NEWS
18/04/2018 06:41 SAST | Updated 18/04/2018 06:42 SAST

KPMG Hopes AG's Termination Of Its Contract Is Just Temporary

The Auditor-General Fired KPMG and Nkonki as government's external auditors on Tuesday.

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KPMG's CEO Nhlamu Dlomu hopes that the Auditor-General's decision to cut ties with the auditing firm will be temporary, Fin24 reported. On Tuesday, Auditor-General Kimi Makwetu announced that government would no longer use KPMG and Nkonki Inc as auditors, citing reputational risks.

Makwetu reportedly said government uses external auditors to support its own auditing staff, and that they were obliged to "stringently follow" his office's auditing standards.

"Once these have been fundamentally impacted, we are called upon to review and reassess our position," he reportedly said.

KPMG has come under fire recently for its alleged links to state capture – it allegedly gave several Gupta firms a free pass despite irregularities in their books. KPMG also had to retract findings it made in a report into the so-called "Sars rogue unit" after it emerged that the "rogue unit" allegations were false.

AmaBhungane revealed recently that Nkonki Inc's chief executive, Mitesh Patel's R107 million "management buyout" of the firm was funded by Gupta employee Salim Essa. Patel resigned this week.

It then emerged that KPMG had also audited the books of VBS Mutual Bank, and that the banking regulator had found evidence of fraudulent transactions, which KPMG did not report. According to Business Day, on Sunday, KPMG announced a series of reforms at the firm. Two senior partners working on the VBS account had also resigned after it emerged that they had taken loans from VBS.

Dlomu told Fin24 that the decision comes at a time when the firm is taking "significant steps towards building a firm that is in tune with the needs of our country".

Dlomu reportedly said the firm would keep Makwetu up to date with all the changes taking place and would also work with his office to "minimise disruption" to those government entities it audits.

On Sunday, KPMG's chairperson Wiseman Nkuhlu reportedly told the media that the firm's 3,000 employees would be vetted every two years for warning signs of malpractice, according to Bloomberg.

"We've reached the breaking point. Owning up to the fact that things are broken is very important," he reportedly said.

KPMG reportedly lost several high-profile clients in the wake of the allegations against it, including The Foschini Group and Sasfin Holdings, Bloomberg reported. Standard Bank is reportedly "assessing the latest adverse information," a spokesperson told Bloomberg, and Barclays Africa Group's board will reportedly discuss KPMG's role in VBS's collapse. Investec told Bloomberg it was assessing the auditing firm's report into its financials for the 2017 year, while Nedbank reportedly said it could not practically change auditors this year.