Ann Crotty Writer-at-large
A branch of VBS Mutual Bank in Thohoyandou, Limpopo. Picture: Antonio Muchave
A branch of VBS Mutual Bank in Thohoyandou, Limpopo. Picture: Antonio Muchave

In another blow to two of the country’s top four audit firms, the curator of Venda Building Society Mutual Bank, Anoosh Rooplal, has announced the withdrawal of the bank’s 2017 audited financial statements.

PwC was the internal auditor and KPMG the external auditor for the 2017 financial statements. Rooplal said the financial statements were withdrawn because "they contain material misstatements and are no longer considered to be reliable".

VBS made the announcement in response to a query from Business Day after unsuccessful efforts to access the 2017 annual report, which had been available on the VBS website on Friday.

VBS said the financial statements had been withdrawn and removed from the bank’s website. A representative said the amended/restated financial statements would be reissued in due course. Users of the financial statements were asked not to rely on the 2017 statements.

"The decision to withdraw the 2017 audited financial statements will not change our focus as curator. We are still of the view that the curatorship role provides the best mechanism to rehabilitate the bank if possible, and my primary role of stabilising the bank and protecting the interests of depositors remains firm," said Rooplal.

KPMG was unable to provide a comment before Business Day’s deadline. A representative for PwC said they would not be able to comment by Business Day’s deadline.

While KPMG has made detailed public statements on the audit failure at VBS, PwC has not commented publicly on its role, other than responding to questions from Moneyweb.

As internal auditor, PWC was required to provide independent assurance on the effectiveness of VBS’s risk-management, governance and internal control processes. The VBS curator has requested PwC to halt its engagement with VBS.

Two KPMG partners who were facing disciplinary charges in relation to their role on the audit resigned from the firm on Friday.

The decision to remove the financial statements from the public domain contrasts with the approach taken by Steinhoff. The financial statements have not been removed from the website but every page of statements for financial 2015 and 2016 has been stamped with a warning that "information can no longer be relied on".

Before they were removed from the website, the VBS financials for 2017 revealed the strong growth in total assets recorded by the bank since 2015, when total assets amounted to just R337m.

They almost trebled to R1bn in 2016 and from there doubled to R2bn in 2017. Net profit rose from R1m in 2015 to R5.9m in 2017 while operating profit increased to R87m in 2017 from R28m in 2015.

One of the most controversial aspects of the bank’s accounts is the cash on hand. According to the 2017 financial statements, the bank had R763m cash on hand at the end of March 2017, up from just R144m in 2015.

The recent exceptionally strong growth recorded by VBS has been linked by some commentators to the bank’s decision in 2016 to extend a R8.5m loan to former president Jacob Zuma. The loan was to enable Zuma to pay for upgrades at his KwaZulu-Natal homestead.