Johannesburg - KPMG ended a torrid week with another slap on the face after JSE-listed AVI cut ties with the firm after 17 years on Friday.
As though that was not enough, the South African Reserve Bank (Sarb) also said the country’s banks reserved the right to review their relationships with the beleaguered firm as that would undermine financial stability in the market.
KPMG spent the entire week trying to douse fires after public and private sector investors indicated that they wanted to cut ties with the firm over its auditing of the Gupta-owned Linkway Trading and its complicity in the now withdrawn report on the SA Revenue Service’s so-called rogue unit.
Sarb said it would like to categorically state that it had not instructed banks on steps they should take on their contracts with KPMG.
The central bank said it would engage the lenders and auditing firms to manage any potential financial stability risks that could arise from the firm’s fall from glory. “These engagements have taken place but at no point did the SARB instruct banks on how they should deal with KPMG,” Sarb said.
This week the firm’s senior executives battled to convince MP that it had taken concrete steps to clean its house - admitting that it was fighting for its survival and that it had opted to pay handshakes to executives implicated in the fallout.
Newly appointed KPMG SA board chairman Gary Pickering told MPs that some of the executives implicated in the Linkway saga had been paid to avoid a lengthy court battle.
“Severance packages were paid certain of the nine partners who left the firm and that was in the interest of of speed and to enable us to move on and exit the partners concerned and allow new leadership to take office,” Pickering said.
Last month KPMG withdrew its report on a probe into the existence of the Sars "rogue spy unit" and said that its audit on Linkway fell below standards.
The firm also fired its senior management and appointed a new leadership team. However AVI on said that it would announce its new external auditors in due course.
“The Board of AVI has considered the information relating to KPMG and certain of its past activities that are currently available to it, and has concluded that it is appropriate to give notice to KPMG.”
"The termination will be effective on the close-out of all matters pertaining to the 2017 financial year-end audit, but no later than the end of November 2017,” AVI said.
On Thursday JSE-listed Interwaste Holdings joined Wits University who earlier cut ties with the beleaguered auditing firm. Interwaste said it had replaced KPMG with its rivals Deloitte. The two institutions join Sygnia Asset Management and Sasfin among others, in cutting ties with the firm. Blue chip companies like Barclays Africa and Investec have said they are reviewing their relationship with the firm.
In another blow to the profession, auditor-general Kimi Makwetu this week also raised questions on the quality of SizweNtsalubaGobodo (SNG)’s work after it initially gave Denel, the controversy-prone state-owned arms manufacturer a clean audit, despite lack of supporting evidence.
“On August 18, 2017, at a meeting with SNG, we noted that Denel’s clean audit opinion was not supported by evidence. It was established at that meeting that SNG’s interpretation of the criteria to evaluate irregular expenditure might have been incorrect,” Makwetu said.
- BUSINESS REPORT