor Hoole indicating that the "association risk is too great for us to continue". Majority-owners of Oakbay are the Gupta family, who have been accused of undue influence on president Zuma and interference in appointments of ministers, a practice that has been labeled 'state capture'.
SizweNtsalubaGobodo is the country's largest black-owned audit firm, which is trying to make inroads in the private sector, which is still heavily dominated by traditional audit firms KPMG, Deloitte, PwC and EY. While the JSE would like a bigger role for black-owned firms like SNG, Nkonki and SekelaXabiso, it cannot force listed firms to contract them. "The market is still dominated by the Big 4 accounting firms. The regulator is concerned about this. Nevertheless, we are working hard to break the barriers and this based on our competence," says SNG CEO Sekese, whose firm is auditing MTN, Datacentrix, Pinnacle and now Oakbay.
(In the photo three members of the panel of judges of the 2016 CFO Awards: SizweNtsalubaGobodo CEO Victor Sekese, JSE Limited CFO Aarti Takoordeen and Deon Viljoen, CFO and acting CEO at Alexander Forbes)
This week the cabinet instructed three ministers to engage South Africa's four major banks, which severed their relationships with Oakbay, after KPMG terminated its contract. The firm also needs a new listing sponsor, after Sasfin Capital followed KPMG's example. SNG, however, was not approached by ministers, nor by the Gupta-family says Sekese, who says he only dealt with "executive management" of Oakbay.
We asked Sekese if there were any hesitations to accept the assignment, given the politically sensitive nature of the business.
Sekese said:
"As is common with the decision to accept any external assignment and in accordance with the International Ethics Standards Board for Accountants' Code of Ethics for Professional Accountants (IESBA Code) together with the Independent Regulatory Board for Auditors Code of Professional Conduct (IRBA Code), we are required to be independent of the Companies that we audit. We are in a position to fulfil our ethical responsibilities in accordance with the requirements that are relevant to our audit of the financial statements. Further to the ethical requirements, as Registered Auditors and good corporate citizens, we are aware of our reporting responsibilities to various stakeholders."
Earlier SizweNtsalubaGobodo sent the following statement to the media:
21 April 2016
NEW CLIENT APPOINTMENT: OAKBAY RESOURCES AND ENERGY LIMITED
We confirm that we have been appointed as independent auditors of Oakbay Resources and Energy Limited (ORL). We have been awarded this opportunity following a competitive bidding process .
It is a statutory requirement of the Companies Act 71, 2008 for public interest companies to appoint an auditor and SizweNtsalubaGobodo (SNG) has thus been appointed as ORL's auditors accordingly.
SNG is one of the top five auditing firms in South Africa and has been in successful practice for more than 30 years. SNG has a number of large listed companies as well as public sector organisations amongst its clients. We have offices throughout South Africa in 12 centres, and we provides full auditing, advisory and forensics services. With our 30 years' experience in performing audit assignments, we are in a position to perform an independent and professional audit of ORL.
As members of SAICA we are bound by International Federation of Accountants professional codes. In accordance with the International Ethics Standards Board for Accountants' Code of Ethics for Professional Accountants (IESBA Code) together with the Independent Regulatory Board for Auditors Code of Professional Conduct (IRBA Code), we are required to be independent of the Companies that we audit. We are in a position to fulfil our ethical responsibilities in accordance with the requirements that are relevant to our audit of the financial statements. Further to the ethical requirements, as Registered Auditors and good corporate citizens, we are aware of our reporting responsibilities to various stakeholders.
We are aware of media reports relating to the client as a result of its majority shareholders. One needs to understand that an audit is an objective process independent from client's management, those charged with governance, its owners and other audit clients of the firm. We conduct our audits in accordance with International Standards on Auditing (ISAs). In accordance with ISAs, we exercise professional judgment and maintain professional skepticism throughout the audit. The firm has followed a stringent on-boarding process in accepting the client.
We have in accordance with the professional standards consulted with the predecessor service providers of ORL and established that there are no professional and ethical reasons not to accept the client.
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