KPMG South Africa hit hard as more clients sever ties following audit scandals
Mining company Gold Fields and mutual savings bank Finbond are the latest blow to the Big Four firm's audit clients
KPMG South Africa has lost a new load of audit clients as its disastrous year continues following the recent scandal which hit the firm.
Mining company Gold Fields and mutual savings bank Finbond are the latest businesses to cut ties with the Big Four firm.
Finbond Group Limited has appointed KPMG’s rival Deloitte as its new external auditor following its AGM.
In a separate blow, Gold Fields revealed PwC would be taking over from its competitor at the end of the 2018 financial year.
The losses are just part of a string of hits for KPMG SA, who last month had to close regional offices and cut hundreds of jobs as a result of the scandal around VBS Mutual Bank in April.
Senior partners Sipho Malaba and Dumi Tshuma were forced to resign after VBS was placed under curatorship after being unable to repay some client deposits.
After Malaba provided an unqualified opinion when signing off on the bank’s accounts at year end last year an investigation was launched into the two men’s conduct. KPMG admitted the partners had misled them about their relationship with the bank, especially regarding undisclosed loans.
This all blew up in the wake of the Gupta family scandal, in which KPMG was accused of facilitating the wealthy Gupta family in tax evasion and corruption.
As the scandal unfolded, at least eight senior KPMG employees quit their jobs and the firm began losing clients as it became clear the firm had missed warning signs in the audits of Gupta-controlled companies.
Lost clients included Witwatersrand University in Johannesburg and mining group Rainbow Minerals as well as the waste disposal company Interwaste and the African unit of insurance company Munich Re.
The then very new head of KPMG SA, Nhlamu Dlomu, was forced to apologise publicly.
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At the time, Dlomu said: “This has been a very disappointing episode for KPMG. There can be no tolerance, however, of any conduct that compromises our reputation and we have moved decisively to deal with the situation”.
The fresh blow follows a wave of difficulty for the Big Four firm, which was reprimanded and fined last month over misconduct relating to their audit of the scandal-ridden Quindell. A few weeks later the FRC condemned the audit quality of the Big Four, saying KPMG’s in particular had suffered “an unacceptable deterioration”.
