KPMG auditor paid R34m to cover up #VBSBankHeist

AN investigator says KPMG should be forced to take responsibility for its role in VBS’s collapse. David Ritchie / African News Agency

AN investigator says KPMG should be forced to take responsibility for its role in VBS’s collapse. David Ritchie / African News Agency

Published Oct 11, 2018


JOHANNESBURG – KPMG's lead auditor in the R1.8 billion scam at VBS Mutual Bank, Sipho Malaba, played an active role in covering up the fraud and was rewarded with a handsome R34 million. 

Malaba's conduct has put embattled KPMG into further peril. He tried to conceal the undue money he received from VBS as loans but the forensic investigator rubbished his explanation.

"Malaba had obtained very substantial facilities from VBS which cannot be regarded as arm’s length borrowings and were not declared to KPMG. He gave an unqualified audit opinion in circumstances where he knew the financial statements were misstated. He also gave a regulatory audit opinion which he knew to be false," the forensic report reads.

Below Business Report details how Malaba strong-armed junior auditors to toe the line in the multi-billion rand theft:

A junior trainee auditor (Nduli) raised the concern that the cash on hand that they had established with reference to the bank statements of the various banks where VBS holds its funds did not accord with the amounts recorded in the trial balance and the draft financial statements. When the trainee auditor pressed form more information from VBS, Malaba was called in.

Nduli told investigators as follows: "When Sipho signed the audit and I realised that my work paper hadn’t changed, it was still there, and there were no additional procedures performed on cash, and there was no additional information that’s been placed on the audit file, that’s when I said: Okay, no, then I’ve actually been led down the wrong hole, or I’ve been led incorrectly here, because now there is actually an audit difference and me putting this amount in the statement column and me saying "were performed" is actually incorrect, because nothing was done subsequently. I was told that something would be done, and that those differences were understood."

2. Audit Manager (Munalula) for the VBS audit on 2017 testified that she had become aware as early as mid-May 2017 that there was a clear and evident discrepancy between the available bank statements and the amounts set out in the general ledger. "I did raise it several times with the engagement partner (Malaba), but he told me that he was auditing the cash section."

The forensic final analysis on Mabala's conduct: "In all the circumstances, I find that Malaba approved and signed off on VBS’ financial statements for the year ended 31 March 2017, knowing of the falsities and inaccuracies contained therein. This is fraud."

Reached for comment by KPMG said it noted the publication of the report of the SA Reserve Bank‘s forensic investigation into the affairs of VBS Mutual Bank.

KPMG said the report included serious findings concerning the conduct of a former KPMG partner.

The auditing firm said when these issues first arose in March, KPMG investigated the matter quickly and the partner was exited from the firm. KPMG recognised the seriousness of the issues contained in the report and would co-operate fully with any investigations that flow from this report.

KPMG executive chairman Wiseman Nkuhlu commented: “Lessons have been learned and decisive action has been taken since these matters came to light, and we will study the Reserve Bank’s report to see if there is more we can do. There can be no tolerance of any conduct that compromises the quality and integrity of our work.

I am confident that the extensive remedial changes the firm has already made will enable us to rebuild public and client trust in KPMG, helping us to continue to serve business and society in South Africa.”

KPMG's offices on the corner of Empire and Jan Smuts roads in Johannesburg.
Photo: Nhlanhla Phillips


Who is Malaba:


- He qualified as a chartered accountant some eighteen years ago. He did his articles at KPMG.

- He became the engagement partner for the VBS audit about five or six years ago.

- He testified that his ordinary salary after tax was between R120 000 and R130 000 per month

- His residential home in Fourways is the one purchased by way of the mortgage bond held with VBS.

- He purchased Range Rover Evoque using VBS money. The debit orders for payments to this account were almost invariably reversed and VBS never took any collection steps on the accounts apart.

- A Discovery 3.0 TSD and a Mercedes Benz were also purchased through VBS’ closed motor vehicle finance scheme, which provided special terms only available to employees, directors and shareholders of VBS.

KPMG's lead auditor in the R1.8 billion scam at VBS Mutual Bank, Sipho Malaba, played an active in covering up the fraud and was rewarded R34m.

Additional reporting by Vernon Pillay.


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