Home Accounting and Auditing Denel’s accounts littered with flaws – AG

Denel’s accounts littered with flaws – AG

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Shoddy and incomplete accounting at South Africa’s troubled state-run arms firm Denel left the country’s Auditor-General unable to make a judgment on the soundness of its most recent financial statements, according to the firm’s annual report.

Reuters reports that the AG listed more than 30 problems at Denel, which reported a R1.7 billion loss for 2017/18 and recently fired its chief financial officer over allegations of misconduct, that left it unable to offer an opinion on its accounts.

Reforming struggling state-owned firms is a top priority for President Cyril Ramaphosa, who replaced former president Jacob Zuma one year ago and has promised to restart South Africa’s sluggish economy and clean up public institutions.

But ongoing problems at public enterprises like Denel and power utility Eskom – both embroiled in corruption scandals – undermine confidence in him ahead of elections in May.

The list of issues outlined by the Auditor-General at Denel included a failure to apply international accounting standards and “basic” financial management disciplines, a lack of any information on fruitless or wasteful spending and the absence of an effective system to recognise irregular expenditure.

The Auditor-General said it “was unable to obtain sufficient appropriate audit evidence to provide a basis for an audit opinion.”

In the report, Denel’s Chairwoman Monhla Hlahla and its acting CEO Michael Kgobe wrote that they received the auditor’s conclusions with “grave concern” and had launched an audit turnaround plan to address the issues raised.

The main opposition Democratic Alliance (DA) party said the report had been slipped under the radar.

“The DA reiterates its call that Denel and other struggling state-owned entities be placed under business rescue in preparation of partial or full privatisation to suitable partners,” the party said in a statement.