Gordhan queries repercussions for auditing firms
FORMER finance minister Pravin Gordhan and economist Iraj Abedian have raised hard-hitting questions about the repercussions auditing firm KPMG should face for potentially costing the economy billions through state capture.
In a public debate last night at Wits University in Johannesburg‚ the two tore into the actions of Gupta-linked auditing and financial advisory firms KPMG and McKinsey.
The debate‚ which drew hundreds of people to the university’s Great Hall‚ looked at the lessons learnt from the Gupta state capture scandal‚ which has potentially seen billions of rands looted from state-owned entities and South Africa’s financial coffers.
Gordhan raised the Independent Regulatory Board for Auditors’ (IRBA) code of conduct on how firms must always act in the public’s interest, and queried whether the firms’ conduct followed the code.
“Does the facilitating of the disappearance of billions of rands act in the public interest and, if not, what should be the repercussions – should the repercussions be equal to the events?” he asked.
“A [total of] R150-billion of South Africans’ money lands in strange bank accounts all over the show. Should the repercussions not be equal to this?”
Gordhan said all South Africans should become revolutionaries to ensure that looting and corruption were stopped.
“There are systemic issues where accounting and auditing firms keep on featuring in big issues like this globally. There is clearly a problem,” he said.
“State capture is about national resource capture and the appropriation of money through money laundering and racketeering where professionals assist‚ aid and abet.
“Professional bodies need to take a tough look at their actions, especially with the ethics gap growing.
“If these activities are continuing, what are we‚ as South Africans, doing to make a noise and get onto the streets and protest about these actions,” Gordhan asked.
He said globally over the past two years financial advisory and auditing companies had paid out more than $200-billion (R2.71-trillion) in fines for misconduct.
“What does this say about the auditing work and assurances to the public that everything is financially all right?
“What does it mean when the terms of references of forensic auditors are changed twice on reports?
“Does it mean that according to the code of conduct you are objective‚ acting with integrity and being professional?” he asked, in reference to KPMG SA rescinding its findings‚ conclusions and recommendations of its so-called SA Revenue Service Rogue Report.
Gordhan said questions needed to be raised over where the auditors were when state-owned entities were being captured.
“Instead of providing assurance‚ some professionals have become partners in these schemes.”
Gordhan said poverty and the quality of citizens’ lives needed to be the focus of society to address the massive exclusion of the majority of South Africans from the economy.
“We need an active citizenry where people are constructive in finding solutions, and leaders in civil society and corporates are identified to address the situation we find ourselves in.”
Abedian called for not only a national debate on state capture but also the protection of South Africa’s national resources.
“Our national savings‚ specifically those of the working class‚ are managed by a select number of institutions,” he said.
“Our national resources are being feasted on and I am deeply worried that our pensions – like our taxes and our public enterprises, which are all interconnected – are not in good hands.”
He cast doubt on whether the country’s auditing firms could be believed. “There is an embedded culture where national resources are for the benefit of the rich.”
Abedian said South Africa was going through an ethical crisis where the ethics of business were being questioned.
He slammed advisory firm McKinsey for its links to the state capture saga.
“I am excited that KPMG has landed in this position because it creates an opportunity to question where the heads of these companies‚ their executives and board members were and what they were doing when they should have been ethically governing.”
Abedian said there had been an invitation to connect the dots around the lack of governance of state-owned enterprises‚ “but what we should be doing first is looking at the actions of those who sit on boards of insurance companies‚ banks and investment companies who should be overseeing these SOEs’ actions”.
“We are grateful our economy is growing by 0.3%‚ when we should be furious,” he said. “The damage these professionals‚ like those from KPMG‚ are doing is not just financial damage. It is impacting on unemployment.”