Nedbank to review KPMG status after spin-off
Nedbank says it will review its relationship with KPMG in the 2019 financial year, once the bank’s separation from its parent, Old Mutual plc, is complete.
"It remains important to complete managed separation with the same auditors as Old Mutual Limited/Old Mutual plc," Nedbank CE Mike Brown said on Monday.
This, coupled with the need for Reserve Bank guidance on how mandatory audit-firm rotation would work for banks with joint auditors, as well as clarity on Companies Act constraints on the extent to which the same firm could provide audit and advisory services to clients, meant it was not in the interests of stakeholders for Nedbank to change auditors at this stage, Brown said.
"We will review our position" in 2019, he said.
KPMG risks losing the business of large banks after it emerged that one of its audit partners, Sipho Malaba, who was the lead engagement partner on Nedbank and VBS Mutual Bank, did not disclose loans held with VBS, in contravention of company policy.
VBS was placed into curatorship in March and is now suspected of engaging in fraudulent transactions that benefited certain key individuals and companies connected to the bank.
None of this was raised by KPMG during its audit of the bank, with the Independent Regulatory Board for Auditors (Irba) confirming that KPMG filed its first "reportable irregularity" pertaining to VBS on April 11, which simply detailed information recorded in media reports around the issue.
Nedbank had requested that KPMG International review the work of KPMG SA in its most recent audit to provide "additional comfort" over the quality of work conducted by KPMG SA, Brown said. This would have been for the 2017 year.
KPMG is also the joint auditor of Investec, Standard Bank and Barclays Africa. Investec and Standard Bank confirmed that neither Malaba nor KPMG partner Dumi Tshuma, who also resigned after facing disciplinary charges, was on their audits. Barclays Africa said KPMG’s status as external auditor remained under review pending the outcome of investigations by the audit and accounting regulators.
Meanwhile, PwC — which was VBS’s internal auditor responsible for risk management, internal control and governance processes — did not submit any reportable irregularities to Irba either. A reportable irregularity is an unlawful act committed by management that could cause material financial loss to an entity or is fraudulent or represents a breach of fiduciary duties.
In terms of the Auditing Profession Act, external auditors must report these to Irba. Internal auditors are not subject to this provision but can use their discretion in this regard. Citing client confidentiality, PwC declined to comment on why, if VBS was illegally accepting deposits from municipalities, which placed the bank at material financial risk, it did not report this to Irba.