Financial services group Sasfin has dropped auditing firm KPMG as an independent sponsor, and will review all future engagements with the group, effective immediately.
“In view of the well-publicised concerns recently raised with regard to KPMG as well as Sasfin’s commitment to good governance in respect of auditor independence and auditor tenure, Sasfin has decided to put its audit out to tender,” it said.
KPMG has been a joint auditor for Sasfin for 18 years.
It made the announcement on Tuesday (19 September), one day after the South African Revenue Service laid into KPMG, threatening to sue it and get it blacklisted in the country for “unethical, immoral and illegal activity”.
On Friday (15 September), KPMG released a statement in the wake of the Gupta scandal, wherein eight senior executives of the South African branch, including CEO Trevor Hoole, resigned over poor business practices relating to Gupta-linked companies.
The firm has been accused of turning a blind eye to alleged money laundering taking place between Gupta-linked companies, which allowed the family to pay for a R30 million family wedding in 2013.
As part of the Friday briefing, the auditing firm also announced that it was withdrawing a controversial report into the “rogue SARS unit”, which it said did not pass the company’s ‘quality standards’ and could not be relied upon.
SARS accused the firm of trying to ruin its reputation by making it look like it was on a witch-hunt with the report, and threatened to take legal action that would, among other things, result in the auditing firm being blacklisted from working for government, and also have all its work over the last 10 years reviewed.
Despite its attempts to undo the damage caused by doing business with the Gupta family, KPMG’s reputation has been tarnished by the saga, with two investigations – one by the Independent Regulatory Body for Auditors (IRBA) and another by Companies and Intellectual Properties Commission (CIPC) – still ongoing, while several big firms are reconsidering their relationship with the auditor.
Sygnia dropped KPMG as soon as the Gupta wedding scandal came to light, while Absa and Investec have both put their relationship with the firm on review.
Old Mutual and Nedbank said they are actively engaging with KPMG on the matter, and the board of the Institute of Directors in Southern Africa (IoDSA) has suspended its relationships with the company, pending an outcome to the investigations.