The audit clerk working on Nkobi Holdings' 1999 accounts said he was instructed to make allegedly fraudulent journal entries "without understanding the rationale behind it".

The testimony of state witness Anthony Gibb, the David Strachan & Taylor (DS&T) audit clerk at the time the firm concluded the Nkobi Holdings annual financial statements for the year to February 1999, supported earlier defence arguments that auditors and accountants were to blame for the irregular entries *1 at the centre of the fraud charge against Schabir Shaik.

The charge relates to R1,2m allegedly falsely written off by Shaik in the books of Nkobi subsidiary Kobi IT to conceal payments to Deputy President Jacob Zuma.

On his second day in the stand at the Durban High Court, Gibb said his responsibilities included planning and draft workings for the audit and that DS&T tax partner Paul Geiring and audit partner Ahmed Paruk instructed him to insert the irregular entries relating to the development costs.

Gibb said that without writing off the R1,2m as development costs of another Nkobi subsidiary, Prodiba, Kobi IT would have suffered a loss.

"The company would have become technically insolvent given the accumulated R1,4m loss (it had already chalked up), " Gibb said.

He did not understand the rationale behind the entries, but could not question his bosses.

Gibb also confirmed that the auditors signed off accounts that included the development cost write-off, a R171 000 reduction in the director fees credited to Shaik's personal loan account and a revaluation of unit Kobifin's shares, without qualifications.

He neither found nor received evidence of an acknowledgement of debt between Shaik and his companies.

In generally accepted accounting practice, each step in the auditing process is discussed with the client *2 but Gibb only recalled one meeting in which both the auditors and Shaik were present.

With acknowledgements to Nicola Jenvey and the Business Day.

*1 A very interesting and benign view of things.

*2 It seems highly implausible that client's instructions to create fraudulent journal entries would be given or discussed with a junior Audit Clerk in a formal audit review.

Such instructions are far more likely to be given by the client to the Audit Partner using a combination of pre-arranged encoded declarations, encrypted faxes, nudges, winks, not so haphazardly scribbled notes on pieces of paper before being crumpled and tossed idly into the bin (or more likely more purposefully into one of the assorted shredders standing by), muted telephone calls using a "nice big cellphone" from the behind the carpark at Zeta's Whisky and Lingerie Bar - or maybe just during one on one chat between Client and Audit Partner in the Group Boardroom.