KPMG missed chance to clean up after Gupta mess, says commentator Khaya Sithole | Fin24
 
Loading...

KPMG missed chance to clean up after Gupta mess, says commentator Khaya Sithole

Apr 13 2018 15:53
Tehillah Niselow

Johannesburg - KPMG once again finds itself in hot water, after it missed the opportunity to clean up its operations in September 2017 when several senior executives resigned over the audit company’s handling of the Gupta family’s financial statements, according to chartered accountant and commentator Khaya Sithole.

Business Insider reported on Thursday that KPMG suspended Sipho Malaba, the head of the group's financial services auditing unit, and the person responsible for signing off on the VBS Mutual Bank financial statements.

An internal investigation could lead to disciplinary action against more staff.

The South African Reserve Bank, meanwhile, announced on Friday it has commissioned a forensic investigation into VBS Mutual Bank following revelations that R900m of the bank’s deposits of R2.9bn cannot be effectively confirmed. 

The bank, which became famous after lending ex-president Jacob Zuma R7.8m to repay his Nkandla debt in 2016, was placed under curatorship in March this year.

Sithole said that both VBS and the Guptas were politically connected clients that have dented KPMG’s image. 

KPMG, one of the ‘Big 4’ auditing firms, had promised the public and Parliament in 2017 it would root out unlawful elements, as several big clients including listed companies and public institutions cancelled their accounts with the company.  

Its spokesperson Nqubeko Sibiya told Fin24 on Friday that the circumstances surrounding Malaba's actions when he signed off on VBS Mutual Bank's financials was getting the auditing firm’s due attention.

However, he was tight-lipped on how long such a probe would last.

“KPMG South Africa is investigating the matter in full cooperation with the curator of VBS Mutual Bank. Pending the outcome of the ongoing investigation, the VBS audit partner has been suspended. As the investigation is ongoing, it would be inappropriate to comment further at this time,” Sibiya said.

He said it would not be common procedure to determine a sanction on those being investigated before the facts established by that investigation are finalised.

How to restore auditing profession

The auditing profession has come under increased scrutiny in recent months with KPMG being just one target.

Fin24 published a story by amaBhungane on Friday reporting that Nkonki Inc chief executive Mitesh Patel resigned this week after the investigative centre revealed that his R107m “management buyout” of the pioneering black auditing firm eighteen months ago was funded by Gupta lieutenant Salim Essa.

Deloitte’s handling of the African Bank and Steinhoff crashes have gained public attention while there’s been outrage directed towards prominent registered Chartered Accountants of South Africa such as former Steinhoff CEO Markus Jooste and former Eskom chief financial officer Anoj Singh.

Sithole, an independent commentator and registered chartered accountant, told Fin24 on Friday that there are two ways in which the South African auditing profession can restore its reputation, once admired internationally.

“We need to reconsider, in this climate, whether it can offer both audit and advisory services to the same client.”

This issue was raised by the SARB in 2017 which said there should be policy conversations around whether providing both audit and advisory services to the same client constitute a conflict of interest.

Sithole added that there should also be greater focus paid to the attention of audit committees who sit on the boards of companies 

“We don’t seem to be confronting audit companies, they can confront auditors and management…but they seem to be rubberstamping decisions”.

Sithole said that he didn’t hold much hope in the two industry bodies acting against the latest apparent accounting misdemeanours.

“IRBA (Independent Regulatory Board for Auditors) suffers from a massive backlog, [and is] unable to resolve cases, despite heightened levels of public interest.”

The organisation is currently investigating KPMG's audit of the Guptas and the communications team said they needed time to check whether IRBA is looking into the VBS Mutual Bank matter. 

KPMG forwarded proof to Fin24 that Malaba is a member of the voluntary South African Institute of Chartered Accountants (SAICA) and the institution said it needed to check with its legal team before commenting whether he'll face an investigation, like other KPMG executives involved in the Gupta account.

kpmg  |  investigation
NEXT ON FIN24X

 
 
 
 

Company Snapshot

Money Clinic

Money Clinic
Do you have a question about your finances? We'll get an expert opinion.
Click here...

Voting Booth

Would you switch to a bank that rewarded you for 'good' financial behaviour?

Previous results · Suggest a vote

Loading...