Payment for the infamous Gupta wedding came under scrutiny as the disciplinary hearing into the conduct of a former KPMG auditor who worked on the books of companies owned by the family wrapped up on Sunday.
Jacques Wessels, who audited Linkway Trading accounts, is facing six charges relating to improper conduct and tax evasion. The charges were instituted by the Independent Regulatory Board of Auditors (IRBA).
The Gupta-owned firm is alleged to have been used to divert funds earmarked for the Vrede dairy project to foot a multi-million bill for a family wedding and the hearing revealed to some extent the unusual money trail between various companies owned by the wealth family of Indian descent.
In its closing arguments, the professional body sought to demonstrate that Wessels was “grossly negligent” in his conduct, and lacked diligence when conducting the audit involving the financing of the 2013 wedding extravaganza, which cost over R30-million.
The amount equalled 55% of Linkway’s revenue, and was paid into the company’s account by a Dubai-based entity, Accurate Investment.
According to Wessels’ heads of argument, Linkway sustained a loss of R6.9-milliion due to the wedding expenditure.
The loss was accounted for in the financial statements as an operating expense, but Linkway later restated it in the annual financial statements as cost of sales.
This action gave rise to Wessels’ charge of evading tax by misstating the R6.9-million loss.
Wessels’ legal representative, Advocate Azhar Bham, argued that there was no deliberate attempt to hide the wedding expenses or act dishonestly, as put by the IRBA.
He, however, acknowledged that Wessels ought to have been more sceptical.
“What you rely on to draw inference of dishonesty is not proven. The wedding transaction ought to have raised questions but there was no deliberate attempt to hide anything or act dishonestly,” said Bham.
“There is no evidence at all to demonstrate that there was a conduct to collude with a client to hide expenses in order to gain a tax benefit,” he said.
The hearing chaired by Advocate Alan Dodson heard from the IRBA that there was a “significant risk” in Linkway’s revenue, which Wessels failed to address.
Bham argued extensively that Wessels was simply “naïve” and never intended to act dishonestly.
According to the IRBA, Wessels pleaded guilty to contravening auditing regulations in relation to the wedding transaction, and “failed to perform his duties as an auditor with the degree of professional competence, due care and skill as may reasonably be expected from an auditor”.
“Mr Wessels concedes that the transaction relating to the wedding function organisation was an unusual transaction, and he failed to evaluate the business rationale for this transaction that was outside the normal course of business to identify whether there might be fraudulent financial reporting or misappropriation of assets,” said IRBA.
Linkway Trading’s main business was construction, but it was used to organise the wedding, which Wessels also attended.
Wessels resigned from KPMG in September 2017, before the troubled auditing firm could institute a disciplinary hearing against him.
KPMG conducted tax services to Linkway for the financial period ended February 28 2014. — Fin24