Regulator ‘likely’ to probe KPMG
• Irba CEO says it would investigate role of firm in preparing SARS report
The Independent Regulatory Board for Auditors (Irba) is considering whether to investigate the role of KPMG in the preparation of the report on the “rogue unit” at the South African Revenue Service (SARS).
In a briefing to Parliament’s standing committee on finance on Tuesday, Irba CEO Bernard Agulhas said that such an investigation was likely.
KPMG International has withdrawn the controversial report because it did not meet the firm’s quality control standards. The report was used as a basis for the attempted prosecution of former finance minister Pravin Gordhan.
Agulhas said that the report of KPMG’s forensic investigation into the “rogue unit” had been signed off by a registered auditor and therefore fell within the jurisdiction of Irba. The body would investigate whether the auditor exercised due care and complied with the applicable standards.
DA finance spokesman David Maynier has written to Agulhas to formally request that Irba investigate the conduct of the KPMG auditor responsible.
Irba has also received a complaint from the DA on the alleged inadequate disclosure of South African Airways’s goingconcern status in its financial statements. The financial statements were audited by PwC and Nkonki.
Agulhas said the complaint would be examined by the investigating committee, which would meet in October.
Regarding the audit by KPMG of Linkway Trading and the diversion of public funds from a Free State dairy farm to the Guptas’ offshore bank accounts in the United Arab Emirates, the funds were allegedly used to fund the Gupta wedding in 2014. Leaked Gupta-related e-mails indicate that KPMG was aware that Gupta family companies were categorising the wedding costs as business expenses.
Agulhas said Irba had met KPMG International chairman Bill Thomas and KPMG SA CEO Nhlamu Dlomu last week to discuss the process of the investigation and to urge their cooperation, which had initially not been fully forthcoming.
“At the beginning, we did not always obtain the information we required,” Agulhas said. He said the international leadership had committed themselves to co-operate and to provide all the necessary information.
The Irba board had held a special meeting to discuss the KPMG matter and has asked that the investigation be fast-tracked. Agulhas said Irba wanted to finalise the investigation as soon as possible as it was a public interest matter.
Agulhas said the investigation might be extended to cover other auditors. Irba also had to manage the risk of loss of confidence in the profession. Appropriate regulatory action had to be taken if improper conduct was established during the investigation. Should an auditor be found guilty of improper conduct, Irba can impose sanctions including the withdrawal of the licence to act as an auditor.
Committee chairman Yunus Carrim urged that cases of those found guilty be referred to the police for prosecution.
Agulhas said Irba had been engaging with international regulators who had an interest in the outcome of the KPMG matter because it had become an international matter. KPMG might have audited companies with branches overseas that fell under the supervision of international regulators.
On the investigation into African Bank, which opened in December 2014, Agulhas said draft allegations had been tabled with the investigating committee in December 2016. An initial response was received from African Bank in June 2017. The investigating committee would consider what recommendation to table with the disciplinary committee in October.