Last week's decision by the auditor-general (A-G) to terminate contracts of KPMG and Nkonki dealt a fatal blow to Nkonki, with the audit firm yesterday announcing that it would be closing its doors soon.
Nkonki in a statement said while it provided its services to substantial private clients, the majority of its contracts were in the public sector.
“Given the company’s current state in which it finds itself, there was no other option but to resolve to voluntarily wind-up the company,’’ the firm said.
“The winding-up process may take several months under the control of the liquidators appointed by the Master of the High Court.
“Nkonki intends, where possible, to complete its outstanding work and effect all necessary transition processes to ensure that its clients are not compromised.”
A-G Kimi Makwetu last week said recent media reports on matters arising from the shareholder transactions involving the firm were of “grave concern and pose significant risk on the reputation of my office through the statutory audits contracted” to Nkonki.
Earlier this month, reports emerged that erstwhile chief executive Mitesh Patel’s R107 million management buyout of the black audit firm was funded by alleged Gupta stooge Salim Essa.
According to the firm’s website, it has nearly 400 staff and more than 30 directors and partners.
The firm also has a presence in five provinces in the country. It was established 1993, co-founded by Sindi Zilwa, who retired as chief executive in 2016 and sold her shareholding through a management buyout.
Nkonki said that it was in a process of repurchasing shares bought by Patel, but the termination of its public sector contracts had poured cold water on the deal.
“Thuto Masasa, who is the minority shareholder, and some of the executives engaged with Mr Patel to purchase his shareholding to ensure that Nkonki could continue as a viable and successful company without any adverse allegations.
Not finalised
“The sale of the shares could not be finalised as a result of the cancellation of Nkonki’s public sector contracts.”
The demise of Nkonki is a blow to black audit firms who compete for contracts with the more established big four firms, PwC, KPMG, EY and Deloitte.
The Independent Regulatory Board for Auditors last year proposed the Mandatory Audit Firm Rotation (Mafr) framework in part to enhance long-term career prospects for black accountants in auditing.
The Mafr also aims to advance the number of black partners in senior and executive roles in the audit firms