Delek Group Ltd. (TASE: DLEKG), controlled by Yitzhak Tshuva, last week unexpectedly announced that it is replacing its auditors EY Israel, with its accounting rival Deloitte.
Delek said, "The switching of the company's current auditors after a protracted period of more than 20 years is appropriate and reasonable, among other things, to ensure the appropriateness of the company's control and auditing procedures."
The move from EY to Deloitte comes after last month EY decided to again attach a 'going concern' qualification to Delek Group's financial statement for 2020, which serves as a warning sign to investors and reflects doubt about the company's ability to meet its obligations in the short-term. The 'going concern' qualification was first attached to Delek Group's financial statement for 2019 and remained unchanged during all the quarterly reports published in 2020.
During 2020, Delek significantly reduced its debts by realizing assets and raising capital and debt. However, at the end of 2020, Delek remained with debt of more than NIS 5 billion and faces major challenges over the next two years, with the need to repay debts of NIS 1.53 billion in 2021, and NIS 2.165 billion in 2022.
These debts persuaded EY that it was necessary to keep the 'going concern' qualification. The auditors felt that repaying the debts on time depended on the company's ability to realize major assets and investments, and raise significant debt and capital.
In the invitation to next month's shareholders meeting it stressed that the decision to change auditors came after the desire to refresh and make the auditing process more effective, and not because of any problems with EY's work.
This is not the first time recently that Delek Group has changed a professional body. Last year Delek Group ceased its connection with rating company Midroog, after it cut its debt rating by 13 levels.
EY will continue to serve as the auditor for Delek Group's energy exploration and production unit Delek Drilling LP (TASE: DEDR.L).
Published by Globes, Israel business news - en.globes.co.il - on April 18, 2021
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