KPMG needs surgery to exorcise demons
For a business to business it’s quite amazing how many individuals have been ruined by KPMG, the disgraced auditing firm. Just as surprising has been its clumsy response to the crisis that has engulfed it.
After months of piecemeal diversionary tactics including internal reviews, in September it let go of its mahogany row including CE Trevor Hoole. And, curiously, it withdrew portions of a report it prepared for the South African Revenue Service (SARS) in respect of its alleged rogue spy unit and offered to pay back the fees it received from the tax-collecting authority.
The response also included the appointment of Nhlamu Dlomu as CE. As part of her first act, poor Dlomu has had to facilitate private sessions in which KPMG offers personal apologies to special victims of its skulduggery including former finance minister Pravin Gordhan and former SARS officials such as Ivan Pillay and members of the so-called spy unit.
The less special victims including a friend who was harassed out of the country, have yet to receive a mea culpa call from KPMG.
The rest of the country is battling to deal with what is essentially a black-and-white matter. Big business, through Business Leadership SA, has suspended KPMG’s membership and the Institute of Directors has distanced itself from the firm. Like Hulisani and Sasfin, Parliament and its medical aid have sacked KPMG as auditors. The SA Institute of Chartered Accountants has announced an inquiry of sorts.
The big banks are still unsure about what to do with KPMG, which audits most of them. But the central bank, their regulator, is understood to be nervous about the banks firing KPMG as this might destabilise the financial system. The auditor-general’s office has already said it won’t fire KPMG — this, of course, despite a call by the finance ministry to review all relationships between KPMG and government entities, of which there are many.
KPMG plays an important role in the country beyond taxes and the employment it provides to thousands. It cannot collapse.
Similarly, it would be immoral to ignore the damage it has done to individuals and this country. The question that remains is, what should KPMG do to retain its social and business licence to operate in this country?
The parent company either doesn’t understand the scale of the crisis facing its South African operation or doesn’t care — otherwise it would have deployed resources to help resolve the crisis.
For Dlomu, who has been given a hospital pass, it’s clear she needs to do something big to restore the public’s trust in the company. Unfortunately, maintaining the bottom line isn’t the big thing that is required. Neither is repeating the half-hearted apology offered by the company.
The first thing she will have to do is accept that what has happened here is much more than an aberration — this is about the culture of the company. Letting go of the leadership and some partners is a small but important step.
But hard as it is to accept, it would be naive to think the wrongdoing was limited to a few individuals. Fixing the culture of the company should be her main priority. And this might require firing more people who might be considered good for the fees but bad for ethics.
Second, all the special victims have, quite rightly, asked KPMG to fully account for its (mis)conduct. Explaining this away or focusing on the good it has done in the past doesn’t constitute accountability. A start would be coming out clearly about who ordered the withdrawal of portions of the SARS report and why.
This exercise cannot take place in an opaque process or another KPMG internal investigation. What is required is painful and potentially embarrassing, but necessary. Nothing less than full open-heart surgery is required to help exorcise KPMG’s demons.
Dlomu cannot do this alone. She needs a credible independent inquiry into what occurred at KPMG, who the actors were and how long it has been going on. She needs to appoint someone with unimpeachable integrity and preferably out of active legal practice. She needs someone like Dikgang Moseneke, former deputy chief justice, to lead the inquiry.
Furthermore, it would be counterproductive to appoint such an inquiry and keep its results secret. The public needs to know the outcome of the probe. This is a hard assignment. But it’s not undoable. Dlomu needs support from all stakeholders, especially her colleagues. Internally and externally, she needs the support of a chairman with gravitas to help open the doors she cannot.
It is hard to think of anyone who commands more respect than Wiseman Nkuhlu to help restore trust in KPMG.
SHE NEEDS A CREDIBLE INDEPENDENT INQUIRY INTO WHAT OCCURRED, WHO THE ACTORS WERE AND HOW LONG IT HAS BEEN GOING ON
Dludlu, a former Sowetan editor, is founder of Orwell Advisory Services.