Why didn’t PwC pick up corruption?

SAA MESS: COMMISSION HEARS OF IRREGULARITIES

Concern after auditors give airline’s financials clean bill of health for five years. Moneyweb

South African Airways (SAA) continues to make headlines for all the wrong reasons. While government seems determined to ensure that its business rescue process goes ahead and is successful, some of the factors that contributed to the dire state of affairs at the airline were heard at the Commission of Inquiry into State Capture last week.

The PwC audit partner assigned to the SAA audit for 2014 to 2016, Pule Mothibe, testified at the commission on Thursday and Friday. SAA was audited by joint auditors Nkonki and Pricewaterhouse

Coopers (PwC) for 2012 to 2016.

The commission last dealt with the aviation industry in February this year, when it had begun looking at the role of auditors in the SAA-run companies.

Mothibe was expected to shed light on a question the commission had been pondering. As evidence leader Kate Hofmeyr put it: “If corruption and looting was potentially taking place in our public institutions in the past – how was it that the auditors did not pick it up?”

In the five years that Nkonki and PwC audited SAA, PwC never picked up on anything untoward, and gave the SAA financials a clean bill of health.

Mothibe defended the audit work carried out by PwC:

On the allegation that PwC did not identify any deficiencies in material controls in 2017, he replied: “We did not identify any deficiencies in internal control that we considered sufficiently significant for inclusion in this report.”

When asked to explain why the irregular expenditure significantly increased from 2016 to 2017, Mothibe maintained that the irregular expenditure identified by the auditor-general was peculiar to 2017. “The audits for 2015 and 2016 were correct.”

He was absolutely clear that PwC would never take on an audit that it could not deliver on. “We identified deficiencies, we raised them with management and the audit committee, but we did not elevate them to the audit report.”

Mothibe: “We did the work but we failed to report it.”

Nkonki and PwC were appointed to audit SAA for the year 20112012. However, it continued to audit the company for the next four years without SAA having gone out on tender. Thus, the “appointment” of Nkonki and PwC for the next four years was irregular in terms of the Public Finance Management Act.

The joint audit partner, Nkonki, made two payments totalling R312 500 to Kwinana and Associates, the audit firm belonging to SAA nonexecutive director Yakhe Kwinana.