Deloitte South Africa investigated over Steinhoff audits

Deloitte South Africa is being investigated by the country’s audit regulator over its audits of Steinhoff International for the years ended 2014-2016.

The group, which owns multiple retail chains including Poundland in the UK, reported the discovery of accounting irregularities which prevented it from publishing its financial results for 2016 and 2017. Following this, share prices plummeted by 80% in two days.

Steinhoff subsequently hired PwC to conduct an independent review of the accounts. The company has not disclosed any further details or revealed the extent of the irregularities.

Deloitte, who have audited Steinhoff for almost 20 years, have said they will cooperate with the investigation.

Bernas Aghulas, CEO of the Independent Regulatory Board for Auditors (IRBA) commented: “The investigation will follow due process and the timing will depend on information which will come to our attention once we have established the nature of the alleged irregularities and have had further discussions with the relevant parties.”

He stressed the importance of cooperation between international regulators, particularly Germany, where Steinhoff is primarily listed, and the Netherlands, where the holding company is based. The embattled group is also currently undergoing a separate investigation in Germany relating to accounting fraud dating back to 2015.

These discoveries have led to the resignation of chief executive Markus Jooste. Steinhoff’s largest shareholder, Christo Wiese, also resigned as chairman.

Susan Gawith, a portfolio manager familiar with the group, was quoted in Bloomberg stating Steinhoff “reminds many in South Africa of Enron.”

Steinhoff owns 6,500 retail outlets across 30 countries, employing about 90,000 people.

Deloitte becomes the second Big Four firm embroiled in an audit scandal in South Africa, following KPMG becoming caught up in a corruption scandal surrounding the Gupta family.