Icam fines MEC’s auditors BDO K4.8m for Malawi poll mess

Institute of Chartered Accountants (ICAM) has found BDO Chartered Accountants (Malawi) guilty of four counts of serious misconduct in its operations as the retained auditor in the Tripartite Elections held on 21 May 2019 and has since been fined with K4.8 million.

The electoral agents verify electoral materials at the CCAP primary school poling station in Mzuzu two days ahead of Presidential elections. – Malawi’s constitutional court on February 3, 2020 has cancelled the presidential vote result. (Photo by PATRICK MEINHARDT / AFP)

In the verdict which Nyasa Times is in possession with, ICAM had been investigating the conduct of BDO Chartered Accountants (Malawi) during the controversial elections following the allegations of professional misconduct that ICAM received from Malawi Congress Party  (MCP) and a concerned citizen.

The development comes after Constitutional Court on February 3 2020 annulled the  last May results that gave President Peter Mutharika a narrow win, citing widespread irregularities, especially the “massive” use of correction fluid on ballot sheets.

The court ordered a fresh election within 150 days and an investigation into the conduct of the electoral commission by parliament.

The charges for the audit firm were five;  three on negligence, one on lack of professional competence and due care and one on misconduct.

After BDO were duly presented with the charges, the audit firm appeared before ICAM’s Investigations Committee and Disciplinary Committee to present its side of the story held at ICAM Office at Stansfield House along Haile Selassie Road, Blantyre, on 24 September 2019 at which they were given the opportunity to respond to the five charges.

On first charge of negligence, which BDO was found guilty of and fined K1 million, the particulars are failure to carry out a risk assessment of the assignment the audit firm was engaged to undertake despite being aware that the assignment was sensitive, of significant public  interest and that the stakes were very high.

“Furthermore, the terms of reference had a serious and  significant limitation on the scope of the work that threatened the independence of BDO — the firm  was not allowed to stop the transmission and processing of the results if they noticed any irregularities,” says the verdict, signed by ICAM president, Bwighane Joel.

“The conduct of BDO Chartered Accountants (Malawi) was contrary to Section 2.4 of the ICAM Disciplinary Guidelines as read with Section 113.1 A3 of the IFAC Handbook of Code of Ethics 2018.

“Section 2.4 of the ICAM Disciplinary Guidelines provides that a member is negligent where: ‘Without reasonable cause or excuse, and subject to the proviso to Section 20 (7) of the Public Accountants and Auditors Act, fails to perform any work or duties commonly performed by a registered accountant and auditor with such degree of care and skill as in the opinion of the disciplinary committee may reasonably be expected’.

“Section 113.1 A3 of the IFAC Handbook of Code of Ethics 2018 provides for diligence as follows: ‘Diligence encompasses the responsibility to act in accordance with the requirements of an assignment, carefully, thoroughly and on a timely basis’.

“The ICAM Council considered this matter and found that the absence of the power to stop the transmission and processing of the results where any irregularities are noticed is a serious hinderance in the conduct of such a sensitive exercise of national importance.

“Lack of this  power means that the outcome of the exercise will be compromised because of any unresolved irregularities which are allowed to occur alongside the process of auditing the results.

“The absence of the power also erodes the much-needed independence of any auditor in such exercises. The report of the audit would hence be unreliable.”

The second count of negligence, also found guilty of and also fined K1 million for, are that BDO aided a foreign firm, BDO Jordan, to carry out a professional assignment without a special clearance from the Malawi Accountants Board (MAB) and without paying prescribed fees to the Board  which is  contrary to Section 2.29 of ICAM’s Disciplinary Guidelines as read with Section R115.1 of the IFAC Handbook of Code of Ethics 2018.

But BDO Chartered Accounytants (Malawi) survived the charges of  failure to  report to MAB as reportable irregularities, contrary to Section 2.4 of ICAM’s Disciplinary Guidelines as read with Section R115.1 of the IFAC Handbook of Code of Ethics 2018.

“The ICAM Council found that BDO (Malawi) had  taken the necessary steps to inform both Malawi Electoral Commission and United Nations Development Programme (UNDP) about the irregularities the firm had found.

“Therefore, BDO were cleared of this charge. “

Nonetheless, BDO (Malawi) did not obtain reference for the junior auditors recruited for the assignment contrary to Section 2.4 of ICAM’s  Disciplinary Guidelines as read together with Section 113.1 A3 of the IFAC Handbook of Code of Ethics 2018.

