Denel would like to state that all matters relating to irregular expenditure incurred in the 2017 financial year have been fully disclosed in a report.
Denel has noted media reports with regards to the allegations of refusing to release an adjusted audit report which would state that Denel has an unqualified audit with irregular expenditure from its auditors SizweNtsalubaGobodo (SNG) with advice from the Auditor General (AG).
Denel would like to state that all matters relating to the irregular expenditure incurred in the 2017 financial year have been fully disclosed in note 35 on page 202 of the integrated report. This report was thoroughly reviewed by SNG prior to them signing off their audit report on the 31st July 2017.
SNG has been the external auditor for Denel for the past five years. It has extensive knowledge of the business and the key risk areas requiring focus within Denel, of which irregular expenditure is one. In the 2017 financial year, SNG conducted an independent audit taking into account its standard operating procedures without interference from Denel management. All information and accounting records were made available to SNG in order to conduct the audit during the period starting in February 2017 to July 2017.
Following the extensive audit process, SNG concluded its audit and presented its report and opinion at the Denel Audit and Risk Committee meeting which was attended by the AG representative. This board subcommittee meeting following a thorough review of the annual report with no objections from neither SNG nor the AG, recommended the annual report for approval to the board. Subsequent to board approval, SNG signed its audit report as reflected in Denel’s integrated report.
Unless there is a material event that occurred during the audit which was not disclosed to SNG and became evident subsequent to the signing of the audit report, there is no basis for the proposed change to the report. Extensive information with regards to irregular expenditure was made available to SNG to enable it to complete their audit and arrive at its conclusions as reflected in the audit report it signed.
Denel engaged SNG with the view to understand what material information subsequently came to light which was not made available during the audit that has led it to amend its audit opinion, and up to now Denel has not been furnished with that response. Furthermore, if this was as a result of an error on SNG’s part, the amendment of such audit opinion must be on the basis that the undisclosed information is material, which in this case cannot be, given that Denel had already disclosed all this information anyway in its integrated report.
Denel presented its integrated report to the Annual General Meeting as approved by the board on the 25th of August 2017. This report, in the presence of the auditors, was adopted by the AGM with an instruction that Denel and SNG must resolve their differences.