South Africa: KMPG Woes Continue as More Organisations Dump the Audit Firm

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South Africa’s University of Witwatersrand (Wits), says it is dropping KPMG as its auditor after a scandal about the firm’s work for businessman friends of President Jacob Zuma, it said on Wednesday.

“It was agreed that KPMG had not been sufficiently transparent and that it is hard to reconcile KPMG’s conclusion that no one did anything illegal when senior individuals have been dismissed,” said Vice-Chancellor, Adam Habib in a statement released by the university.

Similarly, the African arm of Germany’s Munich Reinsurance  (Munich Re) also dropped KPMG as its auditor, the latest company to cut ties with the accountancy firm.

In a response to the scandal, KMPG sacked its South African leadership last month after it found work done for companies owned by the Gupta family – a trio of Indian-born businessmen with close ties to Zuma – “fell considerably short” of its standards.

“It is well known that KPMG has faced some reputational and credibility challenges,” says Munich Re Africa’s CEO Nico Conradie.

He added: “I don’t want to accuse them of anything but we just felt that it would be better for us if we are dealing with a new auditor in 2018”.

Munich Re’s decision was taken last Friday, Conradie said, weeks after the reinsurer’s director, Iraj Abedian, quit, protesting over the board’s decision to wait for the outcome of KPMG’s internal investigation before taking any action.

Big financial clients such as Barclays Africa and Standard Bank are considering whether to ditch the accounting firm, while the South African parliament has also said it would no longer work with the firm.

It is understood that several of South Africa’s big four banks said the bank had received letters from major clients telling it to cut ties with KPMG.

The banks want KMPG to show it had “done everything in its power to cut out the rot,” including commissioning a fully independent external audit rather than the internal review it has conducted so far.

But the South African central bank has already warned the big four lenders they cannot fire KPMG because it might undermine financial stability.

The Guptas and Zuma deny wrongdoing and say they are victims of a politically motivated witch-hunt. The Guptas and their companies have not been charged with any crime.

KPMG, whose local unit traces its roots to Johannesburg’s gold rush days in the late 19th century, is currently under investigation by industry watchdog, Independent Regulatory Board for Auditors.

The regulator’s Chief Executive Bernard Agulhas told lawmakers in Cape Town on Tuesday that his office would fast-track the inquiry.

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