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Accounting firms must put public interest before clients - archbishop

Apr 19 2018 05:15
Tehillah Niselow

Johannesburg - Archbishop of Cape Town Thabo Makgoba had a harsh message on Tuesday morning for chartered accountants and auditing companies, saying they need to put the public interest first ahead of their clients who could want negative information in their financial statements hidden.

“If you can’t trust the accounting firms, how do you trust the companies they have audited?

“If we cannot trust our accounting firms and chartered accountants, how can we trust the decisions of the government and ministries they audit?” Makgoba asked at panel discussion hosted by the South African Institute of Chartered Accounts (Saica) at Wits University in Parktown.

The accounting profession has had a torrid few months, with explosive revelations related to their involvement in Gupta-linked companies Steinhoff [JSE:SNH] and VBS Mutual Bank scandals.

The panel discussion - which ironically took place directly opposite from embattled audit firm KMPG - counted numerous accountants among the audience.

Makgoba, who teaches ethics to MBA students at the University of Cape Town, pleaded with them to embark on a self-examination process, similar to the one that churches have undertaken

“It’s not easy, it can and should strain old relationships and old patterns of doing things," he warned

Makgoba called the recent issues affecting the accounting profession “one of the most trust corroding episodes here in SA” and said that the industry needs to restore trust as this is the “lubricant of a healthy democracy”.

“This country’s accounting firms had better take a step back, before they take the next step forward."

AG couldn't 'reward robbery'

Auditor General of South Africa Kimi Makwetu was also on the Saica panel a day after announcing the decision to terminate contracts with KMPG and Nkonki Inc.

The audience applauded Makwetu when he explained the reason behind the action taken.

He said that the institution - which is responsible for auditing all national and provincial departments, municipalities and state entities - decided to give KMPG a reprieve in September 2017, pending the outcome of investigations into the company’s audit of Gupta-owned companies and the compilation of the 'rogue unit' report of the South African Revenue Services.

Makwetu said they realised the Independent Regulatory Board for Auditors could take years to complete an investigation, as officials keep finding new information and extending the scope of the probe.

“We were still patient up to the point that the curator [of VBS Mutual Bank] report came forth, implicating another level of conduct... and then we thought we will continue to reward not for virtue, but for robbery.”

KMPG announced at the weekend that two partners had resigned over failing to declare financial interests while auditing VBS Mutual Bank.  The bank’s 2017 financial statements have since been withdrawn as the curator- SizweNtsalubaGobodo – said that they can’t be relied upon.

Makwetu said that the decision to withdraw all public sector work from Nkonki Inc followed the new share transaction, which introduced a “bigger risk”.

The auditing company’s CEO Mitesh Patel resigned last week after investigative journalism centre amaBhungane revealed that his R107m "management buyout" of the auditing firm was funded by Gupta associate Salim Essa. 

The AG’s office relies on contracting 40 accounting firms - including the ‘Big Four’- as the state’s financial year ends in March and much of the work is seasonal, reducing the need for internal capacity. 

The auditing firms share in public sector contracts to the value of R450m annually.

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kpmg  |  thabo makgoba  |  economy
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