KPMG South Africa has published its first integrated report which aims to provide a transparent account of the firm’s efforts to ‘fundamentally’ change itself over the past 18 months following a range of criticisms, a ban from public sector auditing, and a loss of clients.
Following the high profile Gupta scandal, KPMG has been taking measures to try and rebuild the country’s trust in the firm. This included donating the fees it earned from the audits of Gupta-related entities to not-for-profit organisations and civil society organisations promoting ethical leadership and the appointment of a new CEO from outside of the firm.
The report highlights KPMG’s reforms to governance and leadership, including the introduction of independent non-executive members to the board, re-evaluating its client portfolio and existing relationships which do not align with the firm’s risk assessment criteria, and establishing a Public Interest, Social and Ethics Committee in early 2018 to ensure that ethics and the public interest remain a priority for the firm.
In 2018, the firm reduced its headcount from 3,298 to 2,317. The report acknowledged that this was a result of generally higher levels of attrition, but has also been part of deliberate action by the firm to reshape the business ‘in line with current levels of market permission’.
The report said that this was one measure of reshaping the firm through the closing of a number of smaller regional offices and also included a refocus on advisory services and a scaling down of internal business support.
KPMG South Africa chairman Wiseman Nkuhlu said: “KPMG is today a profoundly different firm. Far-reaching changes have been introduced to governance, to leadership, to risk management, client engagement and client continuance as well as audit quality controls. Our ongoing task is to rebuild trust in KPMG both internally and externally.
“Quality and ethics underpin our efforts to rebuild that trust. These are not mere words. They are wired into our operating practices and supported by the changes we have made to our governance framework.”
He added: “I am excited about the prospect for further, accelerated renewal under our new CEO Ignatius Sehoole’s leadership when he joins the firm in May. As we look forward with a sense of excitement, we do so also with a sense of humility.
“The past is still close at hand and we will never forget the lessons we have learnt. We believe that the changes we have made have earned us a second chance and an opportunity to rebuild the firm.”
However, KPMG South Africa could be potentially facing renewed unwelcome attention as one of its clients, agriculture business Tongaat Hulett issued a cautionary announcement on the Johannesburg Stock Exchange.
Tongaat Hulett, whose internal and external auditors are KPMG and Deloitte respectively, said in a statement that an ongoing financial review of the company has ‘revealed certain practices which will require further examination and which, if verified, might require remedial actions , including , in some instances, assessing the impact on previously reported financial information.”
The company has brought in PwC to assist with its review.
While KPMG South Africa are working to rebuild their reputation within the country, if failings at Tongaat Hulett are found to be the firm’s responsibility, KPMG could find itself to be in hot water once again.