Why are we still tolerating KPMG in SA? | Fin24
 
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Why are we still tolerating KPMG in SA?

Sep 27 2017 08:00
Simon Brown

The KMPG story broke just as I was heading off to the beach for 10 days; a good thing as my initial response was just anger.

Anger that they really thought letting nine executives quit would make the problem go away.

Anger that they think they can just withdraw the South African Revenue Service (Sars) “rogue unit” report and everything will be fine. Anger that the rot within KPMG SA was so pervasive.

Anger that it thinks it can continue to operate in South Africa.

Now that I’m back from holiday my thoughts turn to Arthur Andersen, remember that firm? Old-timers such as myself will, but most have never heard of it. This is because auditing is about trust, and when you lose that trust, you go out of business.

When the Enron story broke, I was holidaying with my brother-in-law who was then the chief financial officer of an AIM/LSE-listed company. He flatly said to me that Arthur Andersen (Enron’s auditor) wouldn’t survive for that single reason: auditing is about trust.

It so happened that Arthur Andersen was also his company’s auditor and the first thing he did on returning from holiday was to fire that firm, because anybody seeing Arthur Andersen as his company’s auditor would wonder whether the results could be trusted.

In the auditing sector, we used to have the big five auditors and now we have four.

Enter KPMG SA and the acceptance that the firm has been enabling state capture via dodgy Gupta-linked company audits and the retraction of the Sars “rogue unit” report.

Make no mistake – careers have been destroyed thanks to that report and state capture is damaging our country.

We now also know that KPMG SA has played a material part in this process. Both state capture and the Sars report have played a huge role in our country being downgraded and as a result ordinary South Africans from every walk of life are worse off.

KPMG SA cannot hide behind nine executives who quit and pretend it is now clean. What company culture allowed these nine to do what they did?

What processes did the firm have in place to ensure this sort of thing never happened? Why were the nine allowed to quit without a formal disciplinary process to get to the bottom of the rot?

KMPG SA has played a material role in damaging our country – it has lost our trust and I don’t see a way back for the firm.

Every company using KPMG for audits must replace it – or risk having those audits viewed with great scepticism.

Many suggest that losing one of the big four auditors will be bad, especially for the banks who require two audit firms for their complex audits.

I disagree. The slack will be taken up the remaining three and up-and-coming audit firms. Simply forgiving enablers of state capture just because not to do so would be messy, is not in our country’s best interest.

The audit world used to have a big five, then it became the big four and everything was just fine – well, until now.

Lastly, for the past year or so I have been voting at every annual general meeting (AGM) as my online broker enables easy online proxy voting.

If a company I invested in did not have a policy of audit rotation (and now we see why this is a critical policy), I would vote against the auditors. I will continue to do this but am adding a new feature to how I vote.

If a company I have shares in has KPMG SA as the auditor, I will of course vote against it.

But I will also vote against all the directors for not firing KMPG SA. I will attend AGMs where possible and ask the directors how we can trust the results if KMPG is auditing them.

KPMG SA has lost the one thing that mattered – our trust – so far it has done nothing to indicate that the company will regain it.

state capture  |  kpmg  |  sars investigation
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