Ex-Hippo CFO wants audit report revoked
Former Hippo Valley Estates chief financial officer John Chibwe has filed a petition in the High Court seeking the quashing and quashing of a forensic audit report which linked him to financial misconduct at the sugar-producing company .
Tongaat Hulett, third defendant and major shareholder of Hippo Valley Estates, released the findings of a PriceWaterhouseCoopers (PwC) (fourth defendant) forensic audit report into its operations and those of its subsidiaries, which alleged wrongful conduct by Mr Chibwe.
The South African auditing firm concluded that certain senior executives, Mr Chibwe said, initiated or participated in undesirable accounting practices which resulted in, among other things, the recognition of income in reporting periods earlier than they should not have been, and the improper capitalization of expenses into assets. .
“This resulted in an overstatement of earnings for the respective years and an overstatement of certain assets in THL’s financial statements,” Tongaat Huletts said. The company said it would file a civil suit against the alleged culprits.
PwC’s investigation also revealed that there were a number of governance failures whereby internal policies, guidelines and frameworks were not followed, creating an environment in which “senior managers could initiate or participate in anomalies in the financial reports”.
Other respondents named in Mr Chibwe’s application to the High Court include Zimbabwe Sugar Sales Limited (first defendant), Hippo Valley Estates (second defendant) and PriceWaterCoopers South Africa (fifth defendant).
In the motion, Mr Chibwe said the audit report should be declared void and the illegality of such a “fictitious process and result” should be ruled by the court as nothing can depend on a nullity. .
“So I pray that the court will declare the audit report null and void and set it aside for the aspects that concern me,” he said.
He said that the fact that the audit was carried out at the instigation of Tongaat Hulett, himself the main figure on the board of directors, the alleged transactions having been deemed correct by the auditors and accepted by the shareholders of Hippo Valley Estates leaves a messy stain that needs to be removed.
“The auditors went beyond and beyond what Tongaat could do as a member/shareholder. As part of due process, the audit regarding the first and second defendants should have been sanctioned by their respective boards of directors in terms of their articles of association and memorandum of association,” Mr. Chibwe said.
“I wish further to state as a matter of fact that the first and second never commissioned a forensic audit investigation of their affairs. I say this because of my position then as a member of the board of directors of the two entities.
“By so mandating the audit, the third defendant violated the statutes of the first and second defendants and the existing provisions of the Companies Act at the time, which provided that companies make rules about how such a process had to be carried out.”
He asserted that the audit process and its subsequent findings must be nullified in law as it was undertaken by the Fourth and Fifth Responders in violation of the Public Accounts and Auditors Act (Charpetr 27:12), which provides prior registration in Zimbabwe. of any auditor, including forensic auditors, by the relevant regulatory body.
“I assert that the auditors who undertook the audit process whose resulting report I challenge here were not registered here in Zimbabwe and could not, under the law, offer a valid result.
“The audit report was also sanctioned and commissioned by the third defendant in direct violation of the then current section 196 of the Companies Act (Cap 24:04) as read with section 198 of the same law. The court therefore requests the annulment of the audit report because it was done in disregard of existing legal instruments,” reads the petition.
Mr Chibwe also argued that the forensic investigation was a legal void because the way the audit process was conducted violated his rights.
“I was never informed that I was undergoing an audit process by the representative of the fourth and fifth respondents who asked me about the sale of bulk sugar to first defendant and an alleged redemption letter from BancABC.
“It remains abnormal that the auditor does not ask me to explain certain practices within an organization, in particular first and second responders, only to end up tackling the same issues in the final report.
“Indeed, shocking as it may seem, I have never commented on or clarified any matters attributed to me as wrongdoing, except for the brief comments I made to Trevor White on the second respondent, not knowing that this was a forensic audit investigation.
“In its substance, the forensic audit report is grossly inaccurate and can easily be passed off as an ax job designed to smear my name, career and reputation,” he said.
Mr. Chibwe pointed out that the fourth responder concluded that the bulk sugar sale conducted by the first responder was related to the bonuses I earned as the second responder’s CFO when this is not correct.