“The ICAM Council considered this matter and found that BDO Chartered Accountants (Malawi) were supposed to make sure that the junior auditors it employed were fit and proper for the exercise which was a very sensitive exercise of national importance.

“Employing auditors without reference means that there was always a chance for unfit or improper or insufficiently experienced junior auditors taking part in the said sensitive exercise of national importance, thereby reducing the quality of the work and its product.”

On the charge of misconduct and found guilty of with a fine of K800,000 are that BDO (Malawi) did not have the capacity to carry out the assignment.

“The firm allocated one engagement partner and 16 supervisors against 197 constituencies. There were 5,002 polling stations and there was no single staff at the polling stations from the firm.

“BDO Chartered Accountants (Malawi) responded that it had allocated 1 engagement partner and 16 supervisors against 197 constituencies. The firm had recruited junior auditors 3 days to the start of the assignment.

“It was observed that BDO was constrained with time but proceeded to execute the assignment. The conduct of BDO Chartered Accountants (Malawi) was contrary to Section 2.21 of ICAM’s Disciplinary Guidelines as read together with Section R113.3 of the IFAC Handbook of Code of Ethics 2018.

The Section 2.21 ‘Contravenes or fails to comply with any provision of the Act with which it is his duty to’ and thatSection R113.3 of the IFAC Handbook of Code of Ethics 2018 states as follows in terms of limitations inherent in the services or activities:

‘Where appropriate, a professional accountant shall make clients, the employing organization, or other users of the accountant’s professional services or activities, aware of  the limitations inherent in the services or activities’.

The ICAM Council observed that IBO (Malawi) should  have employed sufficient numbers of staff commensurate with the workload and also bearing in mind the sensitivity of the exercise since the insufficiency of staff rendered the exercise ineffectual.

“In view of the verdicts as per the above, you are being requested to pay the penalties to the Institute by 31 March 2020.

“Please, be reminded that you may appeal against this decision of the Council to MAB within 30 days of this notice,” said the verdict released on Monday, February 17.

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Vilhomwe Ndivimbuli
4 years ago

ABALE A Jane Answer

4 years ago

tidzaona .sikaletu

Boris Johnson
Boris Johnson
4 years ago

Ndinkadabwatu when ICAM was calling for applications for Junior auditors a week before elections. Kodi wasn’t it ICAM who made the recruitments? Coz i remember applications were asked to be sent to an ICAM address.

Anyway, its a mediocre country. We tolerate anything.

4 years ago

ICAM charging is not according to the ethics of ICAM. The recommended charges should have been K15,7mln. Can the price be revised please.BDO as s team of Auditors contributed a lot to the mess of Malawi’s elections or ban it because they have damaged the reputation of all Auditors.

4 years ago

Was there even a bid to provide audit services to MEC?
As an accountant myself, BDO is well faulted here. Ethics were flawed and it’s a disgrace to the profession. Granted that there could have been some political influence in the system but BDO should have done better than complying with whatever forces were influencing their misconduct.

Kangaude Mukhonde
Kangaude Mukhonde
4 years ago

This was a serious misconduct penalty yachepa. If that’s according to ICAM guidelines then revise them
I feel the auditors contributed alot to this mess.

4 years ago

Malawi Electoral Commission Commissioners must also pay for grave misconduct they performed during the same electoral process.

Jwa Mjipi
Jwa Mjipi
4 years ago
Reply to  monosile

They will pay. One legal expert told me that the good thing about democracy is that once Govt changes hands, wrong doers eventually pay for their crimes. He gave me the example of late Sam Mpasu and his Fieldyork saga. As long as UDF Govt was in power, Mr Mpasu could not be taken to task. But once UDF was no longer in power, it was possible to prosecute Hon Mpasu and he served his sentence. These Commissioners can’t be touched as long as APM is president; but he’s not going to be around for too long. The Commissioners did… Read more »

4 years ago
Reply to  Jwa Mjipi

You know what, their resistance to move out is not for nothing or mere rudeness! These idiots are aware that they will dance to their jazz immediately the first plot is occupied by some different party…!! Apo biiiiiiii once the change happens, we shall see some mirror image of suicide cases from this crop of commissioners!!

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