State entities need to look into their work with KPMG, says Malusi Gigaba
Recent developments show the importance of audit rotation, the finance minister says
Finance Minister Malusi Gigaba wants government and its entities to consider reviewing their work with professional services firm KPMG to ensure their audit processes have not been compromised.
Gigaba also called on government entities to take appropriate steps where there has been any compromise.
The Independent Regulatory Board for Auditors (Irba) is conducting its own independent investigation of KPMG and the role it played in auditing Gupta-owned companies and in the South African Revenue Service (SARS) report on the so-called rogue unit.
In addition to this, the South African Institute of Chartered Accounts (Saica), the industry body for professionals, is expected to make an announcement on Friday regarding its own investigation of its members employed at KPMG.
We should all join hands in rooting out bad elements that undermine the optimal functioning of our promising economy and its globally reputable institutions.
"It is … warranted and critical that the relevant law enforcements and bodies such as Irba look into this matter to identify and sanction those responsible for any wrongdoing," Gigaba said on Friday.
"We should all join hands in rooting out bad elements that undermine the optimal functioning of our promising economy and its globally reputable institutions."
Gigaba said the recent developments highlighted the risks posed by market dominance and concentration of a few firms in key industries. This offered yet another opportunity for introspection and reforms, he said.
"We call for a concerted effort by all stakeholders to open up the sector to more players for a more de-concentrated and transformed audit sector."
Gigaba said the developments around KPMG also reaffirmed the need for the mandatory rotation of audit firms.
"In this regard, government should explore possible regulations for both the public and private sector in an effort to ensure and preserve the integrity and good governance in the audit fraternity," Gigaba said.
"This move will not only ensure that companies diversify their audit options but also build in a peer review oversight mechanism."
Gigaba said it could not be in the interest of good governance to have one audit firm auditing a company perpetually.
In early June 2017, Irba issued a rule prescribing that after 10 years listed companies had to implement mandatory audit firm rotation with effect from April 1 2023.
However, the issue has split opinion in the both the accounting profession and in listed companies.