South Africa - Cape Town - 20 February 2019 - Magda Wierzycka, CEO of the Sygnia group. Picture: David Ritchie/African News Agency(ANA)
CAPE TOWN - At its board meeting on May 21, the directors of Sygnia took the decision to look for alternative external auditors, given what it termed, “unsatisfactory engagement” with Deloitte and the reputational risk associated with the firm.

However, before the asset manager, led by South Africa’s richest woman, Magda Wierzycka, could enforce the decision and formally fire them, Deloitte took it upon themselves to terminate their relationship with Sygnia. Strategic move by the auditing firm or something more?

Deloitte recently made headlines after Tongaat Hulett announced that its 2018 financials will probably have to be restated, which cast a dark shadow on more than a decade’s worth of books Deloitte signed off for the company. (Deloitte was Tongaat’s external auditors.)

Tongaat and now Sygnia come after the audit firm is slowly recovering from a bloody nose dealt by the controversy over the collapse of once JSE darling Steinhoff International.

In its announcement on the Stock Exchange News Service (SENS) earlier this week, Sygnia only cited “unsatisfactory engagement” as the main reason it wanted to part ways with the audit firm, without delving into details.

The UN’s Office of Internal Oversight Services uses three types of ratings for opinion - satisfactory, partially satisfactory and unsatisfactory:

  • A rating of “satisfactory” means that governance, risk management, and control processes are adequately designed and operating effectively to provide reasonable assurance regarding the achievement of control and/or business objectives under review.
  • A rating of “partially satisfactory” means that important (but not critical or pervasive) deficiencies exist in governance, risk management or control processes, such that reasonable assurance may be at risk regarding the achievement of control and/or business objectives under review.
  • A rating of “unsatisfactory” means that one or more critical and/or pervasive important deficiencies exist in governance, risk management or control processes, such that reasonable assurance cannot be provided with regard to the achievement of control and/or business objectives under review.

If this is the case, it could also mean that the parting of ways with Deloitte could signal that not all is well at Sygnia too. As a reminder, the asset management firm also sent KPMG packing – about two years ago – for its alleged role in state capture.

KPMG was involved in various scandals, including turning a blind eye at improprieties at VBS Mutual Bank, which resulted in what was dubbed “The Great Bank Heist”.

In response to Sygnia’s SENS statement, Deloitte said the asset manager’s announcement contained certain factual inaccuracies. “While as Deloitte we maintain the highest standards of ethical behaviour and client confidentiality, we are of the view that it is prudent in this instance to set the record straight.”

According to media reports, the JSE may also be looking into the accuracy of Sygnia’s SENS statement.

With several executives and board members also having left in recent months, and Wierzycka remaining silent on the topic of Deloitte’s rebuttal of its statement, it could be there is more here than meets the eye. Perhaps it is time for Sygnia to undergo a fact finding report such as its leader has insisted be conducted on a number of others she has considered to be “unsatisfactory”?

The markets are watching.

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