Ernst & Young LLP (EY) is required to pay a financial penalty of Ksh 10 million to the Capital Markets Authority (CMA) over the firm’s role as the Reporting Accountants during the Uchumi Supermarkets Limited Rights Issue in 2014 and the subsequent use of the proceeds.
In a statement, the CMA says following the Notice To Show Cause hearing conducted by the its Board and subsequent consideration of this matter by an Ad Hoc Committee of the Authority, it has imposed a financial penalty of Ksh 10 million against EY.
The Capital Markets Authority has furtehr directed EY to ensure all employees involved with the audit of financial statements of issuers, companies listed on the Nairobi Securities Exchange (NSE) and licensees of the Authority undertake remedial training on areas highlighted in the Notice To Show Cause for the 3 years.
The training should be supervised by another EY member firm and submission of training reports to the Authority and the Institute of Certified Public Accountants of Kenya (ICPAK).
CMA warns that if EY fails to comply it risks being barred from providing professional services to issuers, companies listed on the NSE and CMA licensees.
The CMA has further recommended that ICPAK takes disciplinary action against EY, being the External Auditors and Reporting Accountants, and EY engagement audit partners for the period 2010-2014. This is due to their failure to ensure adequate and accurate disclosure of material facts in the 2014 annual report and financial statements of Uchumi Supermarkets in accordance with the applicable regulatory requirements.
In 2015, the Authority initiated an inquiry into the affairs of Uchumi Supermarkets which revealed various regulatory violations regarding the Rights Issue in 2014. The Authority’s inquiry revealed serious misrepresentations in the financial statements of Uchumi Supermarkets, which were included in Information Memorandum during the Rights Issue.