KPMG axes CEO, will pay Sars

But moves are not ad­mis­sion of guilt over Gupta deal­ings

The Sunday Independent - - BUSI­NESS RE­PORT - Ka­belo Khu­malo

THE FALL­OUT over the Gup­tas con­tin­ued this week with KPMG ax­ing chief ex­ec­u­tive Trevor Hoole and board chair­per­son Ahmed Jaf­fer while pledg­ing mil­lions to char­ity over claims that the au­dit firm turned a blind eye to al­leged money laun­der­ing by the fam­ily when it per­formed pro­fes­sional ser­vices for its com­pa­nies.

The em­bat­tled firm said on Fri­day that in ad­di­tion to dis­miss­ing key part­ners, it would put R40 mil­lion of the to­tal fees earned from Gupta re­lated en­ti­ties since 2002 into ed­u­ca­tion and pay back to the SA Rev­enue Ser­vice the R23m it re­ceived for its probe on the tax­man’s so-called rogue unit.

But the firm in­sisted that the moves were not ad­mis­sion of guilt as its own in­ves­ti­ga­tion iden­ti­fied no ev­i­dence of il­le­gal be­hav­iour or cor­rup­tion by KPMG part­ners or staff.

It said work done for Gupta com­pa­nies “fell con­sid­er­ably short of KPMG’s stan­dards”.

KPMG is cur­rently un­der in­ves­ti­ga­tion by the au­dit­ing watch­dog, the In­de­pen­dent Reg­u­la­tory Board for Au­di­tors (IRBA), for its role in the au­dit­ing of the Gupta com­pa­nies, while the board of the In­sti­tute of Di­rec­tors in South­ern Africa (IoDSA) has sus­pended co-branded ac­tiv­i­ties with KPMG pend­ing the out­come of the IRBA in­ves­ti­ga­tions.

Nh­lamu Dlomu, who has been ap­pointed to suc­ceed Hoole, said her first or­der of busi­ness would be to build a man­age­ment team com­mit­ted to ethics and in­tegrity that au­dit­ing firms had to hold up to.

Dlomu said the pe­riod had been par­tic­u­larly hard for KPMG.

“I want to apol­o­gise to the pub­lic, our peo­ple and clients for the fail­ings that have been iden­ti­fied by the in­ves­ti­ga­tion,” Dlomu said.

“It is im­por­tant to em­pha­sise that these events do not rep­re­sent KPMG, our peo­ple or the values we have ad­hered to over decades of com­mit­ted client ser­vice. My pledge and prom­ise to the coun­try is that we can and will re­gain the pub­lic’s con­fi­dence.”

KPMG found it­self in muddy wa­ters af­ter al­le­ga­tions emerged ear­lier this year that the firm acted im­prop­erly when it au­dited the books of Gup­taowned Linkway Trad­ing, which al­legedly used R30 mil­lion of tax­pay­ers’ money to fund a lav­ish Gupta wed­ding in 2013.

Al­le­ga­tions say the money was meant to have been used for the up­lift­ment of emerg­ing farm­ers in the Free State.

The firm’s role in the au­dit of the so-called rogue unit at the South African Rev­enue Ser­vice (Sars), which im­pli­cated for­mer fi­nance min­is­ter Pravin Gord­han, has also seen the firm on the ropes.

For­mer chief ex­ec­u­tive Moses Kgosana and an­other three part­ners at­tended the wed­ding.

KPMG said its in­ves­ti­ga­tions on the Op­ti­mum deal found that the Gup­tas had un­der­taken in­creased dis­cus­sions with Glen­core’s rep­re­sen­ta­tives in the ab­sence of the firm and that it was not al­ways made aware of the de­tails.

It said its re­spon­si­bil­ity at the time of list­ing Oak­bay was lim­ited to is­su­ing au­dit opin­ions in re­spect of the his­tor­i­cal fi­nan­cial in­for­ma­tion for the three years ended Fe­bru­ary 2014 con­tained in the Pre List­ing State­ment (PLS), and for is­su­ing a re­port­ing ac­coun­tant’s re­port on the pro forma fi­nan­cial in­for­ma­tion of the group.

It said it was not en­gaged to pro­vide a val­u­a­tion of the group.

It said its probe into the fam­ily’s tax af­fairs con­cluded there was noth­ing to in­di­cate that its part­ners or staff were in­volved in help­ing po­ten­tial money laun­der­ing, tax eva­sion, cor­rup­tion or any other il­le­gal ac­tiv­ity.

But it ad­mit­ted that qual­ity con­trol on the Sars in­ves­ti­ga­tion was com­pro­mised and the Septem­ber 2015 re­port on the so-called rogue unit was not per­formed below ex­pected stan­dards

Dlomu said KPMG had de­cided to take dis­ci­plinary ac­tion seek­ing the dis­missal of Jac­ques Wes­sels, the lead part­ner on the au­dits of the non-listed Gupta en­ti­ties.


The KPMG of­fices in Braam­fontein.

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