![[Kenya] Digital credit provider Tala disbursed Sh240 billion in loans in eight years](https://theafricanbusiness.com/wp-content/uploads/2023/02/TALA-APP-360x180.jpg "[Kenya] Digital credit provider Tala disbursed Sh240 billion in loans in eight years 19")
Deloitte fined in Kenya for negligence that led to bond investors losing $40.3 million in collapsed bank
A fine of $83,960 (Sh10 million) has been imposed on Deloitte by the Capital Markets Authority of Kenya (CMA).
Business Insider Africa understands that this is the first of many likely penalties for Deloitte due to negligence which led to bond investors losing $40.3 million (Sh4.8 billion) following the collapse of Chase Bank Kenya Limited.
A report by the CMA, seen by Business Daily, explained that the audit firm had failed to verify Chase Bank’s claim that it operated a $17.6 million (Sh2.1 billion) account with the Central Bank of Kenya.
Interestingly, the non-existent bank account played a major role in inflating Chase Bank Kenya’s financial position, thereby enticing investors to pump $40.3 million into the company through a corporate bond issuance programme. The investors lost their money.
“The cash and balances at CBK were overstated in the published information memorandum by Sh2, 152,806,000. This overstatement inaccurately enhanced the liquidity position of the bank and materially influenced the decision of investors to subscribe to the medium-term note,” the CMA explained.
Note that Deloitte was the reporting accountant for Chase Bank Kenya at the time of the incident, hence the fine.
In its defence, the audit firm told CMA investigators that “the miscalculation did not cause the bank to breach the minimum liquidity ratio of 20 per cent as per the prudential guidelines. A downward adjustment of Sh2 billion would have caused the liquidity ratio to decrease approximately 43.5 per cent.”
But Deloitte’s defence notwithstanding, the CMA said the $83,960 fine would hold. In addition to the fine, the audit firm would face probe/scrutiny by the Institute of Certified Public Accountants of Kenya.
After the probe, Deloitte would be referred for an additional disciplinary action before a disciplinary committee. And if found liable, the firm could risk being suspended from operating in the East African market. And analysts believe this likely outcome would seriously hurt the company’s reputation and ability to retain clients.
Deloitte is the second largest audit firm in Kenya and a major player in East Africa and across the continent.
