The Reserve Bank on Thursday expressed concern at the “regrettable” auditing practices involving KPMG.
“The South African Reserve Bank [SARB] has noted with concern the regrettable auditing practices and serious errors of judgment that occurred at KPMG, which led to enormous damage being inflicted on certain individuals, organisations, and the country as a whole,” said the central bank.
It further added that the country has over many years been ranked highly because of, among other factors, the strength of our auditing standards and the soundness of our banks.
“As the regulator of banks, the SARB would obviously be concerned about any developments that question auditing standards or could potentially cast a shadow on the quality and reliability of sets of audited financial statements.”
This, as each of the big four banks [Barclays Africa, FirstRand, Nedbank and Standard Bank] are required to have two auditors. KPMG is one of two auditors in three of the big four banks.
KPMG is also the sole auditors for two other banks and a number of insurance companies.
The bank’s concerns come following the fallout as a result of the work done by the company on behalf of the controversial Gupta family. This resulted in several resignations at the company and the appointment of Nhlamu Dlomu as Chief Executive Officer.
“The SARB has also noted the commitment by the new management team of KPMG South Africa to fully own up to previous malpractices, and to engage with relevant parties and the South African public in order to regain their trust.”
The Reserve Bank said announcements made on Wednesday and last Friday, namely to have an independent investigation in addition to the internal investigation already undertaken, represent important first steps in regaining public trust.
“The success of these measures will greatly depend on the credibility of the initiatives embarked upon. The SARB’s interest in this matter is from a public policy perspective, arising from our mandate to regulate banks and ensure the stability of our financial system,” said the Reserve Bank.