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JOHANNESBURG - Embattled auditing firm  KPMG yesterday said it would  be reviewing work done by all  its audit partners in the past  18 months, and is conducting  background checks of its audit  partners and their spouses.

The firm said the drastic  step was to “assess the commitment  to quality and professionalism  of our engagement  teams”.  The review will encompass  about 200 files and comes in the  wake of the firm’s two audit  partners whose conduct was  found wanting in relation to  VBS Mutual Bank, which has  since been placed under curatorship  and a forensic investigation.

The saga surrounding  VBS has firmly brought back  beleaguered KPMG into the  spotlight, with the firm’s head  of its largest business unit,  financial services auditing  Sipho Malaba resigning over  the unfolding scandal. Malaba  was the lead audit partner on  VBS. Another partner at the  firm, Dumi Tshuma, also fell on  his sword. Both were accused of  not disclosing relevant financial  interests. KPMG confirmed  Malaba had loans with VBS. 

KPMG chairperson Wiseman  Nkuhlu said some partners  might feel aggrieved with their  integrity being placed under  scrutiny, but such measures  are unavoidable requirements
to rebuild trust.

“The actions we have taken  are unprecedented. There will  be some unhappiness from both   sides, some people are going  to say ‘this is demeaning’ as I  am trusted by my clients and  colleagues and there will be  resistance from people who are  involved in wrongdoing. But as  a chairperson, I will not blink  in enforcing these initiatives,” 

Nkuhlu said. A team from  KPMG International partners  will start the reviews today. The  firm also looks after the books  of Standard Bank, Investec,  Absa and Nedbank.  Early indications as uncovered  by the curator have found  that nearly R1 billion was  unaccounted for among other  dodgy dealings at the bank.  VBS’s internal auditor PwC has  distanced itself from the messy  state of the bank’s books. 

Chief operating officer of  PwC Fulvio Tonelli said as  internal auditors of VBS, its  role was the consideration of  the bank’s risk management,  internal control and governance  processes. 

“It would not ordinarily  require the examination or testing  of individual transactions  or specifically the identification  of fraud. PwC confirms that  it was not within our scope of  engagement to identify fraudulent  transactions,” Tonelli said.  The SA Reserve Bank  (Sarb) said on Friday that it  had appointed senior counsel  Terry Motau to lead a forensic  investigation into the affairs  of VBS. It said the investigation  would look at the bank’s  business conduct that “involved  questionable and/or reckless  business practices or material  non-disclosure, with or without  the intent to defraud depositors  and other creditors”.

Head of forensics at ENSafrica,  Steven Powell, said  dependent on what facts  emerged, the auditors might  come under scrutiny.  “Recent corporate disasters  in South Africa suggest that  previous reforms may not have  been sufficient and even greater  focus by auditors on identifying  fraud is required,” Powell  said. 

“Because the mandate  of the forensic investigation  emanates from the Sarb, it is  likely that the audit will also  be required to scrutinise compliance  to banking legislation  and the requirements of the  Deposit Taking Institutions Act  and may also identify instances  of non-compliance and irregularity.”  KPMG is already under  investigation by the Independent  Regulatory Board for Auditors  in relation to its audits of  Linkway Trading, a company  owned by the controversial  Gupta family, which allegedly  swindled the Free State government  of R200 million, and the  report into an alleged “rogue  unit” at the SA Revenue Service.