May 6, 2018 / 5:19 PM / in 5 months

South Africa's KPMG arm welcomes review and owns up to failings

JOHANNESBURG (Reuters) - KPMG’s scandal-hit South African arm on Sunday welcomed a review of its turnaround strategy by the Independent Regulatory Board for Auditors (IRBA), saying its failings led to a negative image of auditors.

FILE PHOTO: The offices of auditors KMPG are seen in Cape Town, South Africa, September 19, 2017. Picture taken September 19, 2017. REUTERS/Mike Hutchings/File Photo

The global auditor has been under scrutiny since 2017 over work done for a company owned by the Gupta family and more recently for small lender VBS Mutual Bank.

The Guptas are accused of using their links to former president Jacob Zuma to influence government decisions and the award of tenders. Both the family and Zuma deny wrongdoing.

The firm responded by appointing veteran public servant and former chairman of the Development Bank of Southern Africa Wiseman Nkuhlu as its chairman in January and said it was reviewing the work of its partners.

Two KPMG partners resigned after facing disciplinary charges over failure to disclose financial interests in connection to VBS Mutual Bank, which was placed under curatorship.

The IRBA said on Friday it had taken the unusual step of appointing a specialized team to review KPMG’s turnaround strategy starting this week.

KPMG said it had since last September undertaken far-reaching reforms which seek to put quality and integrity at the heart of the firm.

“We acknowledge that failings at the firm have contributed to adverse perceptions about the audit profession and we accept responsibility to work towards redressing this situation,” KPMG said in a statement, adding that it welcomed the review.

KPMG said it had since September been cooperating with the IRBA and would continue to do so during the review.

“Recent revelations about VBS have unsettled clients and we recognize they require reassurance that KPMG remains a good firm to be associated with,” KPMG said.

The fallout over the scandals at KPMG has been swift.

In April, South Africa’s Auditor General said he was terminating all government contracts with KPMG, saying the scandals had cast doubt over the firm’s ethical conduct.

Last week Barclays Africa BGAJ.J, one of KPMG’s major financial customers and South Africa’s second-biggest lender by market value, and gold miner Sibanye-Stillwater (SGLJ.J) joined more than 10 other clients, to break ties with KPMG since 2017.

Reporting by James Macharia; Editing by Matthew Mpoke Bigg

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