South Africa’s central bank is concerned about “regrettable” practices at auditor KPMG, its governor said, as the company’s chairman held a meeting with a former finance minister it had tarnished in a report it later said was flawed.
“We will engage banks and audit firms primarily to understand the context so we are better placed to manage any potential financial stability risk that may arise from the issues around KPMG,” Governor Lesetja Kganyago said on Thursday.
KPMG cleared out its South African leadership last Friday after it found that work it did for firms owned by the Gupta family, businessmen friends of President Jacob Zuma, “fell considerably short” of its standards.
KPMG’s investigation into its work for the Guptas, accused by a public watchdog of improperly influencing government contracts, identified no evidence of crimes or corruption.
But it acknowledged “flaws” in a report that it compiled for South Africa’s tax service, which implied that former finance minister Pravin Gordhan had helped set up a “rogue spy unit” when he was head of the service.
Both Zuma and the Guptas 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, but the scandal is one of many that have dogged the Zuma presidency.
Gordhan and his former deputy Mcebisi Jonas met KPMG’s global chairman John Veihmeyer and other senior executives from the company on Thursday in South Africa.
Veihmeyer’s appearance in South Africa underscores the scale of the scandal to the auditor, whose work by its very nature is supposed to provide transparency to the world of business.
Gordhan and Jonas were unsparing in their criticism.
“We shared our strong feelings and disapproval of the manner in which KPMG SA has been involved in … corruption in respect of both the South African Revenue Service (SARS) and companies of the Gupta family,” Gordhan and Jonas said in a joint statement after the meeting.“KPMG has a moral duty to account for their conduct to the South African public and they have to be frank and transparent in their disclosures if they wish to restore their own reputation.”
Gordhan and Jonas have both been strident critics of the Guptas, making them poster children for swelling public resentment against Zuma’s scandal-ridden administration.
The scandal has cost KPMG at least three clients and several of South Africa’s largest companies are reviewing whether to continue using the auditing firm.
Separately, a South African industry body group said it would launch an inquiry into the conduct of its members employed by KPMG, which is already under scrutiny by the Independent Regulatory Board of Auditors.
The South African Institute of Chartered Accountants, or SAICA, said it would on Friday announce the establishment of an independent commission of inquiry “into the conduct of certain members of SAICA employed by KPMG”.
KPMG became the third global firm to be damaged by work carried out for the Indian-born Gupta brothers after the business consultancy McKinsey and the public relations agency Bell Pottinger, whose British business collapsed last week.