Redefine Properties has announced that it will be cutting ties with KPMG, becoming the first JSE-listed real estate company to ditch the embattled auditing firm.
Redefine said its audit and risk committe on the board has decided to terminate its association with KPMG, effective after the firm has concluded auditing its 2018 financial results. This is expected to be on November 30 2018.
JSE-listed companies externally audited by KPMG have been under pressure to dump the firm after it missed redflags in its auditing of VBS Mutual Bank and Gupta family-owned companies. KPMG was also forced to withdraw parts of its controversial report on the South African Revenue Service’s so-called “rogue unit”.
KPMG’s future hangs in the balance as it faces two investigations from the Independent Regulatory Board for Auditors (Irba). Irba is probing the conduct of KPMG’s directors and whether the firm flouted audit regulations in its audit of Gupta-linked companies and VBS Mutual Bank.
The audit regulator will continue its investigations despite KPMG instituting its own probe.
Redefine said at the company’s annual general meeting in February, it was proposed that KPMG be re-appointed as its external auditor on the provision that its audit and risk committee “actively monitor the outcomes of the investigations underway and take appropriate action as and when further information becomes available.”
However, the latest controversy surrounding KPMG’s audit of VBS Mutual Bank, which was recently placed under curatorship by the Reserve Bank, prompted Redefine’s board to reconsider its relationship with the firm. “Concerns over good governance and ethics compliance motivated the decision [to dump KPMG],” it said in a statement on Friday.
Said Redefine CEO Andrew Konig: “Redefine’s reputation is everything and our decision was made for this reason. We will have a new auditor on board for the 2019 financial year.”
Leon Kok, Redefine CFO, said the decision to cut ties with KPMG was not taken lightly. “Audit quality, consistency and continuity are of paramount importance to Redefine and we are mindful of the time and effort it takes to onboard new external auditors. Given the current circumstances and in the best interest of all our stakeholders, we felt it appropriate to commence with this change as soon as possible,” he said.
Redefine began its relationship with KPMG in 2016 after it severed ties with Grant Thornton.
Redefine is the latest in a string of companies to fire KPGM. These include Barclays Africa, Sygnia Asset Management, Sasfin Bank and Hulisani. The Auditor-General, Kimi Makwetu, also cut ties with KPMG in light of the firm’s controversies.
Other JSE-listed real estate companies that have retained the services of KPMG Africa according to their latest financial results include Growthpoint Properties, Hyprop Investments, Texton Property Fund and Stor-Age Property.