PwC auditors before tribunal for Fonterra audits

The tribunal heard Fonterra was considering applying for permanent suppression due to commercial sensitivity around details of the audit. Photo / 123RF

Two senior auditors have been hauled before the Chartered Accountants disciplinary tribunal for alleged failures during years of PwC audits for dairy giant Fonterra.

However, suppression orders prevent many of the details of the case being reported.

A hearing on the matter was heard in Auckland on Thursday before a three-person tribunal chaired by Matthew Casey, KC.

The names of the auditors, specific charges as well as evidence had been suppressed on an interim basis until a decision is released, which Casey indicated wouldn’t be made today and would be in writing.

The Herald understands Fonterra is considering applying for permanent suppression due to commercial sensitivity around the details of the audit.

Despite there being suppression in place, Casey said some of details of the case were already in the public domain and could be repeated.

The publicly available notice of the hearing said, “both members are charged with breaching NZICA’s Code of Ethics”.

“The charges against one member arise in the context of the member’s role as engagement partner in the audit of an NZX-listed entity. They concern the member’s audit work performed in respect of documentation of firm independence, impairment and related financial statement disclosures, and letters of representation required from those charged with governance.

“The charges against the second member arise in the context of the member’s engagement [in] quality control review of the audit. The charges concern the member’s evaluation of significant judgments made and conclusions reached by the audit team in respect of its work performed on impairment and related financial statement disclosures,” the notice said.

It relates to a case reported by the Herald this month about the quality of previous professional auditing of Fonterra’s accounts following a 2019 complaint about shock big asset writedowns by New Zealand’s biggest business.

Fonterra shareholder Colin Armer’s official complaint concerned the handling of the co-op’s FY2019 asset writedowns of $826 million and financial statements for 2015-2019.

Armer, a former Fonterra director, made the complaint to the Financial Markets Authority in 2019, claiming inconsistent valuation methods and questioning the timing of the writedowns by Fonterra and the auditing standards of the big dairy company’s then-auditor PwC.

The business advisory firm, which had been Fonterra’s auditor since the dairy exporter’s creation in 2001, surrendered the contract in 2019 after pressure from shareholders, including Armer, who claimed it was too close to the Fonterra board of directors.

PwC NZ audit leader Rich Day said they acknowledged that audit-related matters were now before the NZICA tribunal.

“Delivering quality audits is core to our purpose. We recognise the important role of quality audits in a well-functioning capital market. In recent years, PwC New Zealand has continued to evolve our comprehensive audit quality measures and made substantial quality enhancements, as detailed in our 2022 Audit Transparency Report.”

PwC wouldn’t be making any further comment until the disciplinary tribunal had issued its determination, Day said.

The hearing continues this afternoon.