KPMG feels curse of the Gup­tas

Sunday Times - - BUSINESS TIMES - By RAY NDLOVU and PERICLES ANETOS

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.

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