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Magda Wierzycka on KPMG: I wouldn't rush to them tomorrow

Sep 16 2017 07:00
Yolandi Groenewald

Johannesburg - Magda Wierzycka, the founder and CEO of fintech firm Sygnia, said on Friday that KPMG had gone a ways toward  redeeming its reputation after its SA leadership team resigned. 

Wierzycka has been one of KPMG's fiercest critics since her company ended its relationship with the auditors in July, over allegations that KMPG SA had not been diligent enough in auditing businesses belonging to the Gupta family. 

On Friday KPMG SA's top management stepped down.

Its CEO Trevor Hoole, along with seven other executives, resigned as a body over KPMG's dealings with Gupta family-owned businesses, and the work it had done for the SA Revenue Service (SARS). 

The auditor also withdrew its controversial SARS "rogue unit" report, and even offered to pay back the R23 million fee it received for the report, or "make a donation for the same amount to charity".

Wierzycka said the resignations sent a strong signal that KPMG International was looking to change how the SA firm operated. 

Listen to the full interview:

“It speaks to virtual leadership by KPMG International in that they took the matter seriously,” she said. “I'm very happy with the outcome, I think it is the right thing.”

In hindsight KPMG SA should have acted sooner and not waited for its parent body to step in, she added. “But the truth of the matter is it is never too late to say 'we are sorry, we did something wrong'.”

Questions answered

Wierzycka ended her business relationship with KPMG SA in July, after meeting with it and not receiving satisfactory answers over their auditing of Gupta companies. She told Fin24 at the time that, if the bottom line of a company were affected, it would be more likely to think twice about its actions in the future.

On Friday she said KPMG SA had certainly been put under pressure due to bad press. She also noted that the press release KPMG issued on Friday about the resignations addressed most of the questions she had asked back in July. “I was very amused by the fact that they went through the questions I asked and answered those questions," she said. 

Wierzycka said she was elated by the fact that KPMG also withdrew the conclusions of its controversial SARS report had implicated former Finance Minister Pravin Gordhan in the so-called "rogue unit". 

"Given the failure to appropriately apply our own risk management and quality controls, that part of the report which refers to conclusions, recommendations and legal opinions should no longer be relied upon," KMPG said on Friday. 

Wierzycka said the retraction was long overdue. 

“That was the most significant issue in all of this. They admitted that that report was flawed and they apologised to Gordhan," she said. 

Donation

KPMG’s offer to pay back its R23m fee for the SARS report, and donate the R40m it earned in fees from auditing Gupta-related entities to education and anti-corruption NGOs was commendable, said Wierzycka.  

She said that although Sygnia would consider again appointing KPMG in future, the auditors needed time to fix their internal structures.

“I wouldn't rush to them tomorrow. They have to make sure what has happened in the Gupta accounts could not happen again. But given enough time I think they can fix their internal processes.”

Sygnia appointed Deloitte as its auditors after firing KPMG. 

“Once something this significant happens to you, you learn your lesson,” Wierzycka said. "You almost became hyper vigilant about anything that you do. And that is what you want from your auditors - hyper vigilance.”

She also expects the firm to face regulatory sanctions. “This was a PR exercise - they are fixing their reputation with Joe Public,” she said.

Media pressure

Wierzycka said, although corporate South Africa asked tough questions about KPMG, they could have done more. Ultimately it was the media who applied the pressure that caused the dam to burst, she said. 

KPMG looked on with horror at how quickly Bell Pottinger blew up due to the negative media, she said, adding it "had to act", or face the similar fate.

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