02/07/2017 12:34 SAST | Updated 03/07/2017 13:29 SAST

KPMG Denies Dodgy Dealings With Gupta Companies

Auditing firm KPMG has refuted amaBhungane reports it "saw no evil" at the Gupta's Sun City wedding.


Auditing company KPMG strongly refutes allegations it was involved in, or condoned, any alleged money laundering activities amid claims of Gupta-linked corruption, its southern African press office said on Saturday.

The Independent Regulatory Board for Auditors (IRBA) on Saturday announced it has begun investigating whether KPMG flouted regulations in its auditing of an Oakbay Group company owned by the Gupta family.

An investigation by amaBhungane and Scorpio claims KPMG "played a crucial role" in permitting a "diversion of [R30-million] cash" meant for a Free State empowerment dairy project to the Gupta family for a lavish wedding at Sun City in 2013.

The investigation reportedly shows that a Gupta-owned company, Linkway Trading -- which paid for the wedding of the Guptas' niece -- invoiced another Gupta company for the wedding expenses which was allegedly permitted by KPMG when its books were audited.

"KPMG were the auditors of the Guptas' Linkway Trading (Pty) Ltd," amaBhungane and Scorpio said. "By allowing Linkway to account for the wedding as a "business expense", KPMG further ensured that the Guptas paid zero taxes on their Free State government windfall," it said.

According to EWN, IRBA chief executive Bernard Agulhas said, "When there's any indication that the auditors might have been involved in any misconduct, when such misconduct is reported and we will see if there is a link to the auditors. Because not all misconducts necessarily involve the auditors."

'KPMG executive's Gupta-wedding attendance doesn't impair firm's independence'
The company in a press release rejected claims that attendance at the wedding of some of its partners, including then chief-execute Moses Kgosana, compromised its independence as an auditor. It said all "accommodation and travel costs were borne by KPMG" and they are satisfied this did not impair their independence "any any stage".

The then-chairperson of KPMG Africa, Moses Kgosana, in a thank you note to Atul Gupta according to investigators wrote, "My wife and I were privileged to attend and enjoyed every moment and every occasion."

Kgosana reportedly referred to the wedding as the "event of millennium".

'KPMG possessed itemised invoices sent to Accurate Investments'
KPMG Southern Africa's current chief executive, Trevor Hoole, said it conducted its audit of Linkway Trading, which "project-managed the wedding of the niece of the Oakbay Gupta directors", in accordance with international auditing standards. It said the firm stands by its issued audit opinion, adding "at no stage -- based on the facts at our disposal -- did we consider that any transaction required to be reported under South African or foreign legislation."

Hoole said according to facts known to KPMG at the time, Accurate Investments -- the company which reimbursed costs incurred by Linkway Trading -- was an entity "related to the father of the bride, an offshore resident, who was not related to the Oakbay Group of companies". It was, consequently, not identified as a "related party to Linkway Trading" in terms of global financial reporting standards," he said.

Hoole said on Saturday it is "standard procedure to receive and disburse funds against a specific event" in project management entities such as Linkway Trading. The profit or loss incurred on such a project would form part of a company's taxable income," Hoole wrote.

However, according to amaBhungane and Scorpio, email correspondence acquired shows that KPMG were "well aware of many of the key details surround the event for years". It claims KPMG possessed the four-page itemised invoice of wedding expenses that Linkway sent to Accurate Investments in Dubai.

"Despite the fact that both Linkway and Accurate are beneficially owned by the Guptas, Linkway's financial statements, audited by KPMG, do not consider Accurate to be a related party," amaBhungane published on Friday.

'We will co-operate fully with IRBA's investigation'
KPMG on Saturday said it would co-operate with investigators but it was "unclear... what the basis of the investigation" is, saying it is "only based on reports in the media".

"This is pertinent since we have no knowledge of the matters which allegedly, per these media reports, appear to have their roots in the Free State Dairy project," Hoole wrote.

KPMG said it will give a detailed account of its actions which were "in accordance with professional and ethical standards".

"Consistent with our values, we have acted with integrity in our dealings with the Oakbay Group," he wrote.

The IRBA is expected to investigate KPMG under section 48 (1)(a) of the Auditing Profession Act.