Deloitte facing £86m lawsuit over African Bank Investments audit

Deloitte’s South African arm is facing legal claims from two investors over alleged losses of R2bn (£86.4m) they claim resulted from ‘unorthodox’ accounting practices at the firm’s audit client, African Bank Investments Ltd (ABIL)

The two individuals say they lost R729m and R1.3bn respectively when ABIL collapsed in 2014, due to ‘reckless’ conduct by the company’s directors.

The shareholders say it was ‘false’ of Deloitte to note in its audit opinion that financial statements fairly represented ABIL’s position, and are suing the auditors as well as former and current directors of the bank, according to South Africa’s Business Day.

The paper quotes the legal summons as stating: ‘The auditors were aware or should have been aware that ABIL was concealing non-performing loans by making new loans to the same debtors to service old loans for the sole purpose of making collections look good when they were not.

‘The auditors failed… to indicate… the true state of affairs and the unorthodox accounting practices employed by ABIL, and when this practice was finally reversed in 2013, the effect was a R2.1bn reduction in assets.’

Deloitte has confirmed it is aware of the lawsuit.

Deloitte Africa CEO Lwazi Bam said: ‘Deloitte takes its responsibilities in regard to being a guardian of public trust very seriously and we believe that we have fulfilled and continue to fulfil this responsibility.

‘We wish to re-iterate that Deloitte subscribes to the highest standards of ethics, integrity and professionalism. We are confident in the sufficiency and completeness of our audit procedures and quality reviews, and stand by the quality of our work.’

Bam went on to say: ‘A company’s management has the responsibility for the preparation of financial statements in compliance with relevant accounting standards and as auditors, we have a responsibility to independently audit and report on those statements.’

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Pat Sweet |Reporter, Accountancy Daily [2010-2021]

Pat Sweet was the former online reporter at Accountancy Daily and contributor to the monthly Accountancy magazine, pub...

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