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The Sunday Read: KPMG on transformation, missing red flags and rebuilding a brand

Dec 16 2018 09:30
Sibongile Khumalo, Fin24

KPMG South Africa's executive chairman, Wiseman Nkuhlu, says enhanced audit reviews and stringent client selection are just some of the key strategies that the firm has since adopted to rebuild its tainted brand.

The audit firm, whose reputation took a knock following revelations of irregular audit practices, has given itself 18 months to overhaul its structures.

KPMG has in the recent past been embroiled in various auditing scandals, including its work relating to Gupta-related entities, the South African Revenue Service (SARS) and VBS Mutual Bank. In September 2017, KPMG withdrew its findings on a report into the so-called "rogue unit" at SARS.

“The focus in the next 12 months is not going to be very much on growth, but getting the quality to a higher level,” Nkuhlu told Fin24.

Nkuhlu said the company had undertaken a review of all the work conducted in 2017 as well as some files completed in early 2018.

He did not rule out that "some weaknesses can still be uncovered".

He said the review could be done by the Independent Regulatory Board for Auditors (IRBA) and the firm's parent company KPMG International.

Nkuhlu also laid some of the blame for the company's failure to detect red flags in terms of the Gupta companies due to a lack of diverse opinions on the board.

“If the board of KPMG was diversified and had people who understand the culture and the networks in South Africa and the risk of being caught up in factions … we would not have found ourselves entangled in the state capture, the Guptas and so on,” he said.

“The only lesson that we could learn is that transformation is not window dressing, and that diversity enables you to have a better understanding of society.”

KPMG has pledged to distribute the R47m it earned in fees from Gupta-linked firms to civil society. Nkuhlu, who last Sunday penned an open letter to South Africa appealing for the public's trust,  said that not only has the company lost big clients in the wake of the auditing scandals but it has since also struggled to recruit from universities.

No longer first choice

“It seem like we are no longer the first choice anymore with students,” he said.

While large corporates such as Absa, Redefine and mining giant Sibanye-Stillwater cut ties with the firm, staff numbers also dwindled from 3 000 to 2 000, he said.

But Nkuhlu is confident that the company is poised to emerge from the crisis even stronger.

“We still have a reasonable portfolio of over R2bn … the focus now is to save the clients we serve. They must experience the quality of our work.” 

Nkuhlu said KPMG has strengthened its risk management and has become stricter about client selection.

“We have strengthened our client acceptance process as well as continuous client assessment. We have become very selective, including conducting checks on the directors of companies we take on,” he said.

KPMG said it would soon receive the report of an independent inquiry led by Advocate Dumisa Ntsebeza into the work conducted by the firm for companies linked to the Gupta family and on in terms of its SARS report.

kpmg  |  wiseman nkuhlu  |  auditing
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