KPMG is ‘disappointed’ at being dropped by Nedbank

KPMG says it is “disappointed” at Nedbank’s announcement to appoint Ernst & Young as joint external auditors in May 2019, but the global auditing firm said it believed that it was on the right path to restoring its clients’ trust in it in the wake of the Gupta scandal.

Nedbank is the latest firm to drop the scandal-hit KPMG’s local unit.

The auditor’s South African unit has been under close scrutiny since 2017 over work done for a company owned by the Gupta brothers – who have been accused of using their links to former president Jacob Zuma to influence government decisions and the awarding of tenders – and more recently for small lender VBS Mutual Bank.

The Guptas and Zuma have denied any wrongdoing.

KPMG sacked its South African leadership in September last year after it found work done for the firm owned by the Guptas “fell considerably short” of its standards.

KPMG South Africa said that Nedbank’s decision was “part of the industry-wide move towards mandatory audit firm rotation, which seeks to ensure objectivity and robust auditing services are provided to all public interest entities”.

It added that, in future, this would likely involve a higher degree of change among established auditing relationships.

“It is always disappointing to lose a client, but we remain very proud of the work that we have performed for Nedbank over many years, and of the diligence and professionalism of the team who served them,” executive chairperson of KPMG SA, Professor Wiseman Nkuhlu, said.

“KPMG itself is a very different business from a year ago, as we have implemented far-reaching changes to all aspects of the firm including governance and leadership, the client roster, quality, as well as culture and ethics. I am confident we are taking the right steps and that this is being recognised by clients.”

More than 10 clients across various sectors severed ties with KPMG since last year, including South Africa’s Auditor-General, Barclays Africa and miner Sibanye Stillwater.

In June, KPMG said it would lay off 400 staff and close small regional offices in response to losing the clients.

A central bank investigation published this month said South Africa should seek damages from the global auditor for the role it played in a corruption scandal that saw at least R1.9 billion rand stolen from local bank VBS.

– Additional reporting by Reuters