The Auditor-General of South Africa [AGSA], through its Contract Work Allocation programme to private audit firms that audit on its behalf, has an interest in the matters that were raised in the report titled "KPMG South Africa leadership changes and key findings arising from KPMG International investigation".
Our interest arises from certain audits we have allocated to KPMG to perform on our behalf where they express an opinion on financial statements that are largely our primary responsibility. We also source into our own audits specific skilled staff from KPMG SA where the primary responsibility for the audit report belongs to the Auditor-General.
To this end, we felt it necessary to engage with the leadership of KPMG SA on their report as one of those that purchase their services.
Our arrangements and relationship with all the firms with whom we contract are based on the fundamental principles that define an auditor. These are independence and professional competence to carry out the audit assignment in accordance with auditing standards.
We based our discussions on these fundamental principles in so far as they are apparent in the report. We also benefited from their own insights and reflections pursuant to the release of the report. We were assured that the events that led to the matters in the report are not indicative of a systematic breakdown of risk management and audit practice disciplines.
We have agreed to continue to formally engage with KPMG SA as they make progress in the areas already identified for immediate rectification.
We were also assured that the firm's partners continue to be independent of the entities they audit. They strive to improve their oversight processes while they recognise the seriousness of the weaknesses that were identified in the report.
There are currently processes underway to commence investigations by different parties at KPMG SA including investigations by KPMG International, the Independent Regulatory Board of Auditors and the South African Institute of Chartered Accountants. The outcome of these investigations will help answer the remaining concerns we have raised with the management of KPMG SA.
While we are awaiting the outcome of the above investigations, the Auditor General will continue to secure the services of KPMG SA, limited to the audits currently allocated to them. This arrangement will be in place as an annual allocation rather than a two-yearly allocation of audit work as is current practice with all firms we contract with. This will be reviewed subject to the outcome of the pending investigations.
We have agreed to continue to formally engage with KPMG SA as they make progress in the areas already identified for immediate rectification.Suggest a correction