CMA gets green light to probe EY over Uchumi mess
The Capital Markets Authority (CMA) has been cleared to investigate consultancy firm Ernst & Young’s involvement in the near collapse of retailer Uchumi.
This after the high court dismissed a petition filed by EY seeking to block the capital markets regulator from its investigations.
In 2016, CMA had issued a show cause letter Ernst & Young to respond to allegations of misconduct in its audit of Uchumi’s accounts.
In his ruling on Tuesday, Justice John Mativo said that EY had jumped the gun despite the CMA having acted within the law in seeking to gain insight on auditor’s recollection of accounts into allegations of book manipulation.
“I find that the petitioner moved to court rather too early acting on apprehension, but as at that point in time, I find that the steps already taken by the first respondent are in conformity with the law and no breach of a fundamental right or threat had taken place or has been sufficiently prove,” Justice Mutivo said.
The Capital Markets Authority had accused Ernst & Young of colluding with senior managers of Uchumi to loot millions of shillings through questionable transactions.
A forensic audit conducted by audit firm KPMG found weak internal controls that saw senior managers such as former CEO Jonathan Ciano were operating as Uchumi suppliers.
EY also stands accused of failing present to the board and shareholders of Uchumi’s financial strain leading to its near collapse.
Ernst & Young has since been replaced by KMPG as the auditors for Uchumi.
EY had moved to court in September challenging the CMA’s action arguing the KPMG probe did not offer the firm a fair hearing and that the disciplinary action recommended was
The CMA has already cracked the whip on former Uchumi directors such as Dr Ciano barring them from holding positions in listed firms.
The authority has also sought to recover money paid to them during their tenure at Uchumi.
Faida Investment Bank, which was the lead transaction advisor for Uchumi’s rights issue, was also suspended from offering transaction advisory services for a period of six months.
Additional reporting by Mumbi Warui
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