Daily Dispatch
KPMG has lost its trusted image
THE crisp kernel of the scandal over the role of one of the world’s top four auditing companies in South Africa’s “state capture” is the short and sweet word: Trust.
No business can survive, let alone thrive, without an environment of trust enveloping any business transaction.
Auditors and accounting companies are among a number of businesses and institutions (including banks, insurance, stock exchanges and even shopping malls) whose existence is to ensure or promote trustworthy transactions.
Anyone who has bought or sold a house or a car will know that dealing through a conveyancing attorney or a financing bank is essential because they bring third-party trust to the deal. Paying large sums of money to someone you do not know in the hopes you will get what you expect in return is a risk few want to take, so it is in everyone’s interest for trust to be secured.
KPMG exists for, and has built its reputation on, providing third-party trust. An audit it signs off or a forensic investigation it undertakes carries considerable weight only because of this. Individuals and other businesses trust the outcomes and base their future decisions on them.
It is the damage to this that is likely to cost KPMG far more than its R40-million “donation into education and anti-corruption not for profit organisations” and its refund of the R23-million it charged the South African Revenue Services (SARS) to investigate the so-called “rogue unit”.
KPMG has more than 3 000 employees, the vast majority of whom take their duties and responsibilities very seriously – and they are now likely to feel the fallout from the irresponsibilities of their senior leaders.
Their report into SARS’s “rogue unit” – started in December 2014 and completed a year later – inflicted massive damage on the lives and reputations of many senior SARS officials and the former Minister of Finance, Pravin Gordhan, and damaged the trust in which SARS is held by taxpayers.
KPMG’s conduct was nothing short of appalling. Those affected were not given any opportunity to respond to, or refute, the findings of the investigation. This paints what should have been a trustworthy, bona fide investigation as a shabby witchhunt.
That KPMG can now blithely admit they were wrong yet plead they did nothing “illegal” is almost mind-boggling. Legality, or the lack thereof, is simply not the point – and they know it.
For trust to exist there has to be integrity – which itself is built on morality and honesty. If we can no longer believe that thirdparty institutions of trust – like SARS and auditors – are trustworthy because they no longer exercise moral and honest judgments, then the future of business in this country is in severe peril.
Remember, KPMG is not some small oneperson accounting firm in a small town. It has for years been one of the most trustworthy names in corporate business.
Firing its senior executives and saying sorry is unlikely to cut it much slack. Good businesses may for good reason be very reluctant to deal with, or believe them in future. And that’s the true tragedy.