KPMG faces uncertain future in SA
More distance themselves from tarnished firm
THE future of embattled KPMG in South Africa remains shrouded in uncertainty after a week of high drama, with more corporates and business bodies distancing themselves from the auditing firm amid calls for it to provide full disclosure.
Leon Ayo, the southern Africa chief executive of Odgers Berndtson, said on Friday that it was alarming that the bedrock of South Africa’s corporate sector had been found wanting in keeping to the tenets of good governance.
He said that KPMG would find it difficult to regain its former stature.
“The world of the audit profession is a highly competitive one. While KPMG scours to restore its reputation, competitors will be chasing its clients and look to eat into the firm’s bottom line,” said the boss of the executive search firm.
“KPMG International is too big a brand to want to taint its image by state capture allegations. It is possible that the firm might be considering ditching its South African operations to save face,” Ayo said.
On Monday, SA Revenue Service (Sars) commissioner Tom Moyane said he had recommended that the government blacklist the firm as the fallout over Sars “rogue unit” report continued.
Moyane said the revenue service would institute legal proceedings against KPMG for reputational damage, including but not limited to a civil claim, and would report KPMG to the relevant statutory audit bodies, both locally and inter- nationally.
Business Leadership SA (BLSA) chief executive Bonang Mohale said on Friday that KPMG would do society a considerable service if it assisted through full participation in an independent inquiry.
“We are deeply concerned by the unethical and unprofessional conduct that KPMG engaged in South Africa.
“The firm became a party to the project of ‘state capture’, which has harmed our country, victimised certain individuals and has damaged the reputation of the business,” Mohale said.
He was commenting after the BLSA decided to suspend the membership of KPMG pending the outcome of an independent investigation into the the firm’s involvement in conduct related to state capture in South Africa.
BLSA’s suspension came as another blow for the embattled auditing firm after Hulisani and Sasfin this week cut ties as clients because of reputational risks, and several other clients announced that they would be reviewing their relationships with the firm.
The firm’s increasing isolation triggered its admission last week that it had fallen short of standards when it audited the books of Guptaowned companies and part of the Sars report on the alleged “rogue unit”, which refers to conclusions, recommendations and legal opinions.
KPMG is the second multinational firm to face intense scrutiny for work done for the controversial Gupta family.
Earlier this month, embattled British public relations firm Bell Pottinger had its membership of the Public Relations and Communications Association (PRCA) terminated.
The UK-based PRCA said that Bell Pottinger would not be eligible to reapply for corporate membership of the association for a minimum period of five years.
Minister of Finance Malusi Gigaba on Friday weighed in on the woes facing the auditing firm.
He said that the recent developments involving KPMG further highlighted the risks posed by market dominance and concentration of a few firms in key industries and offered yet another opportunity for introspection and reforms.
“It is, therefore, warranted and critical that the relevant law enforcement and bodies such as the Independent Regulatory Board for Auditors (IRBA) look into this matter to identify and sanction those responsible for any wrongdoing,” Gigaba said.
The IRBA is already investigating KPMG over allegations that it turned a blind eye to alleged money-laundering activities by Gupta-owned companies which it had audited for the past 15 years.
Today is National Heritage Day, when South Africans seem unperturbed by the high meat inflation as they unite around a tasty braai. Kalos Mhlanga, Albazino Ngonyama and Sfiso Nhlapho braai at Tinty’s south of Johannesburg. Kabelo Khumalo