Jaundiced Eye – Investigations into dishonest auditors are a joke

Addressing a public sector forum this week, SA’s auditing bodies confided that they intend to act “aggressively” to salvage their image.

Good luck. In the past few years there’s been a great deal of damage, all self-inflicted by the reckless, negligent, greedy, incompetent and dishonest members of the bodies that are supposed to “self-regulate” the profession.

Self-regulation actually means allowing your members as much licence as possible, while shielding them from the consequences of their actions.

In accountancy, the main cosy clubs are the SA Institute of Chartered Accountants (Saica) and the SA Institute of Professional Accountants (Saipa). There is also the statutory Independent Regulatory Board for Auditors (IRBA), which has proved to be neither independent of the profession, nor able to regulate anything that matters.

The roll of dishonour, just in the past few years, is startling. For starters, there’s the R2 billion collapse of African Bank, overseen by Deloitte & Touche, and there’s the Steinhoff collapse, where Deloitte didn’t notice irregularities that led to huge market value losses.

There’s what the National Prosecuting Authority described as the “collusion” of McKinsey & Company in the theft of R1.6 billion from Eskom. A forensic investigation recommended criminal prosecutions.

There’s Bosasa, which allegedly laundered R5 million a month in cash bribes, to pay off politicians, prosecutors, and government officials. The auditors, D’Arcy-Herrman, didn’t notice anything amiss.

And then there’s KPMG, which has wrought carnage in SA. The forensic investigation into the R1.89 billion fraud that sank VBS Mutual Bank recommended that KPMG should be held financially liable. A judge included KPMG staff among those to be prioritised for prosecution.

But these were mere tasting dishes. KPMG’s gourmet meal was the banquet with the Gupta clan, where the main dish was intended to be the entire SA state. The amount looted was around R50 billion.

And the penalties for the auditors and accountants involved in this cesspool of the theft and fraud? McKinsey did a deal with the Asset Seizure Unit and paid back R99.5 million to Eskom, while KPMG generously donated R47 million of its Gupta fees to civil society organisations and charities.

Saica and the IRBA have been “investigating” the African Bank collapse since 2014 and disciplinary action against two Deloitte partners is still straggling along.

The Steinhoff collapse is also under “investigation”, managing a mere 19 days hearings in 2018, and another 44 scheduled for 2019, only starting in July.

It’s the same with investigating KPMG. At the speed at which Saica and the IRBA are moving, the world’s glaciers will have melted before any “professional” involved will be found guilty and slapped on the wrist.

In 2017 KPMG announced an independent investigation into its role in the Gupta and Sars “rogue unit” matters, and that there would be “full and frank disclosure … as quickly as possible”. We’re still waiting.

William Saunderson-Meyer.

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