PwC resignation from Oceana audit troubling, says shareholder

PWC head offices in Sunninghill North of Johannnesburg. Photo by Simphiwe Mbokazi.

PWC head offices in Sunninghill North of Johannnesburg. Photo by Simphiwe Mbokazi.

Published May 31, 2022

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PriceWaterhouseCoopers’ ending of its contract with Oceana comes at a time of heightened regulatory sensitivity at auditing firms as their roles are increasingly being challenged in high-profile frauds such as Steinhoff and EOH.

Oceana, a fishing group facing turbulent governance issues, said yesterday that its external auditors, PricewaterhouseCoopers (PwC), had resigned with immediate effect due to a strained relationship and a lack of “objective and transparent communication” between them.

The resignation on Friday was just a business day ahead of an Oceana audit committee meeting scheduled with shareholders about PwC’s reappointment.

The meeting was scheduled because of the large number of votes (38 percent) against PwC’s reappointment at the AGM on May 5, and in the interests of governance, Oceana said in a statement yesterday.

Oceana has faced a range of other issues affecting shareholders recently. It’s CFO Hajra Karrim was put under “precautionary” suspension in February, CEO Imran Soomra resigned, while company secretary Adela Fortune resigned. The 2021 results were published late, and a forensic investigation last year following claims by a whistle-blower uncovered some backdating of insurance claims.

Anthony Sedgwick, a founder of independent asset management firm Abax Investments, which holds shares in Oceana, said it was “unfortunate” and “troubling” that the relationship had ended, and may have been a result of PwC trying its best to comply with regulations instead of both firms also trying their best to work constructively together.

He said Abax’s own research into the claims by an alleged whistle-blower at Oceana showed most of the claims were “spurious” and made for a “personal agenda”, and the allegations of backdating of insurance claims, which Oceana had indicated it had rectified, had no effect on the financial results.

Oceana said yesterday that PwC had resigned as auditors for the year to end-September 2022 due to “their assessment of significant doubt as to whether there is objective and transparent communication between PwC and the board, which they assert constitutes a significant impairment of their independence.”

PwC, post Oceana’ s last financial year to end-September 2021, had reported five irregularities at Oceana to the auditing regulatory body, Independent Regulatory Board for Auditors.

These were non-disclosure of a conflict of interest by a senior Oceana management member relating to a relationship conflict with a staff member, for whom an ex gratia payment was paid, and a culture of dominance and bullying involving a senior member of management.

Other irregularities related to interference with the forensic investigation by deletion of information from electronic devices, and suspected management irregularities in the submission of an insurance claim relating to the backdating of an internal approval document.

Two of Oceana’s management members were also found to have contravened a confidentiality instruction from the forensic investigators to not discuss the investigation.

Oceana’s board said remedial actions required had been taken to resolve these issues.

The board acknowledged its “strained relationship with the external auditors.”

Yesterday, however, chairperson Mustaq Brey said: “The changes to our external audit relationship allow Oceana to move forward with a renewed commitment to rigorous governance and transparency.”

He said the board had maintained the “highest” standard of governance through the process of managing delays in publishing the results, the independent investigation, and in their engagement with the external auditors.

Oceana’s 2021 full year results were published three months late on March 9.

The delays were in addition to several other concerns expressed by the company in its annual financial statements around the audit process, including the forensic lens applied by PwC, notwithstanding a comprehensive forensic investigation by ENS and the adverse impact the delays had on the group’s reputation, the board said.

“Three months since the publication of Oceana’s audited accounts, PwC have still not finished their audit of the group’s US subsidiary, Daybrook,” Oceana said yesterday.

The board said it had begun a process to identify a potential alternative to PwC.

Oceana’s board said the 2021 results publication was delayed because of the additional time required to conclude the forensic investigation – no evidence of fraud or criminal conduct was found in the investigation, Oceana said at the time.

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