Pressure on Denel forces it to include irregular spending in audit report

AUDITOR-general Kimi Makwetu has expressed concerns regarding the financial audit that auditing firm SizweNtsalubaGobodo (SNG) did on state-owned arms manufacturer Denel.

According to a letter to parliament’s public enterprises committee‚ the auditor-general found that SNG had failed to properly account for irregular expenditure in its report of Denel’s financials.

SNG requested that Denel amend the flawed reports‚ but according to Makwetu‚ Denel resisted this request and proceeded to table the incorrect financials.

DA spokeswoman on public enterprises Natasha Mazzone said it was disconcerting that Makwetu had to write a letter to an audit firm to request that it reconsider its audit opinion.

“How secure are we that the other audits done by SNG are correct and transparent and free from political interference or massaging of the truth?” Mazzone said.

Mazzone wants Denel to be called before the committee to account for this transgression.

She said the DA shared the auditor-general’s concerns as SNG had also audited the financial statements of Transnet and Eskom.

“Given the fallout from the KPMG scandal and credibility concerns with the audit profession in general‚ we trust that Makwetu will go over the audit outcomes of Eskom and Transnet with a fine-tooth comb to check for similar errors‚” Mazzone said.

“Corruption is rife within our state-owned enterprises‚ and we need to ensure that auditors are transparent.”

Former finance minister Pravin Gordhan also raised grave concerns over the issue. SNG managing director Aaron Mthimunye told the committee there was a disagreement over the irregular expenditure between Denel and its auditor.

Makwetu had to ask the firm to include the reference to irregular expenditure in its audit of Denel.

This would change the audit opinion from a clean audit to one that was unqualified with irregular expenditure‚ Mthimunye said.

“There was considerable resistance from Denel’s chairman and chief financial officer to release the adjusted audit report‚” he said.

The correct audit opinion including the irregular expenditure was submitted afterwards.