Auditors on the frying pan after ‘cooking’ of books at Uchumi

Uchumi Supermarket, Koinange Street Branch. Releasing the financial results for the year to June 2015, Uchumi Chief Executive Julius Kipng’etich said the previous management had concealed losses of up to Sh1.04 billion by cooking the books. PHOTO | DIANA NGILA | NATION MEDIA GROUP 

In Summary

• Releasing the financial results for the year to June 2015, Uchumi Chief Executive Julius Kipng’etich said the previous management had concealed losses of up to Sh1.04 billion by cooking the books.
• Imperial Bank, Dubai Bank, CMC Holdings, Mumias Sugar, Kenya Airways, and now Uchumi, are among companies recently involved in alleged financial scandals without the auditors raising the alarm.

By OTIATO GUGUYU
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Revelations that Uchumi Supermarket management manipulated financial accounts to the tune of Sh1 billion has shifted focus to auditors’ role in listed companies.

Releasing the financial results for the year to June 2015, Uchumi Chief Executive Julius Kipng’etich said the previous management had concealed losses of up to Sh1.04 billion by cooking the books.

“We believe there was manipulation going on over the years, but we had no time so we looked at the last three years where the manipulation shot up,” he said.

Imperial Bank, Dubai Bank, CMC Holdings, Mumias Sugar, Kenya Airways, and now Uchumi, are among companies recently involved in alleged financial scandals without the auditors raising the alarm.

The firms, which are listed on the Nairobi Securities Exchange, also raise the question on whether the regulator, Capital Markets Authority, has been vigilant in ensuring they present the fair value of their books.

“In the case of Uchumi, the auditors should have known the pressure to appear doing well was a risk that could make the management tamper with the books,” Mr Geoffrey Injeni, finance and accounting lecturer at Strathmore Business School told the Nation.

Mr Injeni, however, said an auditor’s work is limited and as soon as the financial statements are prepared by the management, it is difficult to cross-check everything.

Auditors have also defended themselves, saying that the fraud was difficult to detect since it was being done at the highest level of management and over a long period of time.

However, they admit that it is their responsibility to cross check the facts presented.

“An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial systems,” Ernst &Young, Uchumi auditors, says in its report.

Mr Injeni said going forward, auditors might request more time and even raise fees to do more comprehensive checks.