Jamii Bora Bank has filed a law suit against global audit firm EY (formerly Ernst & Young) which is one of the top accounting firms worldwide. The bank accuses EY of providing misleading information contained in an audit report on the financial position of Uchumi Supermarket. The report claims EY is liable for the economic losses they suffered, as a result of their investment in the retail giant. The Ksh. 451 million cash outlay was based on the audit report which indicated Uchumi’s financial position was solid.
In 2014, the bank wemt ahead to purchase 46,580,524 of the retailers shares. It surpassed the investment made by Kenya’s Ministry of Trade to become the retail chain’s single largest shareholder, with a percentage ownership of 15.8 percent of the total shares.
Uchumi is no stranger to controversy, with operations at the retail chain being hampered by allegations of corruption and mismanagement. This has resulted into considerable financial losses and the company going into receivership on more than one occasion. The retail chain has also faced stiff competition from it’s major rivals such as Nakumatt, Tuskys and Naivas leading to reduced sales and decline in revenue.
In an annual general meeting of the bank in 2016, the CEO, Mr Samuel Kimani told shareholders that the information memorandum provided by EY was a work of fiction which did not reflect the actual financial position of the retail firm. Jamii Bora has since then hired KPMG to replace EY.
KPMG conducted a forensic audit of Uchumi, and noted in its report there was widespread manipulation of books of accounts and concealed losses in the retailers financial statements.
The bank in a statement said, “The forensic audit by KPMG thus revealed that EY negligently prepared the accountant’s report and as a result EY misrepresented the financial position of Uchumi Supermarkets Limited.”
EY has responded to the suit by questioning the validity of any report by KPMG. The audit firm further claims the document the bank is basing its suit on is unsigned, making it of no consequence.
Learn more:
- Jamii Bora Bank sues EY in Sh451m Uchumi shares row
- Jamii Bora ousts Treasury as top Uchumi owner
- Jamii Bora says Sh500m Uchumi buyout was a con
