EcoCash Holdings financial reports questioned by auditors over ‘errors’

EcoCash Holdings Zimbabwe Limited’s financial statements have been given a qualified opinion by independent auditor BDO Zimbabwe Chartered Accountants, raising concerns about the accuracy and reliability of the company’s financial reporting.

The auditor’s report highlights significant errors and distortions in the financial statements due to non-compliance with International Accounting Standard 21 (IAS 21) and the incorrect determination of functional currency for some subsidiaries.

The auditor notes that the functional currency for certain subsidiaries changed during the financial year to the United States dollar, but management continued to use the Zimbabwe dollar as the functional currency.

This resulted in errors in the financial statements, particularly in the reporting of loss from discontinued operations, assets held for sale, and liabilities associated with assets held for sale.

The auditor’s report states that the effect of the non-compliance could not be quantified but is considered material to the financial statements.

The report also highlights key audit matters, including the initial application of IFRS 17, expected credit loss, completeness and accuracy of revenue, and valuation of property, equipment, and investment property.

“The Group has not complied with the requirements of International Accounting Standard 21 (IAS 21), The Effects of Changes in Foreign Exchange Rates, in the determination of its functional currency for some of its significant subsidiaries, namely Econet Insurance (Private) Limited, Econet Life (Private) Limited, Maisha Health Fund (Private) Limited and Mars (Private) Limited.

“Based on our assessment using the guidance in IAS 21, the functional currency for the respective subsidiaries changed during the financial year to the United States dollar, however, management continued to use the Zimbabwe dollar as the functional currency.

“This resulted in distortions to the financial information of the respective subsidiaries,” notes the report.

Auditors also identify the valuation of property, equipment, and investment property as a key audit matter due to the subjectivity of the process and the heightened uncertainties in the economic environment.

“The Group held investment property valued at ZWL 403,672,000,000 and property and equipment valued at ZWL 821,473,179,000 as at 29 February 2024.

“A valuation exercise was carried out at year end. The valuation of property, equipment, and investment property was performed by independent valuers

“The determination of the value of property, equipment, and investment property was considered to be a matter of significance due to:

“Inherent subjectivity of the key assumptions and judgements that underpin the process thereon due to the heightened uncertainties in the economic environment.

“Subjectivity of the process that involved making a choice of the exchange rates to apply in the prevailing economic environment,” the auditors state.

The determination of expected credit loss on advances and sundry receivables is identified as a key audit matter due to the inherent uncertainty and judgement involved in the process.

“The Bank’s expected credit loss (ECL) on advances and sundry receivables amounted to ZWL 79,684,784,296.26. The determination of impairment loss is an inherently uncertain process involving various assumptions and factors including the financial condition of the counterparty, expected future cash flows, observable market prices and expected interest rates.

“The use of different modelling techniques and assumptions could produce significantly different estimates of provisions. The determination of the ECL is a key area of judgement for management.

“We therefore considered the fair statement of expected credit losses as a key audit matter,” notes the report.

These issues are likely to raise concerns about the accuracy, completeness, and reliability of the financial statements, and the auditors’ ability to express an unqualified opinion.

The auditor’s report is addressed to the shareholders of EcoCash Holdings Zimbabwe Limited and is signed by Gilbert Gwatiringa, the audit engagement partner.

In a statement, BDO Zimbabwe Chartered Accountants said, “We conducted our audit in accordance with International Standards on Auditing (ISAs).

“Our responsibilities under those standards are further described in the Auditors’ Responsibilities for the Audit of the Financial Statements section of our report.”