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Kimi Makwetu reassures public about risks‚ after firing KPMG and Nkonki

Kimi Makwetu reassures public about risks‚ after firing KPMG and Nkonki.
Kimi Makwetu reassures public about risks‚ after firing KPMG and Nkonki.

Auditor-General Kimi Makwetu said risks to the public sector were now minimised "to the greatest extent" following his shock decision to drop KPMG and Nkonki as auditors of government departments and state-owned companies this week.

Of the R450m worth of public-sector audits conducted by private-sector audit firms‚ KPMG and Nkonki combined accounted for about R90m‚ according to Makwetu‚ who declined to elaborate on the value of the mandate that accrued to KPMG.

He said the decision was communicated to the companies early this week with a condition that he would review the decision once further substantive information was provided by the companies.

Explaining his decision at a debate into the integrity of the auditing industry in Johannesburg on Wednesday‚ Makwetu said his office — while waiting for the outcomes of various high-level investigations into KPMG’s conduct in recent months — was concerned about the conduct of KPMG audit partners in the external audit of VBS Mutual Bank.

Two KPMG partners took undisclosed loans from VBS. VBS was put into curatorship on March 11 after experiencing a severe liquidity crisis.

KPMG was embroiled in state capture allegations in 2017. It repaid R23m for work it conducted for the South African Revenue Service and withdrew its findings after the report was discredited.

Added to this was a report by the curator of VBS Bank‚ which "Implicated another level of conduct that was extremely unacceptable in relation to the first offence"‚ Makwetu said.

"Then we thought we will continue to reward not for virtue but for robbery. We decided that the best thing for us is to minimise and mitigate the risk."

Makwetu said shareholder transactions at Nkonki raised discomfort in his office." It introduces a bigger risk for us because we do not know whether the new owner might have other intentions that do not accord with the code."

He said inquiries into KPMG’s conduct could take‚ "Three years or 20 years but our risk is minimised to the greatest extent."

Makwetu‚ said who said in a radio interview with 702 on Tuesday evening that the auditing profession was " in the gutter"‚ said a report published in 2001 and which emanated from a commission of inquiry by Judge Hennie Nel into the Masterbond group and its associated group of companies‚ revealed serious concern in terms of integrity‚ dishonesty and lack of independence in the profession‚ among other issues.

"We’ve been here before and many people were hurt and auditors and accountants were made to look in the mirror. Maybe they did not‚" he added.

Fanisa Lamola‚ acting CEO of the South African Institute of Chartered Accountants (Saica)‚ said that in last 12 months‚ nine chartered accountants were stripped of their CA designation and 77 were fined a maximum of R100‚000. She said 23 trainees were found not to be behaving in terms of the code of conduct.

An additional 109 chartered accountants were subjected to disciplinary hearings but they were found not to have infringed the industry’s code of conduct.

Lamola said Saica has 46‚000 members and that those implicated in wrongdoing " do not constitute 100".

Anglican archbishop Thabo Makgoba‚ also a panellist‚ called for tighter regulation of the industry. "How can we trust the companies they’ve audited to know whether they are companies people can invest in?"

But Nirupa Padia‚ professor and head of the school of accountancy at the University of the Witwatersrand‚ which hosted the debate‚ said: "More regulation and more of everything is not necessarily what is going to fix this."

Padia said people were motivated by greed‚ fear or love. "What we are seeing today I would put down to greed."

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