It has been a bad few months at the office for international auditing firm BDO in Africa. First, the Institute of Chartered Accountants in Malawi fined the firm 4.8-million kwacha (about R112,000) after it was found guilty of misconduct in relation to the work it did for Malawi’s since discredited election in May 2019.
Charged with negligence, lack of professional competence and misconduct, BDO was taken to task for, among other things, not carrying out a risk assessment of the projected work, and for agreeing to terms of reference that threatened the firm’s independence.
As if the problems in Malawi weren’t enough, BDO has now also come short in Zimbabwe, where it was appointed by the country’s auditor-general to carry out a forensic audit of the National Social Security Authority (NSSA).
BDO seemed, at first, to have achieved considerable success. Its report exposed major fraud and corruption, and led directly to the arrest of Prisca Mupfumira, an ex-minister in the governments of Robert Mugabe and Emmerson Mnangagwa. Mupfumira held several portfolios over the years, including minister of public service, labour & social welfare. She was charged in the wake of the report’s release, and dismissed from her cabinet position while in detention.
However, BDO’s report also implicated former NSSA head Robin Vela in wrongdoing. In February he reported the firm to its head office in Belgium, saying its findings were biased and politically motivated. He also applied to court for the sections of the report that dealt with him — directly or indirectly — to be overturned.
Last week, Harare high court judge Webster Chinamora handed down a decision agreeing that the report had not been fair to Vela, and setting it aside — at least insofar as it referred to him.
BDO’s report was biased and contained inaccuracies indicating a ‘failure to apply one’s mind’
Chinamora said he was concerned by the appearance of bias created by sections of the report. Though BDO claimed to be an impartial auditor, it had indicated, in the letter of engagement it signed with the auditor-general, that it would be willing to testify "for a fee" in any criminal or disciplinary hearings that might arise from its investigation. Vela could be forgiven for concluding that the auditor was compromised, said Chinamora, as it was essentially "touting for business" related to any future steps against him.
When Vela challenged the report for not dealing with cases of the alleged abuse of funds by former ministers, the firm replied that this would have been outside the scope of its investigation, a response Chinamora dismissed as "disingenuous if not dishonest".
The firm was to have dealt with "any other issue that [might] arise", said Chinamora, and so it was "somewhat cavalier" for BDO to say the issues mentioned by Vela in his challenge were not part of the firm’s remit.
Because there was no rational explanation for treating Vela differently from the ministers, the judge said the inescapable conclusion was that the firm had been biased.
‘Unreasonable and irrational’
Chinamora found that BDO was either biased against Vela, or did not apply its mind to the facts of the matter. Or, he said, this was "a case of incompetence".
In his ruling, he said there had been "gross irregularity" when the firm made findings of fact "without an evidential foundation", and it was "simply unreasonable and irrational" to have reached the conclusion it did.
The firm had effectively denied Vela the right to be heard. Its report was biased and contained inaccuracies indicating a "failure to apply one’s mind".
Given its behaviour, BDO’s conduct "warrants censure", said Chinamora. It could easily have verified facts, such as the date on which Vela joined the NSSA board, from information in its possession.
Its failure to do so was among the issues considered by the court in deciding to award legal costs against the firm at a punitive rate.
Vela is not letting the matter rest there: he has now instructed his lawyers to bring a damages claim against BDO in Belgium.
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