KPMG damage-control machine homes in on Gordhan and Jonas
KPMG International continued its bid to defuse the crisis around its South African operations on Thursday, with international chairman John Veihmeyer holding a meeting with former finance minister Pravin Gordhan in Johannesburg.
Gordhan, who was fired from his post partly as a result of KPMG’s South African Revenue Service (SARS) report and who saw many of his former SARS colleagues dismissed because of it, rejected the apology made by Veihmeyer last week, when he withdrew the 2015 report, and threatened legal action.
Gordhan said that KPMG’s "regret" did not come close to acknowledging the damage the report had done to SARS and the livelihoods of honest and professional public servants.
He asked why the firm had not approached him to offer a personal apology and urged it to declare that the SARS "rogue unit" had been legal.
Gordhan was accompanied by his former deputy, Mcebisi Jonas. In a statement issued after the meeting, they said they had agreed to meet KPMG but reserved their legal rights.
"We shared our strong feelings and disapproval of the manner in which KPMG SA has been involved in the validation of state capture and corruption in respect of both SARS and the Gupta companies," they said.
They had also insisted on a full and proper disclosure of the role of various parties in state capture and the manner in which KPMG staff seemed to have colluded in this, Gordhan and Jonas said. This included the complete disregard shown by KPMG management, they said.
Business Day understands former SARS employees implicated in the report on the "rogue unit" were compiling court papers in a bid to sue KPMG.
Gordhan and Jonas said the KPMG delegation had asked that they "recognise their commitment" to SA. "Clearly, given the inadequacy of their earlier statement on Friday last week, further steps needed to be taken by KPMG to be more open and frank with South Africans.
"This will determine whether KPMG can earn the respect and confidence of both corporates and the audit profession on the one hand, and the South African public on the other," Gordhan and Jonas said.
Reserve Bank governor Lesetja Kganyago confirmed at a briefing in Johannesburg that the Bank was to meet representatives of financial institutions out of concern that a possible closure of KPMG SA could affect the country’s financial stability.
"We will engage banks and auditing 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."
He also took the opportunity to deplore KPMG’s conduct, describing it as having shown "regrettable auditing practices and serious errors of judgment", which had led to enormous damage inflicted on individuals, organisations and the country.
An independent investigation, called by the Independent Regulatory Board for Auditors, was an important first step, he said, to regain public trust.
In addition to the Irba probe, the South African Institute of Chartered Accounts, the industry body for professionals, will on Friday make announcements regarding its own probe into the conduct of auditors who were involved in KPMG’s SARS account.