Absa Dumps KPMG South Africa in Blow to Auditor's SurvivalBy and
Lender says it can’t support reappointment as scandals deepen
Auditor says it has taken steps to improve risk management
Barclays Africa Group Ltd. ditched KPMG LLP South Africa as one of its two auditors, the first major local bank to do so, in another blow to the embattled accounting firm’s hopes of survival in the country.
The decision may pressure other lenders into following suit less than a month after KPMG South Africa lost one of its biggest contracts when the government’s Auditor-General terminated its services. KPMG has been tainted for work done for the Gupta family, who are being probed for using their friendship with former President Jacob Zuma to win state contracts and influence cabinets appointments, which they deny.
“It’s not the first time a company has dropped them and I suspect it won’t the last time,” said Wayne McCurrie, a money manager at Ashburton Investments Management Co. “There’s going to be some job losses because KPMG has lost so many clients and they are probably going to lose more. They aren’t getting new clients.”
Johannesburg-based KPMG -- which audits four of South Africa’s six biggest lenders, including Barclays Africa -- last year lost publicly traded clients including clothing retailer The Foschini Group Ltd., financial services firm Sasfin Holdings Ltd. and consumer-goods distributor AVI Ltd. KPMG South Africa employs 3,400, according to the Johannesburg-based Business Times newspaper.
Barclays Africa’s board “is no longer able to support the reappointment of KPMG,” the lender, which is changing its name to Absa Group Ltd., said in a statement on Thursday. The contract will cease once all regulatory steps associated with the 2017 audit have been completed by the end of this month, it said, adding KPMG Inc. and KPMG International had supported the local firm’s work.
During the past nine months, KPMG South Africa has issued a public apology for work done for the Gupta family, withdrawn the findings of a report about the country’s tax authority, and interrogated staff who signed off on VBS Mutual Bank’s accounts before it failed.
“We are disappointed by, but fully accept, the decision,” KPMG South Africa said in a separate statement. “We have implemented far-reaching changes over the past seven months to all aspects of the firm including governance, quality, and risk management. ”
Standard Bank Group Ltd., Africa’s biggest lender by assets, is assessing the latest “adverse information” about KPMG South Africa, a spokesman said last month, while Nedbank Group Ltd. said it can’t practically change auditors this year because parent company Old Mutual Plc is splitting into four separate units. Investec Plc has said it’s scrutinizing the auditor’s current work on the lender’s 2017 fiscal year.