South Africa’s auditor general (AG) has announced that it has terminated the government’s auditing contracts with auditing firm KPMG.
The company has been carrying out public sector audits on behalf of the auditor general. The AG said it uses private audit companies such as KPMG and Nkonki Inc to conduct audits and support its auditing workers.
The contracted companies are required to strictly follow the AG’s auditing standards and ethics of the accounting profession.
“Once these have been fundamentally impacted, we are called upon to review and reassess our position,” he said.
KPMG has been undergoing a tough few days after the resignation of two partners who are facing disciplinary charges and the announcement that the firm would review the work the partners had done over the past 18 months to revive public trust.
In 2017, the Auditor General had said he would wait for the results of investigations into KPMG’s audits of Gupta and South African Service (SARS) report prior to deciding whether to stop its services.
Makwetu’s decision to terminate KPMG’s contract was made on the grounds of the partners facing disciplinary charges and the external audit of VBS Mutual Bank.
“[The supreme audit institution] is one of the tenets that have anchored this organisation for over 100 years, and we encourage all our employees and contracted audit firms to conduct themselves in a manner that will not erode this long-standing legacy,” he said adding that the termination of the contracts is not a “judgement on the capabilities or integrity of the professionals that work in the firms” but the recognition of the “significant reputation risks” that an association with the companies could carry.
KPMG has been under pressure following the resignation of 9 senior executives over the Gupta-linked accounts, the SARS report and the reduced trust from its biggest customers who want all the work the firm has audited for them reviewed.
