For Kuben Naidoo, deputy governor of the Reserve Bank, one of the most painful lessons from its failure to prevent the pillaging and collapse of VBS Mutual Bank is never to assume that auditors are telling the truth. "It's very difficult to get to the bottom of things when there is a conspiracy of lies," says Naidoo, also the registrar of banks. More than a year before VBS was put under curatorship in March, the Reserve Bank suspected it was not meeting its capital adequacy requirements. "We insisted that they hold more capital. They said they were, their financial statements said they were, the auditors said they were. "We now know that was a lie."KPMG handled the external audit and signed off on the accounts each year, while PwC handled the bank's internal audit. The registrar of banks has the power to order reviews of audits and inspect the books. "We had no basis not to believe them," he says. "We are heavily reliant on the auditors doing their job properly. You want a good inte...

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