Cape Town - The audit regulator announced on Saturday that it was launching an investigation into global consultancy KPMG's audits of a company allegedly at the centre of the Gupta wedding scandal.
The latest explosive #GuptaLeaks expose shows how the Free State provincial government largely picked up the tab for the “event of the millennium”, as it was described by KPMG Africa then-chief executive Moses Kgosana. He was a guest at the lavish affair.
- READ: #GuptaLeaks: The Dubai Laundromat – How millions milked from Free State government paid for Sun City wedding
The amaBunghane and Scorpio investigation lays bare an intricate web of money transfers and laundering in 2013 through the Free State government, dairy firm Estina and a host of Gupta-linked companies, including Oakbay Investments, the Indian family's South African holding company, and Linkway Trading, a Gupta-owned company in South Africa.
KPMG were the auditors of Linkway Trading, the company which played a crucial role in allowing the diversion of cash earmarked for the Free State’s Vrede dairy project to reimburse most of the wedding expenses – R30 million to be exact, the money trail showed.
Audit watchdog IRBA, the Independent Regulatory Board for Auditors, confirmed in a statement on Saturday that it would initiate a mero motu investigation into the 2014 audit of Linkway Trading.
IRBA CEO Bernard Agulhas said while the regulator had not received a formal complaint, it had nevertheless initiated its own probe into the audit of Linkway Trading by KPMG for its audit in 2014.
This is despite the fact that KPMG terminated its 15-year relationship with the affected companies in 2015.
IRBA has the power to initiate such investigations without having to receive a formal complaint.
"It is important that we take seriously allegations in the public domain, which are in the public interest,” said Agulhas.
Notices have been issued to the auditors and the audit firm has also been informed, he said.
Bloomberg reported KPMG’s clean audit of Gupta family companies is at odds with its description of itself on its website as a market leader in money laundering prevention.
Kgosana, KPMG South Africa’s then chief executive officer, told Bloomberg by phone on Friday that the auditor hadn’t known about the payments. It would have been obliged to raise them with IRBA had it known, he said.
Agulhas said IRBA has since December 2015 been rolling out measures to increase transparency, improve independence and enhance audit quality. Among these were the mandatory disclosure of audit tenure in the independent auditor’s report to enable shareholders to consider the length of relationship between auditor and company in light of the need for independence, as well as the new requirements to disclose key audit matters and how these were resolved.
"The most recent measure to strengthen independence is the requirement for mandatory audit firm rotation every ten years, which is effective in April 2023,” he said.
- VISIT: #GuptaLeaks special report
SUBSCRIBE FOR FREE UPDATE: Get Fin24's top morning business news and opinions in your inbox.