4 key questions about the VBS scandal KPMG failed to answer on Sunday

Business Insider SA

(Business Insider)
  • KPMG called a press conference a day after it announced the resignations of two partners involved with VBS Mutual Bank.
  • It volunteered no new information on the executives or its audit work at VBS, and provided little more when intensely questioned by journalists.
  • These four key questions are still unanswered.


KPMG South Africa on Sunday volunteered no significant new information about its audit work for VBS Mutual bank, or about the two partners who resigned because of it – at a press conference it called to talk about the issue.

Instead chairperson Wiseman Nkhulu and CEO Nhlamu Dlomu spoke at length about "extraordinary" new steps KPMG would take to ensure the integrity of its audits and partners.

In a statement KPMG said the sudden resignation of two partners over the VBS matter was "a reminder of how much more needs to be done to reaffirm the public's trust in KPMG."

It made no other mention at all of VBS or the partners.

Dlomu and Nkhulu provided a scattering of new information under sometimes outright hostile questioning from journalists – but these four key questions about VBS and KPMG remained unanswered.

How did KPMG miss the red flags in VBS' books for two weeks?

KPMG "looked at the books" of VBS after the government appointed a curator on 11 March, Dlomu said.

Statements by the Reserve Bank indicate those books were in a state of considerable disarray. Yet KPMG took no action against its audit team for two weeks – having apparently found nothing to worry it sufficiently to launch disciplinary proceedings against any of its partners.

Did KPMG approach the VBS curator to talk about its auditors – or did the curator have to bring the trouble to its door?

Since accusations that it turned a blind eye to creative accounting by the Gupta family, KPMG has stressed that it will be proactive in investigating itself and its staff when issues or allegations arise.

On Sunday Dlomu said the disciplinary charges against two KPMG partners came after the firm met with the VBS curator. She was not available to confirm, in person or in writing after the press conference, whether KPMG had sought out that meeting – or had waited to see what would happen.

Was KPMG really asked to stay on as VBS auditors?

The VBS curator dismissed VBS internal auditor PricewaterhouseCoopers after taking over the running of the bank.

But KPMG was told by its lead audit partner for VBS, Sipho Malaba, that it had been asked to stay on as external auditors.

KPMG accused Malaba of dishonesty last week, and he resigned on Friday.

KPMG has not yet been able to determine whether he had been telling the truth and what the circumstances around it remaining VBS auditors were, Dlomu said.

Is KPMG afraid to throw its (former) partners under the bus because of the implications that holds for its audits of four big banks?

KPMG does audits for Investec, Nedbank, Standard Bank, and Absa, Dlomu said, after being pushed for the list.

She skirted questions on how deeply its recently departed partners were involved in the audits of those banks.

KPMG accused Malaba of failing to follow disclosure rules, but steered determinedly clear of any more direct accusations – or of talking about the quality of his work.

KPMG would not say whether this was because it feared the consequences for – and from – other banks on its client list.

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