Tongaat accounting scandal: Questions raised over role of management
The company released a summary of an investigation by auditing firm PwC, which showed executives inappropriately capitalised assets, among other irregularities, to hike profits.
JOHANNESBURG - As the markets reacted to revelations that sugar giant Tongaat Hulett’s profits were overstated for years, there were warnings that unethical conduct by corporates was all too common.
The company released a summary of an investigation by auditing firm PricewaterhouseCoopers (PwC), which showed executives inappropriately capitalised assets, among other irregularities, to hike profits.
Deputy chairman at Sasfin Securities David Shapiro said questions should be asked about the role of the management team at Tongaat Hulett and its external auditors during the period when executives acted illegally.
The company's board said one of the failures in governance identified was a culture of deference and lack of challenge that led to employees following instructions without questioning the basis of the accounting practices.
Shapiro described the developments as tragic.
“It’s rather distressing in a country where we’ve held governance so high, particularly with the various King reports, that we still find public companies doing what they’ve done,” Shapiro said.
Tongaat Hulett suspended its listing on the Johannesburg Stoke Exchange in June at a great cost to its share price.
The company stated that it could not be sure of the underlying value of its assets when the accounting irregularities were exposed.
Among the remedial measures the board would undertake was legal action against the executives who were involved in the deception.