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