KPMG, Price Waterhouse Coopers (PwC) and Deloitte and Touch, three of the auditing firms shortlisted by the Auditor General to bid to examine Bank of Uganda operations in relation to controversial sale of Crane Bank to Dfcu Bank have been pointed out as conflicted, hence ineligible.
The AG shortlisted five audit firms to pick the bidding documents for the job. One firm will be selected to work with a team of forensic experts from his office to investigate Bank of Uganda.
The internal AG team will be led by James Bantu, the director for forensics.
The other shortlisted firms are Ernst & Young Uganda, a member firm of Ernst & Young Global Limited, and Tomson & Company.
It is understood that some members of the AG’s office procurement committee have queried the three firms over conflict of interest as they were clients of the defunct Crane Bank, whose sale is the subject of the investigation.
Crane Bank was audited by KPMG from 2004-2007 and 2013-2015; PwC in 2008-2010; Deloitte and Touch 2011-2012.
Firms can’t audit their client!
It has also been noted that some of the firms are pre qualified by BoU and hence cannot audit their own client.
For example PwC was contracted by BoU to conduct a forensic audit on Crane Bank and it is their forensic report that BoU used as a basis to file a case against former Crane Bank shareholder Sudhir Ruparelia.
The case is pending hearing in the High Court, but Sudhir secured some early victories as the BoU lawyers David Mpanga of AF Mpanga Advocates (Bowmans) and Timothy Kanyerezi Masembe of MMAKS were thrown off the case by court over conflict of interest. Court also advised on mediation and Principle Judge Yorokamu Bamwiine was appointed mediator in the case.
Sudhir’s lawyers, Kampala Associated Advocates (KAA), also rubbished the so called forensic report as a draft document, made by PwC on November 13, 2014.
AG tried to source foreign firms
Because of the conundrum of conflict of interest, Matooke Republic understands that AG Muwanga proposed that a foreign firm be sourced to carry out the audit on BoU.
However the AG’s office was advised by their government lawyers that “each firm has a territorial boundary.” For instance, you cannot engage KPMG Kenya when you have KPMG Uganda.
Sources indicate that in trying to prevent conflict of interest, which is glaring on the onset, the committee added a clause in the bid documents that disqualifies any staff who ever audited BoU or reviewed audits with Bank of Uganda.
KPMG and PwC scandals elsewhere
Some of the shortlisted firms have been in the storm in the recent past over shoddy work in different parts of the world.
Early this year, the Securities and Exchange Board of India (SEBI) banned all the firms in the PwC network from auditing listed companies for two years citing fraudulent dealings.
In 2017 PwC was also banned in Ukraine over an accounting black hole worth billions at Privatbank.
Privatbank was one of Ukraine’s top banks and PWC was the auditor from 2007-2015. In December 2016 Privatbank was nationalised after a $5.5bn capital shortfall was discovered by the country’s central Bank, NBU.
Privatbank filed legal proceedings against PwC, claiming it suffered losses as a result of “serious and extensive breaches by PwC of its duties and responsibilities”. It is seeking damages of $3bn from PwC’s Cyprus and Ukraine branches in relation to their auditing work at PrivatBank between 2013 and 2015.
In South Africa, KPMG LLP has been under increasing pressure over work done for the wealthy Gupta family, with Finance Minister Malusi Gigaba calling on all government entities to review work with the auditing firm.
Late last year, an influential business lobby group suspended the company’s membership and the governor of the central bank said it was concerned that KPMG’s internal standard controls weren’t of an acceptable quality.
KPMG, one the world’s so-called big four accountancy firms admitted that work for the Guptas fell short of acceptable standards.
As we await the AG’s decision on which auditing firm to work with, it is clear the scale is tipped against KPMG, Deloitte and PwC because of their conflict of interest. Court already set a precedent when they threw conflicted lawyers Mpanga and Masembe over the Crane Bank case.