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Ex-KPMG partners in VBS saga failed to disclose links with the bank

Apr 15 2018 16:45
Sibongile Khumalo

Johannesburg – KPMG South Africa has revealed that nondisclosure was at the centre of the recent resignation of two partners who were facing disciplinary charges related to work done for VBS Mutual Bank.

Sipho Malaba and Dumi Tshuma are the latest KPMG staff to leave the firm under a cloud.

Malaba was the head of the group's financial services auditing unit, and the person responsible for signing off on the VBS Mutual Bank financial statements.

"There were issues of nondisclosure that came up. For instance, it was discovered that Malaba had loans with VBS," said Chief Executive Nhlamulo Dlomu.

The firm said Malaba and Tshuma's departure had served as a reminder that "more needs to be done to reaffirm the public's trust in KPMG."

Dlomu said the two had also been doing work for other major banks.

The SA Reserve Bank, which placed the Limpopo province-based VBS bank under curatorship, has now also commissioned a forensic investigation into the bank's business affairs.

KPMG has suffered severe reputation damage since allegations of misconduct emerged regarding the work it did for Gupta-linked companies and its role in the controversial SARS “rogue unit” report.

The embattled firm has launched what it called an "unprecedented" review of all the work done its partners in the last 18 months.

Chairperson Wiseman Nkuhlu told a media briefing on Sunday the review was part of reforms instituted by the firm to help regain public trust and improve the quality of its work.

He stressed that the review "is being done to ensure that nothing comes back to bite us, following the challenges we have experienced in the past".

"...I understand that some partners are going to be angry. There will be some resistance."

The company is looking at reviewing at least 200 files.

"What we are doing is basically opening ourselves up to scrutiny," Dlomu added.

FULL STATEMENT: KPMG's plan to regain 'damaged' trust and place quality and integrity at its heart

KPMG South Africa is hoping to speed up its efforts to rebuild public trust as it announced further steps to accelerate significant change at the scandal-hit audit firm. Read the full statement: KPMG South Africa on Sunday announced further steps to accelerate change and rebuild public trust.

KPMG faces at least two separate investigations and there has been an exodus of clients and senior executive staff since revelations last year.

It kicked out CEO Trevor Hoole, chief operating officer Steven Louw and chair Ahmed Jaffer.

In September last year, KPMG apologised for the SARS rogue unit report and offered to repay R23m to SARS – and to donate R40m in fees from Gupta-owned clients to charities.

In October, the Independent Regulatory Board for Auditors (IRBA) launched its investigation after SARS laid a complaint, and the SA Institute of Chartered Accountants (Saica) is currently holding an inquiry on the conducts of its members employed by the company.

The commission is headed by advocate Dumisa Ntsebeza. 

In October KPMG officials appeared before the parliament’s standing committee of public finances to explain the firm’s conduct.

The company revealed it had started doing work for Gupta-linked firms in 2002, which amounted to 35 different entities.

Nkuhlu said on Sunday said KPMG could still be redirected to regain its former glory.

He said the firm's past reputation was an indication that "it might have been doing something good for some time".

The Democratic Alliance has welcomed the KPMG plan of action, urging the company to come clean.

"KPMG needs to come clean in order to ensure that trust is restored in auditors and that we can get to the bottom of the problems at VBS," said Kevin Mileham, DA Shadow Minister of Cooperative Governance and Traditional Affairs.

"This is particularly necessary given the revelation yesterday that two partners, Sipho Malaba and Dumi Tshuma, had resigned when faced with disciplinary charges." 

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kpmg  |  auditing
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