KPMG South Africa audits own staff after breaking public trust

KPMG South Africa, which has faced scrutiny for its audit work on failed VBS Mutual Bank and companies linked to the politically connected Gupta family, said all staff face background checks every two years to try improve public trust in the firm.

“The vetting is to be done by an external, independent party,” Wiseman Nkuhlu, chairman of KPMG, told reporters in Johannesburg on Sunday. The firm will also extend a review of its past work to stretch back 18 months and set up a hotline for employees to raise concerns about the quality of KPMG’s work, he said.

Two of the auditor’s partners, Sipho Malaba and Dumi Tshuma, resigned this month after they were faced with disciplinary charges related to work done for VBS Mutual Bank, which collapsed in March after the lender was unable to repay some of its clients’ deposits. The allegations against them included their failure to comply with the firm’s policies and procedures regarding the disclosure of relevant financial interests, KPMG South Africa said in an emailed statement on Saturday.

On the VBS work, “the disappointment and anger is palpable,” said Nhlamu Dlomu, chief executive officer of KPMG South Africa. If the two partners who quit need to be reported to the country’s authorities following the KPMG probe, the firm will take those steps, she said.

Last year, KPMG LLP’s South African unit appointed nine new executives in an attempt to restore trust in the auditing firm as clients distanced themselves over its involvement with the Gupta family. The Guptas, who have fled South Africa, are accused of using their friendship with former President Jacob Zuma to win state contracts and influence government appointments. Zuma and the Guptas have denied any wrongdoing.

VBS, which isn’t listed, gained attention in 2016 when it gave Zuma a mortgage to settle a Constitutional Court order to repay taxpayers some of the money spent upgrading his private residence.

The offices of KPMG LLP in the Canary Wharf business and shopping district in London
The offices of KPMG LLP in the Canary Wharf business and shopping district in London

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