Report questions CMC.
The competence of CMC’s finance director and auditors have been put to question by a forensic report over non-compliance with international finance reporting standards.
Alleged failure by the external auditor, Deloitte, to flag off the inadequacies to the shareholders has also been raised.
Following this the Capital Markets Authority has asked the Institute of Certified Public Accountants (ICPAK) to investigate the breaches and take action. ICPAK is mandated to license accountants and auditors in the country.
After release of the report by Webber Wentzel of South Africa, which was commissioned to conduct investigations into the operations of CMC last year by the CMA, the regulator says failure to adhere to the standards of international financial reporting means the company has been misinforming its shareholders.
“The financial director of CMC Motors deliberately understated the overdraft balance by classifying Sh750 million of the overdraft balance to trade payables in the financial information presented to management at December 31, 2009.
This was identified and corrected prior to the release of the March 31, 2010 interim results,” notes the report.
The company also failed to comply with IFRS in regards to interest income recognition, thereby distorting the level of earnings impairments on interests in arrears, revenue recognition and presentation of financial statements.
The regulator has advised CMC to consider changing Deloitte as its external auditor, though the auditor had on February 28 resigned citing frustrations in getting information from the company.
The CMA started investigations on the firm, which is listed at the Nairobi Securities Exchange, after boardroom wars broke out in September last year.
The CMC activities at the NSE were suspended to protect investors.
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