More body blows forKPMG
A-G terminates contracts
KPMG WOES deepened yesterday after Auditor-General (AG) Kimi Makwetu terminated government contracts with the firm as some of the country’s major banks said they were also reviewing their relationship with the embattled auditing group.
Makwetu said his office decided to cut ties with KPMG in the wake of the continuing fallout over the firm’s involvement in the VBS Mutual Bank auditing saga. He said his office had already limited KPMG’s work following the Guptaowned Linkway scandal.
“Recent media reports relating to the external audit of VBS and the conduct of KPMG audit partners are some of the reasons that prompted the decision to withdraw all KPMG audit mandates with immediate effect,’’ Makwetu said.
VBS came to prominence after it bailed out former president Jacob Zuma with a R7.8 million loan to settle his Nkandla debt.
Last week KPMG’s head of financial services auditing, Sipho Malaba, resigned over the VBS saga. Malaba was the lead audit partner on the audit that failed to trace R900m worth of deposits held with the bank.
Another partner at the firm, Dumi Tshuma, also fell after he and Malaba allegedly failed to disclose loans they had with VBS. KPMG chief executive Nhlamu Dlomu said the firm would work closely with the A-G to minimise disruption.
“It’s very much our hope that this announcement will prove to be only a temporary break in the relationship. We will, in the months ahead, keep the A-G closely apprised of all the changes we are making to further embed our quality and integrity in all that we do,” Dlomu said.
KPMG had been under relentless pressure from some of its top-tier clients in the banking sector over accusations of poor quality.
Investec head of investor relations, Ursula Nobrega, said the specialist bank’s relationship with KPMG remains under review, pending the outcome of the ongoing independent investigation. “We will engage KPMG on more recent events and continue to assess our position in this regard,” Nobrega said. “With respect to our yearend audit, which is under way, we have put in place additional checks and balances to ensure the integrity and quality of this audit, which includes joint audit and international reviews.”
In an embarrassing development, the curator of the embattled VBS Mutual Bank on Monday pulled the bank’s audited annual financial statements for the year ended March 31, 2017, charging that they contained “material misstatements and are no longer considered to be reliable”. KPMG was the external auditor of the bank.
KPMG also looks after the books of Standard Bank, Nedbank and Barclays Africa.
A spokesperson for Barclays yesterday said the relationship with KPMG remained under review pending the outcome of investigations by the audit and accounting regulators.
Nedbank has already said that it will review its relationship with KPMG post its separation from Old Mutual in the 2019 financial year.
Standard Bank spokesperson Ross Linstrom said: “All adverse information about our auditors is carefully assessed for its impact on our relationship. The most recent media statement by KPMG will be assessed accordingly.”
KPMG in a statement on Sunday said it is reviewing work done by all its audit partners in the past 18 months, and is conducting background checks of its audit partners and their spouses to avoid “future embarrassments”.