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Auditor-General ‘was right’ to end KPMG contracts, says Parly

2018-05-04 15:20

Parliament has thrown its weight behind the Auditor-General’s decision to end contracts with auditing firms Nkonki and KPMG.

The Standing Committee on the Auditor-General on Friday expressed its support of the decision made by Auditor-General Kimi Makwetu last month to terminate, with immediate effect, the government’s auditing contracts with KPMG and Nkonki Inc.

The two beleaguered companies had been doing public sector audits on behalf of the Auditor-General.

The committee was briefed about the decision today, and heard that the decision was made in order to protect the Auditor-General’s reputation and those of state entities, and was in the best interests of the international standard on quality control.

Co-chairperson of the committee, Themba Godi, said that although the Auditor-General of South Africa was a chapter-nine institution that was only accountable to Parliament, the committee appreciated its prerogative to take independent decisions.

“In this case, the Auditor-General took the right decision,” he said.

The committee said that until Nkonki declared its shareholdings, it should not conduct any business with state entities.

The Auditor-General uses various private audit firms – such as KPMG and Nkonki Inc – to conduct audits on its behalf and support its auditing staff.

The contracted firms are obliged to “stringently follow” the Auditor-General’s auditing standards as well as the ethics that are the pillars of the accounting profession.

READ: ‘Private auditors compromised by profit motive’ - Themba Godi

KPMG has experienced a harrowing few days, following the resignation of two partners facing internal disciplinary charges and the announcement that it would review all the work done by its partners over the past 18 months in a bid to regain public trust.

KPMG’s audit of VBS Mutual Bank was the final straw for the Auditor-General. Makwetu had said in 2017 that he would wait for results of various investigations into the auditing company’s handling of Gupta accounts and a South African Revenue Service report, before deciding whether to terminate its services.

But recent media reports relating to the external audit of VBS Mutual Bank and the conduct of KPMG audit partners were among the reasons that prompted the decision to withdraw all KPMG audit mandates with immediate effect.

READ: Barclays Africa joins growing list of companies to drop KPMG

On the termination of Nkonki Inc’s contract, Makwetu said media reports on matters arising from the shareholder transactions involving the firm were of “grave concern and pose significant risk on the reputation of my office through the statutory audits contracted” to Nkonki Inc.

The decision to terminate Nkonki Inc’s contract follows the resignation of its chief executive Mitesh Patel, who resigned after investigative journalism centre amaBhungane revealed that his R107-million “management buyout” of the auditing firm was funded by Gupta associate Salim Essa.

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November 11 2018