KPMG feels curse of the Guptas
At least 21 companies out of about 66 JSE-listed firms which use KPMG South Africa as their auditor confirmed this week that there was an internal review of their relationship with the auditing firm. This followed the damning revelations from its parent company over work done for the Guptas which “fell considerably short of KPMG’s standards”.
That nearly 32% of KPMG South Africa’s listed clients are having a rethink about the relationship shows that the auditing giant is far from out of the woods.
Adding to its problems was a statement by Finance Minister Malusi Gigaba on Friday that, as a way to restore confidence in audits, all of the government and its entities had to immediately consider reviewing their work programmes with KPMG. They have to ensure audit processes have not been compromised, and take steps if they have been.
Business Leadership South Africa suspended KPMG South Africa’s membership “pending the outcome of an independent investigation” into its conduct. The South African Institute of Chartered Accountants also called for an inquiry into the conduct of the auditing firm’s staff who were members of the body.
Six companies have already fired KPMG as their auditor this year, as the risk of keeping it on due to its links to the Gupta family poses a threat to their own operations. This comes amid increasing calls for corporate South Africa to take the moral high ground.
Firms that are mulling their relationship with KPMG South Africa include Nedbank, Old Mutual, BHP Billiton, Lonmin, Altron, South32, AECI and AVI.
Nedbank chief financial officer Raisibe Morathi said the bank was engaging with KPMG and the relevant regulators, and assessing the relationship with KPMG.
“Nedbank takes corruption seriously. We expect our service providers to conduct themselves in an ethical manner. Should it become necessary to terminate any relationships with service providers or others, we will do so within the confines of the law . . . after following our robust internal process,” said Morathi.
Old Mutual said it had maintained “a dialogue with the highest levels at KPMG” throughout this process. A South32 spokesperson said the company was reviewing in detail the findings of KPMG International’s investigation and the actions announced regarding KPMG South Africa.
“We have no tolerance for any form of corruption or bribery. We will continue to monitor the situation closely and consider our position,” the official said.
Industry commentators believe that the flight of just a few top clients from KPMG could be the spark that causes a wildfire of companies fleeing the firm.