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Falsehood, gossip, libel, rumour, slander

KPMG’s tangled web.
Sars commissioner, Tom Moyane. Picture: Moneyweb

‘Upon my tongues continual slanders ride, The which in every language I pronounce, Stuffing the ears of men with false reports’ – Shakespeare, Henry IV, Part 2.

KPMG was commissioned by Sars in December 2014 to perform an investigation which resulted in ‘Allegations of Irregularities and Misconduct’, (the report). Allegations from this unpublished report hit the news in October 2015 with the vengeance of a tornado – leaving a trail of destruction, mayhem and toxic debris in its wake. But like a tornado, one could observe the impact, but not the inner workings.

Within Sars, the report sowed confusion and disbelief on what was rumoured to be contained in the report. KPMG was a respected firm of auditors. It must be true? But surely, it couldn’t be. Staff battled to concentrate. Many staff at Sars work for the higher purpose, a moral value Pravin Gordhan lived and espoused, and drummed into them during his tenure.

But the ill winds blowing were palpable, lingering and fermenting. There was an ominous sense of foreboding. And then heads began to roll….

The chain reaction from the report continued unabated. But no one had the report. Apart from rumours, there was nothing tangible to respond to.

The report apparently gave credence to the existence of “a covert and rogue intelligence unit” operating within Sars. Johan van Loggerenberg’s book Rogue – The inside story of Sars’ elite crime busting unit, published in 2016, made references to excerpts from the report. Even though Van Loggerenberg appeared in the report, he had never been given a copy.

According to Van Loggerenberg, the initial brief to KPMG was, “to look further into the detail surrounding the establishment of the unit”. Whether or not such a brief falls within the competency of a firm of auditors, and whether or not such a brief can fall within the oversight roles of Saica and Irba, will be the subject of another article. And how would the resulting report conform to the standards of ethics laid down by Saica, Irba (the Independent Regulatory Board for Auditors) and the international bodies of accountants and auditors?

Van Loggerenberg, referring to a meeting held with Van der Walt, the forensic auditor of KPMG, states: “No allegations were put to me to answer or respond to”. Van Loggerenberg summarises his views on the report as follows: “The report contains sweeping statements, is factually incorrect and there is little or no substantiating evidence in too many instances to mention here”.

Was KPMG not concerned by Van Loggerenberg’s allegation of factual inaccuracies? Or of a Sars’ legal firms’ brief to KPMG that would destroy any notions of audit independence? Which begs the question – did KPMG intend to destroy Gordhan? Or was KPMG acting on the instructions of someone who wished to destroy Gordhan? Were Irba and Saica perhaps concerned that KPMG was not acting with objectivity, professional competence, due care, and integrity? Did the scurrilous attack on the integrity of an internationally respected finance minister not raise a warning flag? Would this not cause untold damage to the country as well as to foreign direct investment?

Did Irba and Saica consider why KPMG were chosen to carry out such an investigation? When the rumours regarding the report hit the news with an explosive fallout, why did KPMG then not try to curtail the damage?

The report was used to pull down Gordhan. It not only recommended that Gordhan be probed in connection with the alleged rogue unit, but accused Gordhan of irregularly extending [former deputy Sars’ commissioner] Ivan Pillay’s contract. We now know that this unfounded allegation has been completely blown out of the water by Vlok Symmington’s legal opinion written in 2009, not uncovered in KPMG’S forensic investigation. A forensic auditor may not be skilled in language nor capable of legal findings, but one would have expected a forensic auditor to have at least uncovered that crucial piece of evidence.

KPMG has now withdrawn its report, more than two years later. Too little, too late. It has not admitted wrong-doing, it merely “did not identify any evidence of illegal behaviour or corruption by KPMG partners or staff”, and admitted that the work “fell considerably short of KPMG’s standards”. As if one was referring to a disappointing restaurant. This does not absolve KPMG. They should not be comforted by the fact that they claim to not be guilty of criminal or illegal behaviour.

Their close relationship with the Gupta companies from 2002 raises many discomforting questions. Who recommended KPMG to Tom Moyane? What was the basis for giving such a brief to KPMG? Was KPMG instructed as to how the investigation would take place, and what the conclusion should be?

How can KPMG explain its findings and recommendations? Did the report have malicious intent? Was it slanderous? Did it create falsehoods? Did it cause reputational damage? Did it result in the destruction of careers and livelihoods? Did it result in pecuniary damage? Can KPMG be sued by victims for the loss of income, and the loss resulting from having to resign from the Government Pension Fund?

Should KPMG pick up the litigation costs of those ex-members of Sars who are still embroiled in litigation? Is KPMG responsible for the loss to the fiscus resulting from the loss of senior skilled staff? Did the KPMG have a hand to play in the continual internal restructuring of staff and operations, from which Sars may never recover? Did KPMG hammer the final nail into the coffin in which Sars has been captured?

In KPMG’s recent statement, they divulge that: “this mandate was extended to the provision of a report which included conclusions, recommendations and legal opinions”. My suspicion is that Sars, realising the possible damaging ramifications of the KPMG report, tried to prevent the report from being published, or given to any other party, by making it subject to legal privilege. Did Sars realise that the report might boomerang back and damage them? Who were they belatedly trying to protect?

KPMG appears to be very concerned with its own reputational damage, and has thrown some sacrificial lambs under the proverbial bus to attempt to wash the tarnish from its brand. It does not see the steadily advancing storm, gaining strength by the day. Ultimately, it will be required to reveal the initial brief, the engagement letter, and the report. This documentation may yet become the final noose around KPMG’s neck.

