Following a string of high-profile corporate scandals, the Bank of England’s Prudential Regulation Authority (PRA) has raised questions with financial institutions and other regulators to see whether there were risks to KPMG’s viability.
Speaking to the Financial Times, three people involved in the discussions said the PRA had sought assurance on whether KPMG’s existing clients were planning to cut ties with the firm or whether it was struggling to win new business following heavy criticism of its work in South Africa and for British outsourcer Carillion, which collapsed in January.
The report noted that the regulator was also keen to understand whether KPMG’s problems in South Africa — where it has haemorrhaged clients and cut hundreds of staff over the past 12 months due to its role in a sprawling government corruption scandal – could jeopardise the rest of its international network.
In June KPMG South Africa announced it would be reshaping its business – including a number of retrenchments, along with further support from KPMG International to strengthen leadership capacity.
KPMG is currently under investigation by the Independent Regulatory Board for Auditors in relation to its audits of several Gupta companies and has been dropped by several firms in recent months, including Finbond and the South African Institute of Chartered Accountants’ (SAICA) last week, and ABSA and Redefine Properties last month.
“These changes follow a strategic review of the firm’s activities and take into account recent client losses and current levels of demand for certain services,” it said in a statement.
“They are the latest in a series of initiatives announced by the firm in recent months to support its drive to restore KPMG’s strength in South Africa.”