SAX has asked KPMG to help with its books as it disagrees with auditor-general Kimi Makwetu, who has given the airline a qualified audit opinion.
Makwetu has criticised SAX's lack of adequate governance controls, its leadership, its weak financials and its performance management. "The entity did not have an adequate system for identifying and recognising all irregular expenditure and there were no satisfactory alternative procedures that I could perform to obtain reasonable assurance that all irregular expenditure had been properly recorded in ... the financial statements," Makwetu wrote.
The auditor-general said the carrier failed to take effective steps to prevent fruitless and wasteful expenditure of R30m and that significant internal control deficiencies resulted in it getting a qualified audit opinion.
"Ongoing monitoring and supervision undertaken to enable management to determine whether internal controls over financial reporting are present and functioning were not adequate, which led to material adjustments to the annual financial statements ... reported performance and noncompliance with legislation," he said.
SAX roped in KPMG to look at its books and to take on the auditor-general's assessment of the situation at the airline.
SAX chief financial officer Mark Shelley said the airline's accounting treatment for its maintenance reserves was the main issue of contention.
"Management is accounting for the treatment in line with the requirements of the International Accounting Standards and stresses that the technical opinion received confirms this position. The auditors have accepted the new opinion obtained, but a dispute still exists on the accuracy of classification of the capitalised maintenance reserves," he said.
Shelley said SAX had also reached common ground with the auditor-general regarding maintenance assets.
"KPMG was involved in 2007, way before the [auditor-general] was involved ... because we and the [auditor-general] couldn't reach common ground on treating maintenance reserves as assets, we got KPMG as they audit 80% of the world's airways," he said.
Standing committee on public accounts chairman Themba Godi expressed concern that KPMG's involvement could not be accepted innocently, as it was an entity with a financial interest in SAX's books.
ANC MP Ezekiel Kekana said he was wary of allowing SAX to second-guess the auditor-general and exalting KPMG's analysis of the situation at the regional carrier.
Source: Business Day
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