Auditor-general and SAA board in an alleged tussle that delayed financial statements

The primary reason Finance Minister Malusi Gigaba had to request parliament for an extension on the submission of the SAA annual report is allegedly due to an argument that ensued between the auditor-general and board members.

Highly placed sources with intimate knowledge of the alleged tiff, speaking on condition of strict anonymity, told a story of drama that accompanied the arrival of the auditor-general of South Africa at SAA Bedfordview headquarters to conduct statutory audit on the ailing airline’s books.

According to the sources, SAA may have brought the shock robust audit process on itself.

It is understood that when the airline discovered it had little to no cash reserves to procure services of internal and external auditing firms, it was decided that the auditor-general of South Africa (AGSA) will provide a full spectrum of audit services to SAA.

“The Auditor-General is our auditor this year [2016-17]. For the previous financial years, 2012-2016 the joint audit was conducted by PWC and Nkonki.

“The previous auditors had completed a 5 year term, SAA was due for rotation of auditors. The AG had ramped up capacity in the aviation sector and it was recommended by the Audit and Risk Committee that the AG would audit SAA. This appointment was confirmed by the shareholder,” said Tlali Tlali, head of media relations at SAA.

“It could have been karma or comeuppance, but when [AGSA] audit professionals set up shop at SAA to look at the books, they turned the tables on SAA executives by demanding records dating back as far back as 10 years ago. In most cases, the paperwork could not be located,” another source tipped off The Citizen.

READ MORE: Gigaba asks Mbete to give SAA extension on late submission – report

Sources believe AGSA auditors had to be circumspect due to a number of reasons. They had to be pedantic, as they were discharging audit duties ordinarily outsourced to the big auditing firms. They also are convinced the relentless negative media reports about alleged financial misappropriation at the airline persuaded AGSA to run a robust auditing process.

It is alleged the temperamental exchanges between AGSA and SAA finance employees warranted the escalation of the matter to the board chairperson Dudu Myeni, Gigaba and auditor-general Kimi Makwetu.

The alleged high-level meetings are said to have been necessitated by another sticking point . An estimated 80 audit queries were flagged to the value of about R3 billion.

Feeling railroaded and overwhelmed by the vigorous demands of records dating back almost 10 years back, it is alleged SAA then changed tack and motivated for a compromise with the auditor.

“The number of audit queries significantly came down, not because the AG’s office received satisfactory explanation on items indicating irregular, fruitless and wasteful expenditure, but simply because time constraints and a threat of legal review forced the AG’s office to backtrack and focus on the audit period under review as determined by legislation,” one source said.

When asked to verify claims that SAA was blindsided by AG’s demand for the airline to avail records dating back 10 years ago, Tlali’s response fell short of an official confirmation: “The airline is a public entity that is subject to scrutiny and is regularly audited. We subscribe to the principles of transparency, accountability and promotion of clean administration.”

He also stated: “SAA adheres to the policy regarding the retention of records for 7 years,” and added: “SAA has not lied about the state of its finances. The airline is a public entity that is subject to scrutiny, and is regularly audited.”

Boso Africa, the senior manager for media relations at AGSA, told The Citizen protocol dictated that Makwetu only discuss audit processes and issues when requested to do so by parliament.

Makwetu’s office will, as a result, be unable to discuss the media queries. He did, however, invite The Citizen to pose the questions during the press briefing Makwetu will hold on 2016-17 audit outcomes towards the end of October.