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KPMG South Africa CEO wants independent probe into firm

To reassure clients after a scandal involving its handling of audits for businessman friends of Zuma.

KPMG South Africa wants an independent investigation into the firm’s conduct to reassure employees and clients after a scandal involving its handling of audits for businessman friends of President Jacob Zuma, its new chief executive said on Wednesday.

The auditor cleared out its South African leadership on Friday after it found that work it did for firms owned by the Gupta family “fell considerably short” of its standards. It found no evidence of crimes or corruption.

The Guptas, accused by a public watchdog of improperly influencing government contracts, have denied any wrongdoing, as has Zuma. The Guptas and their companies have not been charged with any crime and they say they are the victims of a politically motivated witch-hunt.

But the scandal has cost KPMG at least three clients and several of South Africa’s largest listed companies are reviewing whether to continue using the auditing firm.

Nhlamulo Dlomu, who took the reigns of KPMG South Africa on Friday, said in an interview with Talk Radio 702 the firm had agreed with an industry body to conduct an independent investigation.

“We have agreed with the South African Industry of Chartered Accountants that it would be appropriate to set up an inquiry into the matters,” Dlomu said.

KPMG became the third global firm to be damaged by work carried out for the Indian-born brothers after the business consultancy McKinsey and the public relations agency Bell Pottinger, whose British business collapsed last week.

On Tuesday, KPMG Global Chairman John Veihmeyer apologised for the firm’s failings in South Africa and said further action would be taken if new information came to light.

Dlomo said the independent inquiry was needed to reassure employees, clients and the rest of the public.

“This would be an additional assurance lens, to ensure the public can truly see we have opened up our doors. We want to be clear about what has happened.”

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So you need and auditor for the auditor that audits your firm.

They need Gobodo-gogo-whatisbbeee the Oakbay orditirs who no one is complaining about.

THey are as pure as the driven snow.

They’re missing the mark with this move. The public’s primary grievance is KPMG’s contribution to state capture.

The rogue unit report was very public for some time. They only retracted it after the international body came sniffing. There was so much harm done buy it before this retraction.

Proving that that they’re capable of being good henceforth doesn’t address this. If they commit to reversing state capture, I’m sure it would help
calm the anger.

sorry a few questions again….there must be a few firms auditing the corrupt government’s books right? They MUST know about all this sly doings. If so they are just as guilty as KPMG?
They must terminate their services and come clean before it’s too late for them as well?

Hopefully the investigation will include the following:
1. Why did the executive (incl current CEO) keep quite for so long or was there discussions among executive. The info was in the media for over 6 months,
2. There are usually 2 directors that sign off on audits. Were these tow directors remunerated for this shoddy work?

And what about all the “qualified reports” of state and municipal accounts? Nothing is done about them, heads don’t roll, no one goes to prison while our country goes down the toilet.

Interesting choice of picture. Wonder if the doves at the top of the picture are somehow symbolic of KPMG’s actions…

Spot on. The government departments and private sector has to work together. Usually the private sector bribe the government officials to facilitate kickbacks or make the wheels go faster.

My views:

In my Banking, Treasury days there were occasions where I wondered whether KPMG were making/auditing the right the correct decision.
Way back in the eighties I joined a Merchant Bank and they opened an XYZ and a ABC accounts in their books.
I queried the modes operandi of these accounts as it was my view that these transactions contravened exchange control regulations.
Their XYZ company basically borrows money offshore and bought the old Financial Rand. These proceeds were then transferred to their local ABC account, where the funds were applied locally (loans etc).
On maturity, these funds were then repatriated via the commercial rand, and massive profits made.
I queried this and immediately became very unpopular and this issue were taken up with KPMG (they were the internal and external auditors). They came back with their usual standard reply: This is an ‘’arm’s length transaction!
Funny how the Bank must have legalised that this was wrong as they soon thereafter closed these accounts and lending operations and all the staff (some very senior) left their employment. My career there were basically also over and I resigned to join another authorised dealer elsewhere!

Amazing the new head has a MA, Clinical Psychology. To head an audit firm.

As an aside, it seems generally acknowledged that KPMG should have terminated their relationship with the Gupta companies a LOT sooner. KPMG announced at the time of terminating the relationship that “the association risk was too high”.

KPMG’s statement last week stated this should have happened a lot sooner. How then is it the case that that another audit firm (SizweNtsalubaGobodo) felt it appropriate to accept appointment as the auditors of the Gupta companies? Auditors apply consistent auditing standards globally. If KPMG are stating loud and clear that they have most likely not lived up to these standards, what standards are the new auditors applying? Are IRBA not concerned by this? Will they be investigating this?

Moreover, a quick google search reveals that this firm then proceeded to issue an unqualified (CLEAN!) audit opinion on Oakbay. (At this junction, no doubt, Tom Moyane would state KPMG were wrong to withdraw from this client)

Commentators like Iraj Abedian have suggested it will be positive for the country and the economy if smaller audit firms get the opportunity to take on more and larger clients from KPMG. Given the above, I do not see these clients queuing to use the services of a firm such as this. In all likelihood they move over to one of the other three big firms and that surely cannot be good for competition.

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