Reserve bank: Banks are free to choose their own auditors

The South African Reserve Bank (SARB) said it will not interfere in the processes banks follow in appointing auditors.

The SARB on Thursday issued a statement following recent developments at KPMG.

The auditor has seen an exodus of clients after being rocked by scandals over the past few months.

This week the auditor general cut ties with KPMG after it was revealed that two partners of the audit firm stepped down after failing to disclose financial interests around the VBS Mutual Bank audit.

READ MORE: KPMG ‘opening itself up to scrutiny’ with review of 200 files

Last year, following the fallout at KPMG over the report on the so-called South African Revenue Services (Sars) rogue unit, the Reserve Bank said it would not instruct South African banks on how to deal with KPMG. Some of the auditor’s clients have left, including Wits University, Sasfin and Munich Re.

The Reserve Bank reaffirmed its position on matters relating to KPMG. “The SARB continues to engage with KPMG as well as with banks that use KPMG as their auditors,” the statement read.

The SARB emphasised that it does not interfere with the appointment of auditors by banks, as this responsibility rests with the banks.

“The choice of auditor remains that of a firm, with due regard to the firm’s need and commercial interest as well as the capacity and quality of the audit firm,” the Reserve Bank said.

READ MORE: KPMG woes deepen after VBS bank scandal

The SARB explained that its prudential authority regulates the process of appointments, but deals with the “capacity and quality assurance provision” of the audit firm.

“We do not interfere in the process of who an institution appoints as their auditor.”

The Reserve Bank acknowledged that auditors play an “important role” in instilling market confidence in the financial statements of financial institutions, and that the quality of audits also assists the work of regulators.

“However, the role auditors play should not be seen in isolation. The robustness and integrity of audits depends to a large extent on the strength of governance and the depth of an ethical culture within a financial institution.

“These are issues that we monitor constantly,” SARB said.

The SARB said its interests in KPMG are from a public policy perspective part of its mandate to ensure the “soundness and stability” of South Africa’s financial system.

“The SARB’s view is that a capable and competitive audit and auxiliary services industry is essential for the maintenance of a healthy business environment.” – Fin24

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Lameez Omarjee
Lameez Omarjee
Parliamentary reporter at

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