Raymond Doherty 16 Apr 2018 10:48am

KPMG SA reviews past audits as partners resign

Two partners have resigned from embattled KPMG South Africa over their work with a collapsed bank

In response the firm has launched an "unprecedented" review of all its work done by partners in the last 18 months in a bid to regain public trust.

Sipho Malaba and Dumi Tshuma, who were facing disciplinary charges related to work done for VBS Mutual Bank, resigned with immediate effect over the weekend, the firm announced.

Malaba was the lead audit partner on VBS which, according to a damning independent report published this week, could not account for nearly R900m (£53m) deposited with it. He was initially suspended last week.

The allegations against the pair included failure to comply with the firm’s policies and procedures regarding the disclosure of relevant financial interests.

It is a further blow to the troubled Big Four firm in South Africa. Most of KPMG South Africa's senior management quit in September last year over its links with the Gupta family, who are under investigation following allegations of political corruption.

It also lost several clients and is still under two separate investigations.

The firm tried to restore public trust and rebuild its image by bringing in a new leadership team – one of which was Malaba as head of financial services auditing.

Following the departures related to VBS, KPMG has announced more drastic steps, including more detailed background checks on partners and their spouses/partners, and reviews of its previous audit work.

KPMG International will coordinate the expansion of the background checks process and the findings will be reported directly to the Board Quality and Risk committee.

KPMG South Africa chief executive Nhlamulo 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”.

Dlomu added, “We realise that to build a KPMG that we and South Africa can be proud of, one that has quality and integrity at its heart, we must be prepared to adopt and embrace significant change to our culture and partner conduct. Some of the steps we are taking are not easy, but we are in a position where such measures are unavoidable requirements to rebuild trust.”

The firm said it will also add non-executive directors to its board and bolster its staff whistleblowing programme. It added that further changes to its governance will be announced in the next few weeks.