NEWS
16/04/2018 06:31 SAST | Updated 16/04/2018 06:31 SAST

KMPG Promises Reforms After VBS Scandal

The auditing firm says it has put a number of measures in place to avoid a repeat of the VBS debacle.

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Beleaguered auditing firm KPMG says it is taking "drastic measures" to restore confidence following the latest scandal engulfing, where it allegedly failed to raise the alarm on possible fraudulent accounting at one of its clients, VBS Mutual Bank.

VBS, which famously granted former president Jacob Zuma a loan with which to "pay back the money" for Nkandla, was placed under curatorship by the Reserve Bank earlier this year following a "severe liquidity crisis".

Last week, Business Day reported that auditors found serious anomalies in VBS's books, including R900-million in deposits that could not be confirmed. KPMG was legally obliged to report this to the banking regulator, but reportedly did not.

KPMG's previous controversies include allegations that it was part of a scheme to tarnish the reputations of senior Sars officials when it published an investigation into the so-called "rogue unit" at the revenue service. It later retracted the findings of a report into that unit, after it was revealed that the "unit" did not exist.

The auditing firm was also alleged to have been involved in state capture, reportedly having failed to report irregularities in the books of several Gupta-owned firms, which it also audited. It lost a number of high-profile clients in the wake of the scandal.

According to the Sunday Times, on Sunday, KPMG announced a number of measures it would be put in place to prevent a repeat of the problems it previously faced.

KPMG's Wiseman Nkhuhlu reportedly said an independent, external partner will conduct checks on the company for possible conflicts of interest every two years, and all work done in the last 18 months will be reviewed.

Some of the partners at the firm were "very angry" following what happened with VBS, he reportedly said, and one had resigned.

He reportedly said some of the measures, such as the independent checks, were likely to cause unhappiness in the firm, but were necessary to restore trust.

"Some people are going to say 'this is demeaning. I am a partner serving a big client and am trusted by my client'‚" Nkuhlu reportedly said.

The independent checks were necessitated by the fact that two KPMG partners working on the VBS account had failed to disclose their financial interests in the bank, reported the Mail & Guardian.

An investigation into the VBS matter is reportedly being done by lawfirm Bowman's.

The lead auditor responsible for signing off on VBS's financials reportedly held loans with the bank.

According to eNCA, on Sunday, Nkuhlu reportedly said the firm intended to do something about its ethics.

He said: "We continued to engage civil society and talk to major players we have had workshops at KPMG we need to do something enhance ethics in our culture we must transform the culture and we must deal with quality assurance issues."

The firm would also cooperate fully with all investigations into the Sars and Gupta matters, he reportedly said.