As more firms cut ties with KPMG, the audit company names nine new executives
Andrew Cranston, a partner and former chief operating officer of parent KPMG International, will be the local firm’s interim chief operating officer
KPMG ’s South African unit appointed nine new executives in an attempt to restore trust in the auditing firm, as clients continued to distance themselves over its involvement with the politically connected Gupta family.
Andrew Cranston, a partner and former chief operating officer of parent KPMG International, will be the local firm’s interim chief operating officer, while 36-year company veteran Brian Stephens will take the new position of head of risk, newly appointed CEO of SA operations Nhlamu Dlomu said in an e-mailed statement on Monday. Gary Pickering will lead the audit practice.
KPMG International said on September 15 that the local business would face an independent inquiry after an internal investigation found its work for companies associated with the Guptas, who are friends of President Jacob Zuma, fell short of its own standards.
Clothing retailer The Foschini Group became the latest South African firm to replace KPMG as auditors on Monday, while Telkom said it would not offer the firm new business until the outcome of an independent inquiry.
The announcement is unlikely to prevent clients ending their relationship with KPMG as the firm "has to come clean before it can win back the trust of the society", Iraj Abedian, CEO at Pan-African Investments and Research Services, said in an e-mailed response to questions. "Changing a few characters around before coming clean is ignoring and not dealing with the issues."
KPMG was the auditor for Gupta-linked companies Oakbay Resources and Energy and Linkway Trading. It also produced a report for the South African Revenue Service (SARS), parts of which it has since said "should no longer be relied upon".
Eight senior executives quit in the wake of the findings of the internal investigation in September, even though KPMG did not find evidence of illegal behaviour or corruption. Some of them were paid severance packages, Pickering told MPs last week.
"This is day one for the new KPMG, a KPMG where public interest will share an equally important role with enhanced governance, quality and ethics," Dlomu said.
"We understand that the immediate road ahead will be challenging, but I believe the individuals in this team have the necessary skill, experience, passion and energy." Apart from the independent investigation, KPMG is being probed by the country’s regulatory body for auditors and the South African Institute of Chartered Accountants.
AVI, Munich Re of Africa, Sasfin Holdings, Sygnia Asset Management, and Hulisani have previously stopped using the accountancy firm’s services.
Three of the country’s biggest banks, including Barclays Africa, are reviewing their contracts with KPMG. Standard Bank said on Friday that the firm had not yet done enough to restore its reputation.
In September, Finance Minister Malusi Gigaba called on all government entities to consider reviewing their work programmes with KPMG to make sure their audit processes had not been compromised.
The remaining executive appointments include Sipho Malaba, who will take on the strategic projects division as well as the financial services audit unit he already runs. Granville Smith will take on the advisory practice, while Joubert Botha will be interim leader of tax. Modise Maseng will lead public sector work while Makgotso Letsitsi will be the head of a unit called KPMG people. The markets team will be overseen by Nosisa Fubu, according to Dlomu.