The South African unit of international audit firm KPMG has lost its business with the South African government as it has been banned from auditing public institutions in South Africa. This was made known on Tuesday by the country’s Auditor General who terminated all contracts with KPMG due to its scandals that have led to public distrust over its professional and ethical conduct.
KPMG was in the news again, recently, when two of its partners resigned instead of facing disciplinary proceedings for not disclosing financial interests related to VBS Mutual Bank before it failed. It would be recalled that 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.
“Recent media reports relating to the external audit of VBS Mutual Bank and the conduct of KPMG audit partners are some of the reasons that prompted the decision to withdraw all KPMG audit mandates with immediate effect,” Auditor General Kimi Makwetu said in a statement.
The audit firm has been under scrutiny for over seven months for its involvement with companies linked to the Guptas. The Guptas have been accused of using their influence with former president of South Africa Jacob Zuma to take up state contracts to benefit their business rather than allow other firms have a fair share of the contracts.
Apart from the South African Government, other companies that have ditched KPMG as their auditor include South African miner, African Rainbow Minerals, South African retailer, The Foschini Group (TFG) and the University of Witwatersrand.
In a bid to reassure its clients, KPMG announced that it would be reviewing past audit files. This would be an extra cost and work to the troubled auditing firm, which has a reputation for being one of the best globally.