JOHANNESBURG, Nov 29 (Reuters) - South Africa’s Tongaat Hulett said on Friday a PwC probe found that certain senior executives had overstated profits and certain assets by using “undesirable accounting practices”.
The agriculture and agri-processing firm, which produces a range of sugarcane and maize-based products, has been battling to restore investor confidence after announcing in March that it would have to restate prior financial reports as part of a strategic and financial review.
The review, as well as an initial investigation of allegations prompted by a whistleblower, revealed certain business, accounting and other practices that were of concern to the board and required further examination and the appointment of PricewaterhouseCoopers (PwC) in March, Tongaat said in a statement.
The report said the executives initiated practices that resulted, amongst others, “in revenue being recognised in earlier reporting periods than it should have been, and in expenses being inappropriately capitalised to assets.”
The report also found that there were a number of governance breaches that resulted in the failure to follow internal policies and guidelines, creating an environment in which senior executives could initiate or participate in the misstatement of its financial reports.
Shares in Tongaat have shed around 75% of their value this year, with investors jittery about accounting irregularities after multinational retailer Steinhoff International Holdings NV revealed a more than $12 billion hole in its accounts in late 2017.
The main misstatements include the early recognition of revenue from the sale of land, the overstatement of the carrying amount of cane roots and standing cane as well as the overstatement of sugar sales in some regions.
Tongaat said PwC identified certain areas in which financial restatements are required and management is in the process of quantifying the adjustments and the financial impact will be included in the 2018 and 2019 annual reports, due to be released shortly.
“In light of the information that has come to light in the PwC report, the board intends to pursue claims against certain individuals who appear to have been responsible for, or party to, the undesirable activities outlined in the PwC report,” Tongaat said.
“Their involvement was such that at the very least they knew or ought to have known, inter alia, that the 2018 annual financial statements contained information that was materially inaccurate.” (Reporting by Nqobile Dludla Editing by Tim Cocks and Louise Heavens)