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Johannesburg – The South African Reserve Bank (SARB) has not instructed banks on the actions they should take regarding KPMG.
In a statement issued on Friday, the Reserve Bank clarified the stance it has taken on the matter.
Referring to the Monetary Policy Committee briefing on September 21, the Reserve Bank reiterated Governor Lesetja Kganyago’s statement that its interest in the KPMG matter stems from a public policy perspective arising from the SARB’s mandate to regulate banks to ensure the stability of the financial system.
The SARB is engaging with banks and audit firms to understand the context of the matter, to allow it to be “better placed” in managing potential risks to financial stability.
“These engagements have taken place but at no point did the SARB instruct banks on how they should deal with KPMG,” the bank said.
Deputy Governor Francois Groepe has also spoken on the SARB’s position on the matter on September 26. Groepe said the developments around the audit firm require “thoughtful leadership and restraint”.
“The South African economy would be better served if further market concentration within the auditing and auxiliary professional services sector could be avoided.”
The Reserve Bank went on to say that no person can be appointed an auditor of a bank unless the appointment has been approved by the Registrar of Banks.
According to Section 61 of the Banks Act, the appointment of an auditor can be withdrawn for several reasons. Among these include if the auditor has been convicted of an offence of which dishonesty is an element, or if the auditor is found to be incompetent or unfit to perform the functions of an auditor, and if the auditor is under investigation by the Public Accountants’ and Auditors’ Board. The appointment can also be removed if it ails to disclose and direct or indirect interests which may constitute a conflict of interest in respect of such auditor’s duties.
Several clients have dropped KPMG, including Sasfin Wealth, Munich Re, Sygnia Asset Management and Wits University.
Banks, Nedbank [JSE:NED] and Investec [JSE:INL] who are clients of the firm have called for KPMG to provide the results of an independent investigation into the work it did for the Gupta family, Bloomberg reported.
KPMG CEO Nhlamu Dlomu issued a statement regarding the inquiry this week. She said that the firm would announce details of the investigation later this month.
"The Inquiry will be fully independent and the panel will be led by two experienced senior counsels. The panel members, the scope of the inquiry, terms of reference and the estimated duration of the Inquiry will be announced on 12 October 2017," said Dlomu.
She added that the firm would cooperate with the Independent Regulatory Board for Auditor (IRBA) in its inquiry into KPMG's conduct in handling the SA Revenue Service's (SARS) “rogue unit” report.
ABSA also issued a statement previously indicating that the allegations that KPMG have been implicated in, are “in conflict” with the bank’s values and that of Barclays Africa [JSE:BGA].
“Given that some investigations and reviews are underway we will continuously reconsider our position as more information becomes available,” the banks said. Old Mutual [JSE:OML] is also reconsidering its relationship with the firm, Bloomberg reported.
Dlomu and interim chair of the auditor's policy board Gary Pickering answered questions of the standing committee of public accounts (Scopa) on Thursday.
Pickering told Parliament that there was no systematic risk within the organization and that it submits to quality reviews which include annual inspections by IRBA, KPMG International and those of major banks. Pickering explained that the auditors of the Gupta contracts lacked “professional skepticism” when red flags were raised in doing their work.
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