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BDO Zim at the centre of yet another accounting dispute

The development comes barely four years after former National Social Security Authority (Nssa) board chair Robin Vela dragged BDO Zimbabwe to court over allegations of authoring a forensic audit report, which he said was littered with irregularities and fell short of global auditing standards.

THE unprecedented dispute between the Insurance and Pensions Commission (Ipec) and First Mutual Holdings Ltd (FMHL) over a forensic audit has damaged the BDO Zimbabwe Chartered Accountants brand and jeopardised FMHL’s future commercial prospects, according to market watchers.

In an unusual case, FMHL announced this week that it was dragging its regulator, Ipec, to court, seeking a review of a corrective order.

The development comes barely four years after former National Social Security Authority (Nssa) board chair Robin Vela dragged BDO Zimbabwe to court over allegations of authoring a forensic audit report, which he said was littered with irregularities and fell short of global auditing standards.

The forensic audit, which was commissioned by Zimbabwe’s Auditor-General, allegedly showed adverse findings which were levelled against Vela and others in a discredited BDO report into Nssa operations between January 1, 2015, and February 28, 2018.

In a latest development, FMHL disagreed with the findings in the audit report produced by BDO and the resultant corrective order by the regulator claiming its submissions “were not properly considered”.

Early this year, FMHL announced that it had received an order for corrective measures from Ipec over its alleged defiance to the law on the separation of insurance and pension businesses.

Ipec had ordered a forensic investigation into the affairs of First Mutual Limited (FML), a subsidiary of FMHL, over its failure to separate shareholders and policy holders assets.

Investment analyst Enock Rukarwa told businessdigest that the noise around the issue affected customer confidence.

“Regardless of the actual fair position on the matter, the noise around First Mutual Life Assurance Company and Ipec with regards to asset separation affects customer confidence in the FML brand especially on future business prospects,” he said.

“Asset separation helps in segregating the assets of the insurance company from those of the policyholders. This ensures that the assets backing the policies are not exposed to the risks associated with the general business operations or financial obligations of the company.”

Rukarwa said on the other hand, BDO continues to be in the midst of controversies around disputation of its audit findings and such unwarranted attention attracts confidence deficit in the brand.

Conflicted sources who commented on the issue anonymously said matters around forensic audits were better handled by actuaries.

“Accounting and actuarial science are two different worlds. Insurance liabilities are dealt with at best by actuarial scientists not by accountants. I would assume that BDO took a purely accounting view whilst the matters are largely actuarially,” the source said.

Another source said despite the shortcomings, FML could not appoint an independent firm itself. 

“The move by FML is unprecedented in the history of Zimbabwe. It’s extremely unusual for a financial services entity to take their regulator to court. FML is questioning the credibility of the forensic audit done by BDO and they have indicated that they are appointing an independent firm to review the work done by BDO,” the source said.

“This again, is a mistake because they cannot appoint an independent firm themselves. They should instead request the court to appoint an independent person. Ipec simply implements the Insurance Act and they sought the assistance of BDO to come up with a position.

“That again was a mistake by Ipec because they should have engaged one of the big four accounting firms to do the forensic audit. The big four audit firms have access to world class actuarial skills to do the review and BDO probably has limited access.”

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