KPMG au­di­tor paid R34 mil­lion to cover up fraud

Observer on Saturday - - News - [Ad­di­tional re­port­ing by Ver­non Pil­lay. BUSI­NESS RE­PORT ON­LINE]

KPMG's lead au­di­tor in the R1.8 bil­lion scam at VBS Mu­tual Bank, Sipho Mal­aba, played an ac­tive role in cov­er­ing up the fraud and was rewarded with a hand­some R34 mil­lion.

Mal­aba's con­duct has put em­bat­tled KPMG into fur­ther peril.

He tried to con­ceal the un­due money he re­ceived from VBS as loans but the foren­sic in­ves­ti­ga­tor rub­bished his ex­pla­na­tion.

"Mal­aba had ob­tained very sub­stan­tial fa­cil­i­ties from VBS which can­not be re­garded as arm’s length bor­row­ings and were not de­clared to KPMG. He gave an un­qual­i­fied au­dit opin­ion in cir­cum­stances where he knew the fi­nan­cial state­ments were mis­stated. He also gave a reg­u­la­tory au­dit opin­ion which he knew to be false," the foren­sic re­port reads.

JO­HAN­NES­BURG –

Be­low Busi­ness Re­port de­tails how Mal­aba strong-armed ju­nior au­di­tors to toe the line in the multi-bil­lion rand theft:

A ju­nior trainee au­di­tor (Nduli) raised the con­cern that the cash on hand that they had es­tab­lished with ref­er­ence to the bank state­ments of the var­i­ous banks where VBS holds its funds did not ac­cord with the amounts recorded in the trial bal­ance and the draft fi­nan­cial state­ments. When the trainee au­di­tor pressed form more in­for­ma­tion from VBS, Mal­aba was called in.

Nduli told in­ves­ti­ga­tors as fol­lows: "When Sipho signed the au­dit and I re­alised that my work pa­per hadn’t changed, it was still there, and there were no ad­di­tional pro­ce­dures per­formed on cash, and there was no ad­di­tional in­for­ma­tion that’s been placed on the au­dit file, that’s when I said: Okay, no, then I’ve ac­tu­ally been led down the wrong hole, or I’ve been led in­cor­rectly here, be­cause now there is ac­tu­ally an au­dit dif­fer­ence and me putting this amount in the state­ment col­umn and me say­ing "were per­formed" is ac­tu­ally in­cor­rect, be­cause noth­ing was done sub­se­quently. I was told that some­thing would be done, and that those dif­fer­ences were un­der­stood."

2. Au­dit Man­ager (Mu­nalula) for the VBS au­dit on 2017 tes­ti­fied that she had be­come aware as early as midMay 2017 that there was a clear and ev­i­dent dis­crep­ancy be­tween the avail­able bank state­ments and the amounts set out in the gen­eral ledger. "I did raise it sev­eral times with the en­gage­ment part­ner (Mal­aba), but he told me that he was au­dit­ing the cash sec­tion."

The foren­sic fi­nal anal­y­sis on Ma­bala's con­duct: "In all the cir­cum­stances, I find that Mal­aba ap­proved and signed off on VBS’ fi­nan­cial state­ments for the year ended 31 March, 2017, know­ing of the fal­si­ties and in­ac­cu­ra­cies con­tained therein. This is fraud."

Reached for com­ment by KPMG said it noted the pub­li­ca­tion of the re­port of the SA Re­serve Bank‘s foren­sic in­ves­ti­ga­tion into the af­fairs of VBS Mu­tual Bank.

KPMG said the re­port in­cluded se­ri­ous find­ings con­cern­ing the con­duct of a former KPMG part­ner.

The au­dit­ing firm said when these is­sues first arose in March, KPMG in­ves­ti­gated the mat­ter quickly and the part­ner was ex­ited from the firm. KPMG recog­nised the se­ri­ous­ness of the is­sues con­tained in the re­port and would co-op­er­ate fully with any in­ves­ti­ga­tions that flow from this re­port.

KPMG Ex­ec­u­tive Chair­man Wise­man Nkuhlu com­mented: “Lessons have been learned and de­ci­sive ac­tion has been taken since these mat­ters came

Who is Mal­aba:

He qual­i­fied as a char­tered ac­coun­tant some eigh­teen years ago. He did his ar­ti­cles at KPMG.

He be­came the en­gage­ment part­ner for the VBS au­dit about five or six years ago.

He tes­ti­fied that his or­di­nary salary af­ter tax was be­tween R120 000 and R130 000 per month.

His res­i­den­tial home in Four­ways is the one pur­chased by way of the mort­gage bond held with VBS.

He pur­chased Range Rover Evoque us­ing VBS money. The debit or­ders for pay­ments to this ac­count were al­most in­vari­ably re­versed and VBS never took any col­lec­tion steps on the accounts apart.

A Dis­cov­ery 3.0 TSD and a Mercedes Benz were also pur­chased through VBS’ closed mo­tor ve­hi­cle fi­nance scheme, which pro­vided spe­cial terms only avail­able to em­ploy­ees, direc­tors and share­hold­ers of VBS. to light, and we will study the Re­serve Bank’s re­port to see if there is more we can do. There can be no tol­er­ance of any con­duct that com­pro­mises the qual­ity and in­tegrity of our work.

I am confident that the ex­ten­sive re­me­dial changes the firm has al­ready made will en­able us to re­build pub­lic and client trust in KPMG, help­ing us to con­tinue to serve busi­ness and so­ci­ety in South Africa.”

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