KPMG South Africa has decided to audit its staff every two years, following the resignation of two of its partners who faced disciplinary charges for concealing financial interest in connection to VBS Mutual Bank, which was placed under curatorship.
This is the latest development in the internal and external reviews that started last September when KPMG announced a major shakeup in its leadership. This was following an internal investigation of its practices while working for the wealthy Gupta family, which is at the center of the country’s corruption inquiries with the accusation of using their friendship with South Africa’s former President Jacob Zuma to win government contracts. Zuma and the Guptas have denied any wrongdoing, and the accusations are part of judicial inquiry into “state capture”.
Wiseman Nkuhlu, chairman of KPMG, told reporters in Johannesburg on Sunday that “the vetting is to be done by an external, independent party,” adding that KPMG intends to also extend the audit of its previous work as far back as a year and half period, with plans to have a hotline that employees can channel concerns regarding the firm’s work quality.
Prior to the time KPMG made these managerial decisions, two of the company’s partners Sipho Malaba and Dumi Tshuma had tendered their resignation on Friday, after investigation revealed the disciplinary charges against them were “connected to VBS bank and include, but are not limited to, failure by the partners to comply with the firm’s policies and procedures regarding the disclosure of relevant financial interests,” as noted in an emailed statement by the firm.
In March, VBS Mutual Bank was placed under curatorship by South African Reserve Bank over liquidity issues, because the lender was unable to repay some of its clients’ deposits. KPGM explained that the bank’s curatorship brought to light information linked to the partners, which incited KPMG’s decision to carry out an independent investigation that is still ongoing.
In a reaction to the incidence, KPMG South Africa chief executive Nhlamulo Dlomu said, “This has been a very disappointing episode for KPMG. The disappointment and anger is palpable. There can be no tolerance, however, of any conduct that compromises our reputation and we have moved decisively to deal with the situation. If the two partners who quit need to be reported to the country’s authorities following the KPMG probe, the firm will take those steps.”
In the wake of Malaba and Tshuma’s resignation, the firm looks to review the work done by its partners in a bid to “reaffirm the public’s trust in KPMG.”
“We will look at the last two years,” Dlomu told reporters. “We’re looking at at least 200 files and looking at big, medium size and smaller clients. In essence what we’re doing is we’re opening ourselves up to proper and detailed scrutiny.”
Earlier, KPMG had said its investigation found no evidence of corruption or illegal behavior but identified “work that fell considerably short of KPMG’s standards.” This led to the resignation of the multinational audit firm’s COO and risk management partner Steven Louw, as well as CEO Trevor Hoole, who was replaced by Nhlamu Dlomu, the company’s former Head for People and Change.
South Africa’s then Finance Minister Malusi Gigaba instructed all government and public agencies to review their accounts with KPMG and to ensure audit processes have not been compromised. The crisis has cost the global audit firm its Business Leadership SA membership and clients such as Telkcom, Wits University and Standard Bank.
Asides KPMG, other global firms that have faced problems due to their work for the Gupta brothers include business consultancy firm McKinsey, SAP and public relations agency Bell Pottinger. The Guptas optimum coal mine, Eskom, is not left out of the saga.