The biggest asset for any auditing firm is its own credibility.
An audit firm cannot convince its stakeholders that its audits have been done professionally and independently if it lacks integrity, Quality Gurus Incorporated, a United Kingdom-approved Continuing Professional Development (CPD) provider says.
Such is the dilemma BDO Zimbabwe Chartered Accountants has found itself in.
Smarting from a court defeat to former National Social Security Authority (NSSA) chairperson Robin Vela and being at the centre of a now aborted court challenge involving First Mutual Holding Limited (FMHL), Ngoni Kudenga’s company has been put in an invidious position.
Early this month, the Constitutional Court quashed a ruling by the Supreme Court, which upheld an audit report by BDO on NSSA implicating Vela in several corruption cases at the state-run pension fund.
BDO produced a damning audit report after conducting a forensic audit on the parastatal after being contracted by the Auditor General’s Office in 2019.
In 2020, Vela dragged BDO to court over the audit report on NSSA, arguing that the forensic audit did not only expose incompetence, but contained false information emanating from the biased manner in which the audit was conducted.
Vela said BDO was grossly biased against him with the deliberate intention of besmirching his reputation.
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He also argued that BDO was not qualified to conduct the forensic audit, not only because of a lack of personnel with the requisite professional qualifications to perform that specialised function but also because the audit firm was mischievously biased.
BDO, Vela said, lacked the impartiality and fairness required for that task.
True to Vela’s arguments, before BDO was engaged to audit NSSA investments, objections arose over the involvement of Kudenga, the auditing firm’s managing partner, over his previous relationship with the parastatal which risked his chances of being fair.
Vela raised serious concerns over bias or lack of objectivity as defined in subsection 112 of the IESBA Professional Code of Ethics, a failure to verify observations with corporate governance structures of NSSA as well as failure by BDO to make any reference to or use of section 14(3) of the Public Finance Management Act (Cap 22:19) in the report.
The High Court, in June 2020, ruled in Vela’s favour and ordered a review of the audit report after concurring with him that BDO’s findings were biased, incompetent and targeted at Vela in what obviously seemed a witch-hunt exercise.
Justice Webster Chinamora ruled that BDO had “failed to apply their mind to the issue before them and nullified the audit findings as they relate to Vela”.
Aggrieved by the order, BDO and the Auditor-General’s Office approached the Supreme Court challenging Justice Chinamora’s ruling.
Curiously, BDO did not challenge the shredding of their report by Justice Chinamora and sought to block the reviewing of their audit report.
BDO said its work could not be reviewed because it was a private organisation.
The Supreme Court overturned the High Court decision, arguing that the audit firm was not an administrative authority and, therefore, its report could not be reviewed.
This forced Vela to approach the Constitutional Court, which, using its powers of review, dismissed the Supreme Court ruling and ordered a fresh hearing by different judges.
“As agreed, to by the full bench of this court, the operative part of the judgment, in the exercise of the court’s powers as stated in section 19 of the court’s rules, the judgment in the Supreme Court in SC 61/22 be and is hereby set aside,” part of the ConCourt judgment delivered by Justice Paddington Garwe read.
“The matter is remitted to the Supreme Court for a hearing (afresh) before a different panel of judges.”
The ruling was a huge dent to the credibility of BDO, which is grappling with several other cases where its reports have been challenged.
The issue of bias and lack of both professionalism and competence loom large in all the challenges, although BDO insists it conducts its audits professionally.
In February this year, BDO found itself at the centre of another accounting despite involving a financial services group, First Mutual Holdings Limited (FMHL), a subsidiary of First Mutual Holdings Limited.
FMHL queried the audit report by BDO alleging that it ignored its contributions, a similar pattern to the NSSA report which was described by Vela as bordering on bias and unprofessionalism.
“Interpretations of fact, accounting standards, legal and actuarial principles, as well as currency conversion issues, are in dispute,” FMHL said in a statement.
In 2022, IPEC undertook a forensic investigation on FMHL, following the asset separation exercise initiated by the insurance regulator.
In January, IPEC issued a corrective order on FMHL based on the findings of BDO, directing FML›s shareholders to pay significant sums in Zimbabwe dollars and US dollars to the policyholders in respect of perceived actual and potential losses, as recommended by the auditing firm.
The FMHL challenge once again brought to the fore the question of BDO’s credibility.
In March, BDO issued a series of adverts discrediting Vela’s claims that the auditing firm was not qualified and unprofessional.
BDO insisted it had qualified and professional personnel and conducted their business using the highest standards, a claim that has been challenged by the Constitutional Court verdict. 000.0.
The NSSA audit only progressed after BDO committed that Kudenga would not participate following accusations of conflict of interest.
In 2021, Kudenga was also embarrassingly removed as a corporate rescue for the defunct Cold Storage Commission after Bulawayo-based lawyer Dumisani Dube queried his independence considering that he was a board member to a company that had expressed interest in CSC assets.
His close relationship with Agriculture minister Anxious Masuku, who appointed him was also cited as problematic.
