KPMG acknowledges its failings damaged auditing profession

The auditing firm, which employs 3 000 people in South Africa, has thus far, kept mum about revenue losses and possible retrenchments as it bleeds clients. (Siphiwe Sibeko/Reuters)

The auditing firm, which employs 3 000 people in South Africa, has thus far, kept mum about revenue losses and possible retrenchments as it bleeds clients. (Siphiwe Sibeko/Reuters)

KPMG has welcomed the Independent Regulatory Board for Auditors (IRBA) plan to review its turnaround strategy, saying they “acknowledge that failings at the firm have contributed to adverse perceptions about the audit profession”.

“The controversy around the industry has undermined public confidence and this needs to be restored through thoughtful and constructive measures,” the audit firm said in a statement on Sunday.

READ MORE: Calls mount to split auditing firms

IRBA CEO Bernard Agulhas said in a statement on Friday that an “unprecedented crisis called for unprecedented measures” and the independent review and assessment will begin this week.

KPMG South Africa has seen an exodus of large clients in recent weeks; the Auditor General, Barclays Africa, Sibanye-Stillwater and Redefine Properties.

“Recent revelations about VBS [Mutual Bank] have unsettled clients and we recognise they require reassurance that KPMG remains a good firm to be associated with. We have already taken many steps ourselves, and we welcome the independent scrutiny of the IRBA,” KPMG commented.

Two KPMG audit partners resigned in April after it was revealed they had multiple loans with VBS Mutual Bank, while being involved in the institution’s 2016/2017 financial statements, which will need to be re-stated.

The company announced then that it will review all work done in the last 18 months, in light of the VBS saga and partners will undergo a lifestyle audit.

“Against this backdrop, we are supportive of Mr Agulhas’s call for a ‘rational and measured response’ by all stakeholders, and of his resistance to allowing the industry’s reputation to be defined by the actions of a few bad individual auditors,” KPMG said.

IRBA and the South African Institute of Chartered Accountant (SAICA) are both probing KPMG’s handling of Gupta accounts and a South African Revenue Service report that led to at least 9 senior officials resigning in September.

The auditing firm, which employs 3 000 people in South Africa, has so far been mum about revenue losses and possible retrenchments as it bleeds clients.

Dr Iraj Abedian, Chief Executive of Pan African Investments estimated that the loss of the Auditor General as client could cost the auditing firm a fourth or a fifth of its revenue, alone. — Fin24

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