Choppies charged for delays beyond their control
Oarabile Mosikare | Friday February 19, 2021 16:07
After the dereliction of duty, Choppies Chief Executive Officer (CEO) Ramachandran Ottapathu and founder Farouk Ismail demanded P450 million from PricewaterCoopers Botswana, blaming the auditors for alleged lapses that led to shop’s suspension from stock exchange in 2018 and a collapse in value.
Ottapathu and Ismail in their lawsuit filed in Court last year claimed PwC and its partner, Rudi Binedell breached the audit agreement they signed in 2018 and in the process made the shop lose millions.
According to their court documents the two shareholders of Choppies accuse the auditors of breaching their ethical, statutory and common law by prioritising their own interest and entrenching their position in Choppies without regard to the best interest of the company and its shareholders.
Last year October, BAOA charged Choppies with breach of Section 55(a) of the Act which provides that where any public interest entity or other entity is required to prepare any financial statement or report under any enactment, it shall ensure that the financial statement or report is in compliance with the financial reporting requirements of any other relevant enactment. Choppies was also charged with breach of Section 205(1) of the Companies Act which provides that the Board of every public company shall ensure that, within five months after the balance sheet date of the company, in case of a public company, and within seven months after balance sheet date of any other company, financial statements that comply with Section 206 to 208 are (a) completed in relation to the company at that balance sheet date and (b) dated and signed on behalf of the Board by two directors of the company, or, if the company has only one director, by that director. In their mitigation Choppies represented by Uttum Corea explained that while the issues relating to non-compliance with International Financial Reporting Standards (IFRS) took place from as far back as 2011, the whole process had been done in a transparent manner, with the involvement of the audit committee, Board and the then auditors. Choppies CEO produced files showing evidence of that fact through meetings and minutes accordingly attended and signed by the relevant people.
“Most of the issues had now been addressed as shown by the responses from the current Board through the new chairman of the audit committee,” Corea pleaded. Some of the delays were not Choppies’ fault as the auditor requested reports which were, with the benefit of hindsight, not necessary. “Consequently, the auditors took longer than was necessary and that it was public knowledge that litigation was impeding in this regard. There was also mention of the fact that PricewaterhouseCoopers was conflicted because of an issue of employment with one of its partners.
“The respondent also mentioned that there had been prior engagement with the complainant [BAOA] CEO on the independence issue, which at the time had been concluded amicably after some engagements with PwC managing partner.”
The issue of the audit of subsidiaries, Corea submitted, was of great concern to them, particularly that the auditors had been paid for the work. The issue of the delays was also communicated to the BAOA, through Choppies’ attorneys.
“The respondent had requested extensions of filing the financial statements with Companies and Intellectual Property Authority.”
Lastly, Corea stressed that the delay was beyond their control and that at the point a meeting was convened between the respondent, the external auditors and the Botswana Stock
Exchange at which it was agreed that PwC should assist in the finalisation of the audited financial statements regardless of the form of the opinion, but PwC reneged on the agreement and decided not to finalise the audit.