KPMG in trou­ble over VBS au­dit

The Sunday Independent - - Business Report - Com­piled by Luy­olo Mken­tane Ka­belo Khu­malo

Min­eral Re­sources Min­is­ter Gwede Man­tashe says the coun­try will have a new min­ing char­ter in May. Man­tashe says the de­part­ment will not be ap­peal­ing a high court find­ing on the em­pow­er­ment clause of the char­ter. He says new guide­lines for the char­ter are 80 per­cent com­plete. THE In­de­pen­dent Reg­u­la­tory Body for Au­di­tors (IRBA) is in­ves­ti­gat­ing em­bat­tled KPMG lead au­dit part­ner Sipho Mal­aba on the firm’s au­dit opin­ion of the VBS Mu­tual Bank.

The in­ves­ti­ga­tion comes as the fall­out over the miss­ing mil­lions at VBS es­ca­lates on how KPMG missed the dis­crep­an­cies on the bank’s au­dit.

The IRBA said on Fri­day it had no­ti­fied Mal­aba of the in­ves­ti­ga­tion.

IRBA chief ex­ec­u­tive Bernard Agul­has said the board had given Mal­aba 30 days to re­spond to its ques­tions.

“While it is al­leged that other em­ploy­ees may be im­pli­cated in the VBS Mu­tual Bank au­dits, the IRBA only has ju­ris­dic­tion over regis­tered au­di­tors and it may not open ad­di­tional in­ves­ti­ga­tions un­less those fur­ther em­ply­ees are also regis­tered au­di­tors,” Agul­has said.

The IRBA fur­ther con­firmed that the first re­port of the re­portable ir­reg­u­lar­ity has now been re­ceived from KPMG, dated 11 April 2018, which de­tails the in­for­ma­tion recorded in me­dia re­ports around the mat­ter.

Mal­aba, a char­tered ac­coun­tant, has be­come the face of the dis­crep­an­cies that sur­rounded the VPS au­dit.

SA Re­cerve Bank (Sarb) deputy gov­er­nor Kuben Naidoo said in an af­fi­davit that VBS could not ac­count for nearly R1 bil­lion de­posited with the bank.

The cen­tral bank fur­ther charged that when the cu­ra­tor checked last month, the liq­uid po­si­tion of VBS amounted to just R24.7 mil­lion.

This de­spite the bank claim­ing it held to­tal de­posits “os­ten­si­bly” in the re­gion of R2.9 bil­lion.

“I say ‘os­ten­si­bly’, be­cause Anoosh Rooplal (cu­ra­tor) has been un­able to con­firm the ve­rac­ity of a ma­te­rial por­tion of the so-called cor­po­rate de­posits, which amount to ap­prox­i­mately R900m.”

There are claims that Mal­aba ig­nored the anom­alies as he kept a close re­la­tion­ship with the bank which had ex­tended loans to him.

VBS de­flected ques­tions on whether it did grant loans to Mal­aba while he was au­dit­ing its books, re­fer­ring them to the cu­ra­tor.

Mal­aba was not im­me­di­ately avail­able for com­ment.

In an­nounc­ing a new lead­er­ship team, which con­sisted of Mal­aba in the wake of the fall­out of the Gup­taowned Linkway last year, KPMG SA chief ex­ec­u­tive Nh­lamu Dlomu hailed its ex­pe­ri­ence.

“I be­lieve the in­di­vid­u­als in this team have the nec­es­sary skill, ex­pe­ri­ence, pas­sion and en­ergy to lead KPMG to, once again, be a stan­dard set­ter,” Nh­lamu had said.

Or­gan­i­sa­tion Un­do­ing Tax Abuse (Outa) chief op­er­a­tions of­fi­cer Ben Theron said the firm had fallen from grace af­ter al­low­ing greedy in­di­vid­u­als to in­flu­ence and po­si­tion its op­er­a­tions.

“We urge KPMG to con­tinue to scru­ti­nise its op­er­a­tions and to take de­ci­sive ac­tions in its jour­ney to re­store its reputation.

“We ad­vise all other play­ers in the in­dus­try to con­duct in­ten­sive scru­tiny and in­tro­spec­tion to en­sure they op­er­ate with the high­est level of in­tegrity,” Theron said.

Sarb said based on the cu­ra­tor’s ini­tial as­sess­ment there might have been fraud­u­lent re­port­ing and fraud­u­lent trans­ac­tions con­ducted in or­der to fur­ther the in­ter­ests of cer­tain key in­di­vid­u­als and com­pa­nies re­lated to VBS.

KPMG failed to re­spond to ques­tions on Mal­aba’s sus­pen­sion. The au­dit was the sec­ond to be im­pli­cated in a col­lapse of a bank in less than 10 years.

Deloitte, which was the au­di­tor of both unse­cured lender African Bank (now re­named Resid­ual Debt Ser­vices) and its JSE-listed par­ent com­pany African Bank In­vest­ments (now re­named African Phoenix In­vest­ments) has been charged over shoddy au­dit­ing. The In­de­pen­dent Reg­u­la­tory Board for Au­di­tors slapped the firm with charges in­clud­ing fail­ure to in­ter­ro­gate the bank’s fi­nan­cial state­ments, which did not present the true state of the bank’s af­fairs.

African Bank’s for­mer BEE part­ners are su­ing old di­rec­tors of Deloitte for R2.1bn.

PHOTO: NHLANHLA PHILLIPS

KPMG’s of­fices on the cor­ner of Em­pire and Jan Smuts roads in Johannesburg. Siseko Njobeni

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