KPMG Auditing Standards Concern South African Central BankBy and
Governor says KPMG made “serious errors of judgment”
Eight KPMG executives quit over work done for Gupta family
South Africa’s central bank said it’s concerned about the quality of internal controls at KPMG LLP after the global auditing firm admitted that work for the politically-connected Gupta family was below the required standard.
“We have noted with concern the regrettable auditing practices and serious errors of judgment that occurred at KPMG,” Governor Lesetja Kganyago told reporters on Thursday. The work “led to enormous damage being inflicted on certain individuals, organizations and the country as a whole.”
The central bank supports an independent investigation into KPMG’s dealings with the Gupta family, who are in business with Jacob Zuma’s son and have been accused of using their political connections to win contracts from state-controlled companies. An internal inquiry by the accounting firm criticized its role in advising a Gupta-linked company on the acquisition of a coal mine from Glencore Plc and said four KPMG partners shouldn’t have attended a lavish Gupta family wedding.
Zuma and the Guptas have denied wrongdoing. Eight senior KPMG executives quit following the internal investigation and firm said it would donate the equivalent of $3 million to education and anti-corruption charities. New Chief Executive Officer Nhlamu Dlomu has apologized for the firm’s actions and has agreed to an inquiry by the South African Institute of Chartered Accountants.
The central bank’s concerns arise “from our mandate to regulate banks and ensure the stability of our financial system,” Kganyago said. “We will engage banks and audit firms, primarily to understand the context so that we are better placed to manage any potential financial stability risks that may arise from the issues around KPMG.”
Sasfin Holdings Ltd. and Hulisani Ltd. have dumped KPMG as auditors and Barclays Group Africa Ltd. and Investec Ltd. have said they are considering ending their relationship with the firm.
KPMG helps audit three of South Africa’s four biggest banks, Kganyago said.
— With assistance by Kevin Crowley