CMA fines audit firm EY Ksh.10M over misrepresentation of 2014 Uchumi financials

The Capital Markets Authority (CMA) has fined audit firm EY Ksh.10 million over its role in Uchumi Supermarkets’ 2014 rights issue.

The regulator says the firm failed to ensure accurate disclosure of key financial information during the cash call. 

The issue dates back to 2014, when Uchumi Supermarkets carried out a rights issue using financial statements prepared with EY as the reporting accountants.

A year later, in 2015, the CMA launched an inquiry and found major misrepresentations in those statements.

This led the authority to issue notices to show cause in 2016 to Uchumi officials and EY.

EY challenged the process in court, halting the enforcement temporarily. But both the High Court in 2017 and the Court of Appeal in 2022 upheld the CMA’s mandate, allowing the regulator to proceed.

After reviewing the case, the CMA has now fined EY Ksh.10 million. It has further directed the firm to implement three years of remedial training for all staff who audit listed companies. Failure to do so could see EY barred from working with listed firms and CMA licensees.

The regulator has also asked the Institute of Certified Public Accountants (ICPAK) to take disciplinary action against two former EY audit partners, for failing to ensure accurate disclosure in Uchumi’s 2014 financial reports.

CMA says this decision follows earlier actions taken against Uchumi’s former board and senior management.