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KPMG ordered to produce original SARS memo

Publish date: 09 October 2017
Issue Number: 746
Diary: IBA Legalbrief Africa
Category: South Africa

KPMG has been ordered to provide the memo for the original briefing it got from the South African Revenue Service outlining the scope of the audit firm’s mandate to investigate issues such as the existence of a ‘rogue unit’ at the tax agency, says a Business Day report. MPs demanded that KPMG SA, which has won about 1 301 government projects, stop bidding for lucrative state work. And Attorney-General Kimi Makwetu said his office had decided to reduce work awarded to KPMG until the Independent Regulatory Board of Auditors (Irba) completed its inquiry into the audit firm. New KPMG CEO Nhlamulo Dlomu, flanked by senior management, came in for hard questioning during a Scopa sitting in Parliament last week. But, notes Business Day, not a single ANC MP showed up at the start of the marathon sitting, while Nyami Booi recused himself. One ANC MP attended the latter part of the meeting. About a month ago, Booi appeared next to SARS Commissioner Tom Moyane, when the tax authority provided its response to KPMG’s retraction of the recommendations in its report on the ‘rogue unit’. The KPMG officials at last week’s sitting could not provide straight answers to pointed questions from MPs, leading to a series of embarrassing admissions. KPMG was also forced into a corner when its officials were asked what they meant when they said KPMG had ‘complied with all reporting requirements’. Pressed on this, the officials said they could not provide details of any criminal complaints filed. Dlomu said KPMG would co-operate with Irba during its inquiry. DA MP David Maynier said he was not convinced by Dlomu and director Gary Pickering’s assurances to Parliament that there were no systemic issues at KPMG. ‘My hypothesis is that there is, in fact, a systemic problem at KPMG SA,’ he said.

Full Business Day report (subscription needed)

Dlomu promised sweeping changes to ensure KPMG did not repeat ‘greatly disappointing’ work it did for business friends of President Jacob Zuma, says a Moneyweb report. She said an announcement would be made in the coming days about an independent inquiry into its work at firms owned by the Guptas. ‘I have personally been greatly disappointed by how far we have fallen short of the standards we set ourselves,’ Dlomu told Scopa. ‘I am determined that these mistakes do not happen again, which is why we have already made a number of changes. I am leading other reforms.’ Dlomu said any person found by the investigation to have failed to do their job would be held accountable. She said the changes would also strengthen governance and ensure decision-making was more centralised.

Full Moneyweb report

Trouble may be brewing for KPMG in Botswana. The country’s accounting regulator said it was closely following a lawsuit in which KPMG local unit is being sued by the liquidator of a failed bank, notes a Fin24 report. KPMG Botswana is accused of signing off the financial statements of Kingdom Bank of Africa Limited as a going concern even though the lender’s liabilities exceeded its assets as far back as 2011 before its liquidation in February 2015, according to court filings. In its response, the auditing firm said the bank was solvent at the end of 2013 and had enough reserves to last another 12 months while it underwent a reorganisation. The Botswana Accountancy Oversight Authority became aware of the court case through media reports and is monitoring developments, Ndulamo Ntopo, a spokesperson for the regulator, said. The authority hasn’t received any complaints regarding KPMG Botswana’s conduct, she said. KPMG acted negligently by failing to report the true situation of the bank’s financial position to either the lender’s management or to the Bank of Botswana, John Little, the bank’s liquidator, said in court papers.

Full report on the Fin24 site