- The Bank of England has launched a probe whether KPMG continues to be viable following difficulties in South Africa, Financial Times reported.
- The Bank is concerned that KPMG's South African activities could jeopardise the rest of its international network.
- KPMG has lost most of its major South African clients after its involvement with Gupta-related companies emerged.
The Financial Times has reported that the Bank of England has launched a probe into whether KPMG continues to be viable amid serious woes in South Africa. KPMG was also the auditor for British outsourcer Carillion, which collapsed in January.
Quoting sources close to the probe, the newspaper reports that the BoE’s Prudential Regulation Authority, which supervises the UK’s financial sector, has questioned financial institutions and other regulators to see whether there were risks to KPMG’s viability.
The authority asked existing KPMG clients whether they were planning to fire the firm.
“The regulator was also keen to understand whether KPMG’s problems in South Africa — where it has haemorrhaged clients and cut hundreds of staff over the past 12 months due to its role in a sprawling government corruption scandal— could jeopardise the rest of its international network,” the FT reported.
The authorities are apparently concerned about a repeat of the Arthur Andersen collapse. In 2002, the auditor had to close its doors following the Enron accounting scandal. “At the time, the scale of the disruption was mitigated by senior partners at Andersen switching to the remaining four large accounting firms, but there have been questions over the industry’s ability to react in the same way today given the increased market concentration,” according to the FT.
KPMG in June announced that it will close its regional offices, with up to 400 people losing their jobs, in South Africa.
The auditing firm has been struggling to stay afloat amid an exodus of clients, including Absa, Sasfin and DRDGold. KPMG also resigned as auditor of the South African Institute of Chartered Accountants, which is currently investigating KPMG. Over recent months, more details have emerged about KPMG's association with Gupta companies, and its involvement in a discredited report into a so-called rogue unit at the SA Revenue Service.
KPMG’s head of financial services auditing was also suspended after corruption emerged at VBS, a client of KPMG.
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