Dutch investors gun for Deloitte over Steinhoff
VEB wanted to know why Deloitte had been unable to prevent the multibillion euro fraud
Deloitte’s role in the collapse of Steinhoff has been moved to centre stage following the decision by Dutch Investors Association VEB to hold the audit firm liable for damages incurred by Steinhoff shareholders.
VEB, which served summons on Steinhoff in early February 2018, contends shareholders were encouraged to invest in the group after Deloitte had provided unqualified auditor’s reports for the 2015 and 2016 financial statements.
Following disclosure of widespread accounting irregularities in early December 2017, Steinhoff said it was uncertain about €6bn of non-South African assets. The group subsequently said the 2015 and 2016 accounts had to be restated.
"Auditors have a public duty in supporting confidence in the financial markets. Investors must be able to rely on an unqualified auditor’s report for the basis on which they make investment decisions," said Armand Kersten, head of relations at VEB. Kersten said his organisation had obtained settlements from auditors in many cases it had fought.
Investors must be able to reply on an … auditor's report for the basis on which they make decisions
VEB has also submitted 65 questions to Deloitte that it wants answered before the annual general meeting (AGM) on April 20. Among the issues it wants clarity on is how the accounting scandal came to light in early December 2017 and why the audit firm had not informed investors about this.
Kersten said VEB wanted to know why Deloitte had been unable to prevent the multibillion euro fraud. VEB also wanted to know why Deloitte had waited so long to withdraw its unqualified auditor’s report. The recent announcement that Steinhoff’s European property portfolio could be over-stated by €1bn was also raised by VEB. "How is it possible that Deloitte approved the valuation of the outlets, office premises and distribution centres recognised by Steinhoff, only to find out soon thereafter that a write-down of over €1bn is required?"
Kersten described the upcoming AGM vote on the reappointment of Deloitte as a "dilemma" for shareholders. The Steinhoff supervisory board had urged shareholders to support Deloitte’s reappointment, saying it was in the best interests of the company and its shareholders. It said one of the company’s main priorities was the expeditious finalisation of the financial 2017 statements and the revised statements for 2015 and 2016.
"Deloitte is already involved in these matters and the appointment of a new auditor midway through a financial year will lead to unacceptable delays in the completion of these statements," Steinhoff said in a recent statement.