Business Insider Edition

Six months ago the AG said it was too early to tell if KPMG was compromised. On Tuesday he terminated its contracts 'with immediate effect’.

Phillip de Wet , Business Insider SA
 Apr 17, 2018, 05:13 PM
  • The office of the auditor general on Tuesday ended contracts with KPMG and Nkonki immediately.
  • It said media reports about the two auditing firms caused the terminations.
  • But it left the door open to working with the two companies again down the line.

The auditor general on Tuesday said it was ending its auditing contracts with KPMG and smaller firm Nkonki immediately.

AG Kimi Makwetu's office said the decision was due to recent controversies around the firms.

"Recent media reports relating to the external audit of VBS Mutual Bank and the conduct of KPMG audit partners are some of the reasons that prompted the decision to withdraw all KPMG audit mandates with immediate effect," the office said in a statement.

KPMG has failed to answers questions around VBS since Sunday afternoon.

It has also not been able to say whether any further staff involved in its VBS audits have been suspended, or whether any of its partners (beyond the two who resigned) were currently on suspension.

See also: Curator asked PwC to stop its work as internal auditor at VBS. Millions may have disappeared during its time at the bank

On Tuesday Business Day reported that the VBS curator had withdrawn its 2017 statements entirely. Those had been signed off by KPMG.

In October last year the AG said it would limit contracts with KPMG to one year instead of two, but would keep working with it because it was "too early to get a comprehensive answer" on whether its independence and professionalism had been compromised.

On Nkonki, Makwetu's office said media reports were of "grave concern and pose significant risk on the reputation of my office."

Nkonki chief executive Mitesh Patel resigned last week after amaBhungane revealed that his R107m “management buyout” of the pioneering black auditing firm eighteen months ago was funded by Gupta lieutenant Salim Essa.

The AG's office said the sudden termination of the contracts "are not a judgement on the capabilities or integrity of the professionals that work in the firms, but are recognition of the significant reputational risks associated with matters that affect them at present."

"We will continue to engage with both firms as they focus on their internal systems and the external, industry investigations, in the case of KPMG," it said.

Nkonki was not immediately available for comment.

KPMG issued a statement, which reads in full:

“Every client is important to us and the announcement by the Auditor General has come at a time when we are taking significant steps towards building a firm that is in tune with the needs of our country.

"It is very much our hope that this announcement will prove to only be a temporary break in the relationship.

"We will – in the months ahead – keep the AG closely apprised of all the changes we are making to further embed our quality and integrity in all that we do. We will work closely with the AG to minimise disruption.”

Receive a single WhatsApp message every morning with all our latest news: Sign up here.

See also:

Tagged In