And who will fall with them?

Disclaimer

I refer to KPMG in this article, meaning KPMG as a whole.  Regardless of whether it tries to differentiate between various “income drivers” under Audit, Tax and Advisory services, or separate international “partnerships”, or companies established in various countries. All these entities operate under the global brand of KPMG.

Read more about KPMG:

KPMG clears out top leadership over Gupta scandal

Institute of Directors cuts ties with KPMG

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Excellent article…!!
Cant wait for next instalment.

This is truly scary stuff. How do you react if you are an employee of KPMG and this is what you read about of the company that you dreamed of working for in years gone by?

At risk here is the entire profession of auditors and business consultants, the majority of whom are decent hardworking professionals. But if you remain silent, fearful of rocking the boat you are complicit.

What is needed is for the leadership of ALL auditing firms and business consultants to stand up, take the initiate and commit to professional conduct which embraces “working with professional integrity”. Silence on the other hand reveals evil intent …..and evil flourishes when good men (and women) are
terrified of taking a stand for good.

I’m hoping the DA will be supported in employing the same tactics against KPMG that were employed against Bell Pottinger to rid the land of these parasites.

Maybe this will give a kick up the backside to the Independent Regulatory Board established in terms of the Auditing Profession Act 2005 to be seen to be showing leadership. Chapter 5 of Part2 of the Act deals comprehensively with. accountability issues.

I am afraid that waiting for the IRBA to sanction any member is an exercise in futility. Any investigation will take forever in the hope that the complaint will disappear in the mists of time. CA’s investigating CA’s should not inspire hope in anybody. Remember their
“rule” which enables them to hide everything. Any action or sanction taken against a member will only be made public if they ( the IRBA ) deem it necessary. No one can remember when last they deemed it necessary.

Excellent comment.

The “auditing” “profession” is long overdue for a material shakeup.

What I do not agree with is the vindictive/revenge approach to KPMG. This is reprehensible.

The firm does not have to be destroyed together with it’s workforce. Action has been taken and maybe more is due but to call for boycotts at this stage (after 7 senior employees have been fired) is unacceptable.

Do we really have to stoop so low?

Bomb the whole thing once and for all; what more do you want to see?

Contrary to popular believe, Corporate SA is most corrupt compared to Government Officials.

The only difference here is the other one has cum laude in concealing

TOTALLY DISAGREE with you pacaratac, KPMG must go the same way as Bell Pottinger; they don’t deserve to call themselves Auditors, as they have NO CREDIBILITY anymore!?? Would you allow them to put their name on your set of Annual Financial Statements!??
However, what worries me: the king-pins are so far left alone, while all around them are falling….when will the Guptas be brought to justice!??? This is the source of all the rot!!??

The legality of behaviour is the lowest point of departure when determining whether such behaviour complies with ethical standards. It is no excuse to say there was no illegal or corrupt behaviour. Surely the South African public can expect the leading auditing firms to display honesty, integrity and diligence in all their projects and dealings. It seems at least diligence was sadly lacking in this case.

KPMG’s behavior is a case of 1+1= 3. The Gupta auditing cover up + the false SARS report clearly show it was not a once off occurrence but a clear intention to enable the Gupta’s and their political cronies to weaken SA institutions and steal from South Africans.

This is truly remarkable and surely Gordhan can now legally force them to give him his job back? We live in hope!

Unfortunately Gordan worked for one muppet called Chief Herdsman Zuma acting on behalf of Prezzies Atul and Ajay.

This latest news about KPMG is nothing new. Barry Sergeant in his book “The Kebble Collusion”
(15 years of forensic research) devoted a whole chapter on the way KPMG handled the Kebble/JCI/Rand Gold Exploration saga. If it were all lies, why didn’t they sue him and the publisher? Because KPMG knew that witnesses would be called and undergo cross-examination and everything hidden will come to the fore. There are so many skeletons in those cupboards, it will take days to count them all.

I think KPMG is to Auditing what dog is to tree!

I am not surprised by any of these allegations. Having had to deal with KPMG in some instances with regards to their “consultancy side” they also acted in a similar way to Arthur Anderson Inc and their consultancy arm Accenture. I often questioned the objectivity of a company’s auditors giving advice via their consultancy on business systems and one name always came up – SAP. They were involved in many tenders together which was always suspicious. And where is Arthur Anderson today????

and let’s not forget that this all began with the Sunday Times’ fake news article about a rogue unit within SARS.

The fall out from this is going to have ramifications everywhere and especially the political realm. I have no doubt zuma is in here somewhere too !!!! Bring on the fall out , those clambering for immunity will sing like born again canaries !!! We await the next exciting installment !!

SCORE SHEET

SARS 57 – KPMG 0 (NIL)

I can’t help cracking a smile at the SAICA ads touting ‘responsible business leadership’.

Incidentally the quantum of the fee for the SARS report seems to have elicited little comment – equivalent to 1000 DAYS at senior counsel rates? Unlike the absurd amounts paid by Eskom to Trillian/McKinsey, this was under SARS/Treasury’s direct control, and has a whiff of ‘reach that conclusion at any cost’.

How many questions can be asked in an article? What is one left to do after reading this? How many more auditing firms are dirty? How will SA Inc survive all this fallout? Is this the end-of-time?

End of comments.

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