KPMG vows to bury controversial past
KPMG’s chief executive, Ignatius Sehoole, said the successful turnaround of the audit firm rested on four pillars he was overseeing to re-establish KPMG as an ethical audit and advisory firm since he took the reins 12 months ago.
Sehoole said KPMG had appointed independent non-executive directors and changed the traditional systematic model of audit firms by doing away with partners at board level.
“We wanted to inject independence and objectivity into the policy decisions of the firm, so we had to revamp our governance framework. We appointed Professor Wiseman Nkuhlu as chairperson of the board, Ben Marks as chief audit officer and Imogen Mkhize, an executive director at the Solegna Group,” Sehoole said.
“We have upgraded our risk-management systems, and in that process we exited quite a lot of clients.
“We realised we needed to have robust systems, and we decided we will not do business with companies that do not fit the bill of our risk assessment. It has not been an easy time, as the firm lost a lot of revenue,” Sehoole said.
KPMG was thrust into the spotlight in 2017 when it confessed to publishing a misleading report on the South African Revenue Service, doing work for the Gupta family and turning a blind eye to corruption as an auditor for the collapsed VBS Mutual Bank.
At least eight of KPMG’s top staff resigned that year, including former chief executive Trevor Hoole, following work that “fell considerably short” of the firm’s standards.
Some of the biggest companies in South Africa replaced KPMG as their auditors in the wake of the scandal, which cost the firm one-third of its revenue and saw its workforce shrink from 3400 to 2200.
In 2018, Nkuhlu admitted that KPMG had made many serious mistakes and lost the trust of the public and clients, and had lost sight of its responsibility to serve the broader public interest.
Sehoole reiterated that the fall of KPMG had thrust the entire audit profession into disrepute, and he now saw it as his duty to inculcate the culture and values of serving the public interest back into the profession.
“In my time, there was such a strong aura of integrity around the profession. In my 10-odd years at Saica (South African Institute of Chartered Accountants), I worked very hard with the profession all round to ensure that it was rated number one in the world, and we achieved that,” he said.
“It’s with a bleeding heart that I sit here and be rated number 35 in the world, because that is not who we are.”
Sehoole said KPMG was slowly regaining its reputation, as clients no longer viewed working with it as taking a risky bet.
He said KPMG continued winning new business even during the lockdown period implemented to curb the spread of the coronavirus, showing that it had adopted an ethical culture of doing business.
“The more we build that culture, the more you’re going to attract only people that appreciate the ethos of the firm and they identify with the value system of the firm,” Sehoole said.
“For me, it’s the most fundamental pillar of turning around KPMG. Our new vision is to be the most trusted and trustworthy professional services firm.”