JOHANNESBURG - Following the highly publicised compromised conduct of global auditing firm KPMG, the pertinent question now is just how far-reaching the reputational and legal consequences for the auditing giant will be.
Public focus has temporarily shifted from the actual dealings of KPMG to the JSE-listed companies and KPMG clients who have and continue to draw firm lines of business allegiance. What remains to be seen is whether or not KPMG’s largest clients will be jumping ship in light of the media circus and negative public scrutiny the firm is currently under.
The auditing giant on Friday confessed to huge oversights in its handling of Gupta family-owned companies and the subsequent controversial pulling off parts of it’s SARS so-called “rogue unit” report.
Sasfin Bank on Tuesday announced that it would be terminating its relationship with the firm, following the same action was taken by JSE-listed FinTech asset manager Sygnia which severed ties with KPMG back in July, the first listed group to do so.
But KPMG is still in business with its biggest clients. Companies like real estate investment trust Redefine Properties. Redefine aren’t in the position to jump ship, however big of a PR nightmare it’s association with the firm might be.
According to MoneyWeb the company is midway through its year-end financial results audit, making the immediate severing of ties with its auditing firm a financial nightmare.
“We will meet with our audit risk committee and management after our results are published in November and decide whether we will continue with KPMG. We have to wait and see what happens as we have to make a decision based on facts and not emotions,” Redifine’s executive chairman Marc Wainer told Moneyweb.
KPMG still retains it's biggest clients notably Nedbank, Old Mutual, Standard bank and Investec - who are repordedly still reviewing the firm’s findings. The firm has also continued to enjoy overwhelming support from Lonmin, whose shareholders narrowly voted the firm back in as its external auditor.
KPMG, which has audited the Books of Nedbank for the past 43 years, saw the bank's shareholders in an AGM held in May this year vote 92.5 percent to retain the firm's services, while a meagre 7.4% voted against the move. In yet another vote of confidence, Investec which held its AGM last month, saw 87.7% of shareholders giving a thumbs up to KPMG's work, while 12.2 voted against the retainment of the firm's services. The firm has looked after Investec's books for the last 47 years.
The recent scathing attack of SARS Commissioner Tom Moyane is just one of the battles CEO, Nhlamu Dlomu needs to fight. In a twist of irony KPMG seems to have bridged an unlikely alliance between ex SARS Commissioner Pravin Gordhan and his successor Tom Moyane. Both have lambasted the company for reputational damage and it’s “dismal attempt” to show SARS as a corrupt and incompetent organisation.
In a self-inflicted blow, KPMG’s own report shows that it waited two years before collating data from a performance data review that it was contracted to perform by SARS back in 2014, the said report was only finalised in January 2016; which leads to obvious speculation that KPMG’s recent response is only a bid to prevent client hemorrhaging and not ethically motivated.
However, KPMG is not the only audit firm to recently come under intense scrutiny. Earlier this month Finance Minister Malusi Gigaba told legislators that he has instructed the National Treasury's director general to report Deloitte to the IRBA to investigate the firm over the "shoddy work" it did on behalf of Treasury in the ill fated Integrated Financial Management Systems that cost tax payers R1 billion without any tangible outputs.
- BUSINESS REPORT ONLINE