KRESTON Zimbabwe managing partner, Moderm Mutemwa, has called on auditors to prioritise evidence-based auditing practices to protect investors and attract investment to Zimbabwe.
He said auditors play a critical role in delivering accurate financial reports that serve the public interest by providing transparent insights into the financial health of the companies they audit, which helps investors assess the viability of potential investments.
In recent months, several leading global audit firms, including Grant Thornton, BDO, Forvis Mazars, Ernst & Young, and PwC, have failed quality audit tests in the United Kingdom, with some also facing sanctions in the United States.
This has raised concerns that similar issues could spread to countries like Zimbabwe, where some of these firms also operate. “Correct auditing should prioritise public interest," Mutemwa told businessdigest.
“Auditors are there to make sure that investors, government agencies, shareholders are safeguarded as far as possible.
“It is the responsibility of the auditor to make sure that the audit report they issue is supported by evidence,” he added.
Mutemwa also stressed the importance of maintaining consistency in service delivery across the industry, particularly with regard to International Accounting Standard (IAS) 21, which deals with the effects of foreign exchange rates, and IAS 29, which governs financial reporting in hyperinflationary economies.
“Audit firms just need to ensure consistent delivery of service across the whole industry. I know there have been issues raised in the past regarding how firms have treated issues of IAS 21: The effects of foreign exchange rates, and IAS 29: Financial reporting in hyperinflationary economies,” he said
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“But as an industry, we are coming together to make sure we deliver quality and consistent audits.”
Acknowledging the challenges facing the audit sector, Mutemwa noted that past audit failures have eroded public confidence in financial statements.
However, he expressed optimism that auditors and regulators in Zimbabwe were taking steps to restore trust and protect the public interest.
“Audit failures have been going on for some time now and this has led to robust changes coming on board with regards to the conduct of auditors and the audit report," Mutemwa said.
“Obviously, these failures tend to affect public confidence of financial statements issued by companies but here in Zimbabwe the auditing industry players and the regulator are doing a splendid job to safeguard public interest.
“The trust can be gained through continuous regulatory monitoring, continuous professional development amongst other things,” he added.
Mutemwa also pointed out that the financial reports from companies showed varied outcomes, with some reporting losses due to inflation, while others posted positive results. This, he said, underscored the need for a nuanced approach to auditing, rather than a one-size-fits-all model.
“Like everyone else, if you look at the financial reports for companies, there have been monetary losses that companies have been reporting,” the Kreston managing partner said.
“This reflects losses arising from inflation but there are also other companies that have been reporting good results. It’s not always a blanket approach to everything.”
Regarding currency fluctuations and their impact on the market, Mutemwa noted that if a company reported in a specific currency, auditors should ensure the accuracy of those financial statements.
“If an entity is already reporting in USD (United States dollar) and its functional currency is the USD, there is not much impact as auditors will just have to confirm that the ZiG/USD conversions were done properly,” he said.
“On the other hand, if an entity is reporting in ZiG (Zimbabwe Gold), there are considerations regarding the conversion of Zimbabwe dollar transactions to ZiG and the same for the USD transactions to ZiG.
“What we just have to confirm as auditors is whether the transition and the conversions to the reporting currency are correct. As Zimbabwean audit practitioners, we have seen a lot and nothing is insurmountable.”
