KPMG SA is facing a triple shock to add to its already battered reputation.
So said Wiseman Nkuhlu, executive chairperson of the beleaguered auditor, in a note written this week to former employees of the auditing firm.
KPMG spokesperson Nqubeko Sibiya confirmed that Nkuhlu had sent a letter – of which City Press has a copy – via email to KPMG’s former employees.
“That letter was only supposed to go to KPMG alumni,” he added.
The triple shock that Nkuhlu identified derived from the following:
. The publication of the SA Reserve Bank’s explosive forensic report into the failed VBS Mutual Bank last month, in which KPMG was censured for signing off on VBS’s financial statements;
. The news this week that Nedbank had dumped KPMG as its auditor; and
. The soon-to-be released report by Advocate Dumisa Ntsebeza, who led an independent inquiry established by the SA Institute of Chartered Accountants into the work performed by KPMG SA staff for Gupta-linked entities and the work they did for the SA Revenue Service on its so-called rogue unit.
“This [the report by Ntsebeza] is unlikely to be positive for the firm as its focuses on past events that took place prior to us having taken the remedial steps discussed in more detail below,” Nkuhlu said.
“What happened at VBS is shameful, not least for the considerable distress caused to many customers of the bank … We are acutely aware that the report includes serious findings concerning the conduct of a former KPMG SA partner.
“We do not condone fraudulent behaviour of any sort, and it is of the greatest regret that KPMG SA is in any way associated with what went wrong at VBS,” Nkuhlu added.
“We believe it is crucial that the matter … is fully investigated. We will … cooperate fully with any investigations undertaken by the authorities or judicial bodies that flow from this report.
“As regards [former KPMG partner] Mr [Sipho] Malaba, we want to make clear that the firm in no way condones his behaviour.
"He was dishonest in his interactions with the firm and appears to have been dishonest in his dealings with VBS.
“We understand the Independent Regulatory Board for Auditors and [Saica] are investigating Mr Malaba, as are the Hawks, and that he is also likely to face criminal charges for this conduct.”
The forensic report into the collapse of VBS, compiled by Advocate Terry Motau and Werksmans Attorneys, found that Malaba, a chartered accountant and KPMG’s engagement partner on the 2017 VBS audit, obtained “very substantial facilities” from VBS that could not be “regarded as arm’s length borrowings and were not declared to KPMG”.
“He gave an unqualified audit opinion in circumstances where he knew the financial statements were misstated. He also gave a regulatory audit opinion which he knew to be false,” the report found.
“Malaba’s attempt to deny knowledge of, first, the extent of the cash hole and, second, any wrongdoing on his part, is both unfathomable and unsustainable,” the forensic report found.
The report also found that Malaba received a “gratuitous payment” for almost R34 million from VBS.
News24 has reported that Malaba, who left KPMG in March 2017, has threatened to launch a court challenge against the findings in the forensic report.
Nkuhlu said in his note that KPMG had implemented remedial actions in an attempt to restore its reputation.
“Part of the reason I accepted this challenge was based on a sense of duty, as a proud member of the profession, to stand up and do something about the growing examples of wrongdoing in the profession and commerce more widely.
“One of the reasons I am here as KPMG SA’s chairman is because I believe that it is not always prudent and in the best interests of the economy and society to force companies who have fallen short to close down.
“Yes, the firm made a number of serious mistakes and has paid heavily,” he wrote.