Top audit firm, Ernst & Young, has been sanctioned by the Capital Markets Authority over its role in Uchumi Supermarkets’ 2014 rights issue, fined KSh 10 million, and flagged for disciplinary review after regulators found material misstatements in the retailer’s financial statements.
- •The CMA said EY failed to ensure accurate disclosure of material facts in Uchumi’s 2014 annual report and the information memorandum used for the rights issue.
- •The regulator’s inquiry, launched in 2015, uncovered serious misrepresentations in the numbers presented to investors.
- •The regulator also recommended that ICPAK take disciplinary action against two former EY engagement partners, Michael Kimoni and Joseph Cheborbor.
"EY, being the External Auditors and Reporting Accountants, failed to ensure adequate and accurate disclosure of material facts in accordance with applicable regulatory requirements," the CMA said.
The penalty follows a long enforcement process that was paused for years as EY contested CMA’s actions in the High Court and the Court of Appeal. EY filed Petition No. 385 of 2016 seeking to block the proceedings but the High Court dismissed the petition in 2017, ruling CMA acted within its mandate. EY then appealed, but the Court of Appeal upheld the decision in 2022.
Besides the fine, CMA has ordered EY to put all staff involved in the audit of listed companies and licensees through three years of remedial training supervised by another EY member firm. CMA and ICPAK will receive periodic reports and the watchdog has warned that failure to comply could result in EY being barred from providing services to issuers and licensees.
"All employees involved with the audit of financial statements of issuers, companies listed on the NSE and licensees of the Authority shall undertake remedial training for three years supervised by another EY member firm."
~Noted the statement from the regulato
