04 May 2018
KPMG’s scandal-hit South African arm lost another major client on Thursday when Barclays Africa Group (BGAJ.J) dropped it as joint auditor, raising questions about the firm’s future.
Barclays, one of KPMG’s major financial customers and South Africa’s second-biggest lender by market value, joins more than 10 other clients, including the government and broker Sasfin (SFNJ.J), to break ties with KPMG since 2017.
However, in some rare good news for KPMG, Nedbank Group (NEDJ.J) said it would reappoint it as one of its joint auditors for 2018, as it was required to have the same auditor as its parent companies, Old Mutual Plc (OML.L) and Old Mutual Ltd.
KPMG said it was disappointed by, but accepted, the move by Barclays, and would comment later on Nedbank’s decision.
KPMG’s troubles began over work it did for a company owned by the Gupta family, who are alleged to have used their links to former president Jacob Zuma to amass wealth.
A KPMG inquiry found flaws in work it did for the Guptas, who along with Zuma deny any wrongdoing, and the national tax agency. The auditor has said it is cooperating with authorities and addressing its shortcomings.
But its woes deepened after it was revealed in April that two top KPMG auditors failed to disclose loans from VBS Mutual Bank, which they were auditing, prompting South Africa’s Auditor General to say that month he would terminate all government contracts with KPMG.
This revelation also proved to be the last straw for Barclays Africa, whose board had proposed at the end of March that KPMG be reappointed as its joint auditor along with EY at a shareholder meeting later in May.
“Subsequent to the release of our AGM notice, the board has carefully evaluated the on-going and more recent developments and decided that it is no longer able to support the reappointment of KPMG,” Barclays said in a statement.
– By Tiisetso Motsoeneng, Ed Cropley of Reuters, 3 May 2018
– Link to Reuters.
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