Namibia: Trustco's Directors and Auditors Resign

Trustco Holdings Limited has announced that two of its non-executive directors, one of them the head of the social and ethics committee, and the auditors have resigned following the managing director's request to reduce audit fees by 30%.

In an announcement made last week on the stock exchange news, Trustco's two directors are Kristin van Niekerk and Lana Weldon, while the auditors are Moore Johannesburg.

Van Niekerk was the head of the group's social and ethics committee and served in the audit and risk remuneration and nomination committees. Weldon, a chartered accountant, was a member of the audit and risk committee.

Van Niekerk said the two main reasons for her resignation was the circumstances surrounding Moore Johannesburg's resignation as auditors, and Trusco managing director Quinton van Rooyen's instruction to the audit and risk committee that Moore Johannesburg and BDO Namibia consider a 30% reduction in their proposed fee, as presented at the last committee meeting.

"In my opinion, where a company puts pressure on its auditors in respect of the audit fee, it creates the danger that those auditors will sacrifice their professional competence and due care," she said.

According to an analysis of audit fees done by Trustco, their audit fee is N$10,4 million, which makes up about 0,71% of reported audit revenue of N$1,47 billion.

The former director also said she was quitting because there was uncertainty around the directors' and officers' insurance coverage.

Weldon said she was leaving because she was uncomfortable with how the proposed fee and audit plan was handled.

"Management's request of a 30% reduction in audit fees creates, in my opinion, a threat to independence and due care of the auditors, as required under the code of professional conduct," she said.

The two are resigning from all other boards of Trustco subsidiaries where they also served.

THE DEFENCE

According to Trustco, its management analysed comparable audit fees and audit fees in general for companies listed on the Johannesburg Stock Exchange, which showed that Trustco's audit fees were far above average. Considering this, coupled with the challenging global economic environment, management deemed it prudent to request of the auditors a reasonable reduction in fees.

Van Rooyen, in the defence, said responsible and accountable professionals, more than anyone else, must recognise that they are not exempt from the devastating effects of the current economic climate - not locally, not regionally and not globally.

"It remains in the interest of responsible corporate governance to ensure that their fees are questioned, challenged and not just accepted without pushback from corporate boards. Professionals need to adjust their view that fees can simply be imposed or mandated without question," he argued.

The auditors for Namibia, Mauritius and Sierra Leone operations remain unchanged Trustco said. BDO Namibia is the auditor responsible for the Namibian books.

A reduction in the audit fee would mean Trustco would cut that expense to N$7,28 million.

According to auditing standards and regulations, a reduction in the audit fee in most cases means that a fewer tests would be conducted and the samples audited would be very limited, leading to a compromised audit opinion.

Over the last few months, Trustco has been concluding inter-company transactions pushing profits and revenues into billions, but no cash passing hands in reality.

Some analysts have called Trustco's deals very 'sham' and the inter-company transactions are the only ones to keep the company alive.

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