According to Reuters, in what the publication described as the largest corporate scandal in South Africa, corporate auditing firm PwC has uncovered a $7.4 billion accounting fraud at South African retailer Steinhoff.
Steinhoff first disclosed irregularities in its books in December 2017, but it wasn’t until PwC conducted and completed its investigation into the matter that the accounting fraud was revealed, Reuters reported on Friday (March 15). The company reportedly recorded irregular or fake transactions between fiscal years 2009 and 2017, the publication said, with PwC’s investigation pointing to a few former executives at the retailer, as well as several outside persons, behind the fraud.
PwC’s investigation summary noted that a single “senior management executive” led the scam.
In a statement, Steinhoff said, “The transactions identified as being irregular are complex, involved many entities over a number of years and were supported by documents, including legal documents and other professional options that, in many instances, were created after the fact and backdated.”
Chief Executive Markus Jooste has resigned, but denied any wrongdoing, reports said, while other high-level executives at Steinhoff have also exited. Shareholder value has plummeted, a major disappointment to investors supporting the retailer, which had reinvested itself to become a powerhouse in South Africa’s retail sector.
Reports said the company posted a $12 billion valuation write-down in June, after PwC provided its findings to the firm.
“If we become aware that this impact is materially different, we will update the market,” said Reina de Waal, Steinhoff head of investor relations.
The retailer said it is cooperating with criminal investigations, which have been ongoing since 2015, when state prosecutors in Germany launched a probe into the firm over suspected irregularities. The firm’s disclosure in 2017 led to other investigations, including one by an elite police force called the Hawks, reports said.
PwC itself has faced pressure in several jurisdictions around the globe for its role in detecting such accounting fraud schemes. Last year, the firm was ordered by a federal judge in the U.S. to pay the Federal Deposit Insurance Corporation $625.3 million for its failure to detect fraud at Colonial Bank and Taylor, Bean & Whitaker.