KPMG South Africa to review audit files
KPMG South Africa has announced that two partners, Sipho Malaba and Dumi Tshuma, have resigned with immediate effect after disciplinary charges were brought against them, relating to failure to disclose relevant financial interests when working with a client, and says it will begin a major review of audit files
16 Apr 2018
In a statement, the firm said: ‘In both cases these are conduct charges, 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.’
The South African Reserve Bank placed small lender VBS under curatorship in March because of liquidity issues which raised fears about its solvency, and the board and executive management are relieved of their duties.
KPMG South Africa said that following this move, information arose in relation to the two partners that prompted the firm to launch an independent investigation, conducted by corporate law firm Bowmans. It says that investigation is ongoing and further action will be taken as appropriate.
Nhlamulo Dlomu, KPMG South Africa chief executive, said: ‘This has been a very disappointing episode for KPMG. There can be no tolerance, however, of any conduct that compromises our reputation and we have moved decisively to deal with the situation.’
Dlomu heads up a new leadership team brought into the firm last September, after KPMG South Africa found work done for companies owned by the Gupta family, businessmen with close ties to former President Jacob Zuma, ‘fell considerably short’ of its standards. The Guptas have consistently denied wrong-doing.
In a statement following the latest resignations, KPMG said it had taken ‘significant steps’ to change the firm, including changes to governance, to leadership, significant changes to improve quality and risk management and to the client portfolio.
KPMG South Africa said: ‘We recognise that each of these measures can only be part of our continuous effort to rebuild public trust. The departure from the firm this week of two partners, as part of the ongoing investigation by Bowmans into events at VBS, is a reminder how much more needs to be done to reaffirm the public’s trust in KPMG.’
As part of this, the firm has announced several additional actions. They include an expanded process of Integrity and background checks of all partners (and their spouses/partners). The process will be coordinated by KPMG International using the expertise of an external firm and the findings will be reported directly to the board quality and risk committee.
A new programme of extensive quality file reviews has commenced and will run over the next several weeks. These reviews will cover all audit partners. This programme will be in addition to other internal and external reviews that have been carried out to date. These reviews will be conducted by experienced KPMG partners from elsewhere in the network and will be overseen by a board committee of majority independent non-executive directors.
KPMG South Africa is also to appoint additional non-executives on the board, which it says will ‘ensure that independent scrutiny is built into the DNA of the firm at the highest level.’
In addition, it is implementing a ‘Speak Up’ programme. This is an immediate, expanded initiative that will sit alongside normal whistle-blowing policies and will encourage staff over the next 30 days to speak up if they believe they have any information of relevance to the quality and integrity of the firm’s work.
Dlomu said: ‘We realise that to build a KPMG that we and South Africa can be proud of, one that has quality and integrity at its heart, we must be prepared to adopt and embrace significant change to our culture and partner conduct.
‘Some of the steps we are taking are not easy, but we are in a position where such measures are unavoidable requirements to rebuild trust. We are more resolved than ever to take the necessary steps to restore the firm to health. And we will not hesitate to act decisively when issues are identified.’
Report by Pat Sweet