More audit firms at risk as auditor-general wields axe
Difficulties are everywhere in the profession, says auditor-general
More audit firms could find themselves excluded from the list of the auditor-general’s approved audit contractors after KPMG and Nkonki were struck off this week. Auditor-General Kimi Makwetu says he is awaiting the outcomes of several investigations.
KPMG and Nkonki together accounted for R90m out of R450m worth of audit work in the public sector.
Makwetu’s decision to terminate the contracts was based on concerns over transgressions of professional competence, independence and ethics at the two companies.
The auditor-general’s office contracts 114 private sector audit firms, excluding KPMG and Nkonki, according to his office.
"There are difficulties everywhere in the profession," Makwetu told Business Day on the sidelines of a panel discussion on the integrity of the auditing profession on Wednesday.
"When we look at our contract work schedule we assess all of them. By not acting on the others we are not pronouncing on their guilt or otherwise."
He said the Independent Regulatory Board for Auditors (Irba) was undertaking disciplinary processes with some companies. "We do not want to abuse our purse control. But the matters they have put on the table, should a conclusion be reached we will go back to the drawing board and assess whether we still have the capacity to continue with anyone of those other firms if they have been found to be have done wrong," Makwetu said.
KPMG has been implicated in state capture relating to the Gupta family and recently two of its partners who worked on the VBS Bank audit resigned when it emerged they did not disclose loans they held with the bank, which is under curatorship.
In March, Irba charged two partners at Deloitte with misconduct related to financial statements they signed off at African Bank and its holding company, African Bank Investments, before the entities were placed in curatorship.
In 2017, Irba referred auditing regularities at Eskom and Transnet to the Hawks and other authorities for further investigation. The auditors for both companies were SizweNtsalubaGobodo, who first disclosed the irregularities to Irba.
Fanisa Lamola, acting CEO of the South African Institute of Chartered Accountants (Saica), also a panellist, said in the past 12 months nine chartered accountants were stripped of their CA designation and 77 were fined the maximum of R100,000. She said 23 trainees were found not to have behaved in terms of code of conduct and 109 chartered accountants were subjected to disciplinary hearings but were cleared of having infringed the industry’s code of conduct.
But when pressed for further details about the nature of misconduct, Lamola said Saica outsourced the disciplinary process to an independent committee and she did not have details.
"What we get as Saica is the outcome of what the disciplinary committee has done based on the information that was interrogated in the hearing."
KPMG spokesman Nqubeko Sibiya could not elaborate on the impact of the decision on its auditing business.
KPMG CEO Nhlamu Dlomu said in a statement it was her hope that the auditor-general’s decision was temporary as the company was "taking significant steps towards building a firm that is in tune with the needs of our country".