Reserve Bank notes KPMG developments

Thursday, April 19, 2018

The Reserve Bank has noted developments involving auditing firm KPMG, it said on Thursday.

“The Reserve Bank has noted the recent developments regarding KPMG and in particular its audit of VBS Mutual Bank. The SARB continues to engage with KPMG as well as with banks that use KPMG as their auditors,” it said.

The central bank stated that its interest in the KPMG matter stems from a public policy perspective, arising from the SARB’s mandate to ensure the soundness and stability of South Africa’s financial system.

“The SARB’s view is that a capable and competitive audit and auxiliary services industry is essential for the maintenance of a healthy business environment. The choice of auditor remains that of a firm, with due regard to the firm’s need and commercial interest as well as the capacity and quality of the audit firm,” said the Reserve Bank.

In addition, the Reserve Bank said the Prudential Authority’s regulation of this process largely deals with the capacity and quality assurance provision of the audit firm.

“We do not interfere in the process of who an institution appoints as their auditor,” said the bank.

The Prudential Authority which operates within the administration of the South African Reserve Bank, is responsible for the prudential supervision of banks, insurers, co-operative financial institutions, financial conglomerates as well as certain market infrastructures and for ensuring that these institutions are managed safely and soundly.

The Reserve Bank said auditors play an important role in fostering market confidence in the financial statements of financial institutions.

“The quality of these audits also provides invaluable input into the work of regulators of financial institutions. However, the role auditors play should not be seen in isolation. The robustness and integrity of audits depends to a large extent on the strength of governance and the depth of an ethical culture within a financial institution. These are issues that we monitor constantly,” said the bank.

On Tuesday, Auditor General Kimi Makwetu announced the termination of auditing contracts with KPMG and Nkonki Inc with immediate effect.

Last year, it was reported that the two companies did work for the controversial Gupta family. This resulted in several resignations at the company and the appointment of Nhlamu Dlomu as Chief Executive Officer at KPMG. 

On Tuesday, the office of the Auditor General said as the country’s supreme audit institution that audits South Africa’s public sector, the AGSA, due to the size of its audits, uses various private audit firms -- such as KPMG and Nkonki Inc. -- to audit on its behalf and to augment its auditing staff. -

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