In the wake of a call from Finance Minister Malusi Gigaba for government to review all its contracts with auditors KPMG, SA Federation of Trade Unions head Zwelinzima Vavi has called him “unbelievable”.
He said this because of allegations that the minister had made a number of decisions to favour the Gupta family while he was the minister of public enterprises. KPMG is in the firing line now for questionable work they did for the Gupta family.
Vavi took to Twitter to ask: “Unbelievable! Who when was a Minister of Public Enterprises purged all & replaced them with Gupta associates?”
— Zwelinzima Vavi (@Zwelinzima1) September 22, 2017
Many on Twitter supported his view, with one alleging that Gigaba was one of the “masterminds” behind “this mess”.
Gigaba on Friday advised all government departments and entities to consider reviewing their work programmes with KPMG SA, to ensure that audits done by the firm “have not been compromised”.
KPMG is in a fight for its life after it admitted last week that it missed red flags in its auditing of Gupta family-owned companies and also withdrew parts of its controversial report on the South African Revenue Service’s (Sars) so-called “rogue unit”.
“These developments have created a bad image and have undermined the reputation of good governance and audit independence in one of the key sectors and institutions in our economy,” Gigaba said in a statement.
“These developments further threaten to undermine our efforts in reinforcing confidence and enhancing a climate for investments, both domestic and international.”
Gigaba said the review of KPMG’s work on government would be a measure that helps “to restore confidence in audits”.
On Monday, Sars Commissioner Tom Moyane called on Gigaba to order the government to review all work done by KPMG and to blacklist the firm.
KPMG’s future hangs in the balance as it faces two investigations from the Independent Regulatory Board for Auditors and Companies and Intellectual Property Commission, who are probing the conduct of KPMG’s directors and whether the firm flouted regulations in its audit of Gupta-linked companies. Gigaba said it’s “warranted and critical” that the relevant law enforcement bodies look into KPMG to “identify and sanction those responsible for any wrongdoing”.
JSE-listed companies that are externally audited by KPMG including Sasfin Bank and Hulisani announced this week that they are terminating their relationship with the firm.
The Board of Business Leadership South Africa announced on Friday that it had decided to suspend the membership of KPMG “pending the outcome of an independent investigation into the organisation’s involvement in conduct related to ‘state capture’”.
Former finance minister Pravin Gordhan, who was implicated in KPMG’s report for helping set up the “rogue unit” when he was the Sars commissioner, and his former deputy Mcebisi Jonas, met KPMG’s global chairman John Veihmeyer and other senior executives on Thursday.
In a statement on Thursday evening, Gordhan and Jonas said KPMG’s transparency “will determine whether KPMG can earn the respect and confidence of both corporates and the audit profession on the one hand and the South African public on the other”.
Gordhan was fired from his post as finance minister partly as a result of KPMG’s report on Sars.
Gigaba used the storm over KPMG to push the need for regulation on mandatory rotation of audit firms, which becomes effective in 2023.
“In this regard, government should explore possible regulations for both the public and private sector in an effort to ensure and preserve the integrity and good governance in the audit fraternity,” he said.
“This move will not only ensure that companies diversify their audit options but also build in a peer review oversight mechanism. It cannot be in the interest of good governance to have one audit firm auditing a company perpetually.”