KPMG SA- Will They Survive?
The SA division of the firm came under fire when it was recently revealed that their 2015 report on former Finance Minister Gordhan – which stated that he should have known about irregularities at SARS – was not actually accurate. The report was one of the factors used by the President in firing the Finance Minister. The former Minister had found himself on the opposite side of the Gupta fence during a fight with the Presidency at the time. What followed was the downgrading of SA’s Sovereign debt rating to “junk status” and subsequent economic woes.
‘What followed was the downgrading of SA’s Sovereign debt rating to “junk status” and subsequent economic woes’
Recently, KPMG International chairman Mr. John Veihmeyer and KPMG chairman-elect Mr. Bill Thomas announced that the international parent organisation had launched an independent investigation into work performed by KPMG SA. The investigation’s focus will be on work done on the inaccurate SARS report and other possible Gupta related matters.
Clients Jump Ship
In the wake of the revelations and the subsequent resignations of senior KPMG SA management, several big clients have already said goodbye to KMPG. Organisations like Sasfin and Hulisani have cut ties with the firm and others stand poised to follow suit.
This week it was announced that the Auditor General will, for the moment at least, continue to use KPMG until the findings of an investigation by the Independent Regulatory Board of Auditors into the work the firm did for the Gupta family and on the SARS report. The firm will not, however, be given any new work in the meantime.
KPMG Audit The Big Banks
Since KPMG audit the big banks and it is claimed that they have specialised skills at doing so, the SA Reserve Bank has supposedly told the big banks that they are not to fire KPMG. In fact, due to certain requirements, it is basically impossible for them to do so without the say-so of the Reserve Bank. Whether the specialised skills are not to be found elsewhere is up for debate but thus far the Reserve Bank has proved to be one supporter during a tirade of anti-Gupta and anti-Bell Pottinger (who worked closely with KPMG SA) sentiment.
UK based Bell Pottinger fell under the axe when it was revealed they had been stoking racial tensions in South Africa, in an effort to, supposedly, distract from the relationship between the President and the Gupta family.
KPMG had to appoint a new CEO (Ms Nhlamu Dlomu) after senior management at the firm all resigned suddenly after the initial investigations by the parent organisation revealed irregularities. KPMG SA are now in full survival mode as various clients decide if they too should jump ship.
KPMG are not, however, the only option available. The Banks have to choose two of four possible firms to jointly audit them out of a short list provided by the SARB. The other three options are EY, Deloitte and PwC. The banks have to rotate auditors every 5 years and this makes working with a shortlist of only 3 candidates basically impossible. At present Standard Bank, Barclays Africa, Nedbank use KPMG and are said to be leaving it that way until the findings of the external international report.
KPMG SA currently employs around 3200 staff members locally.
Note: The Gupta family say they are targets of political manoeuvring and have denied any wrongdoing. Neither the Guptas nor their firms have, as yet, been charged with any crime.