KPMG South Africa announced at the weekend the resignation of two of its partners, Sipho Malaba and Dumi Tshuma, who were recently suspended over the VBS Mutual Bank affair.
VBS Mutual Bank, the operation that hogged headlines after extending a R7 million to President Jacob Zuma to pay off his Nkandla homestead debt, is engulfed by a crisis. Its been placed under curatorship by the South African Reserve Bank and there is talk of a missing R900 million.
KPMG said both partners had faced misconduct charges connected to VBS Mutual Bank. The charges include failure by the partners to comply with the firm’s policies and procedures regarding the disclosure of relevant financial interests. Its been reported that this interest by these partners relates to loans from VBS which caused conflict of interest that was never declared.
The firm said when VBS bank recently went into curatorship‚ information arose in relation to these partners that prompted KPMG to launch an independent investigation‚ conducted by Bowmans. That investigation is ongoing and further action will be taken as appropriate.
KPMG South Africa chief executive Nhlamulo Dlomu said “This has been a very disappointing episode for KPMG. There can be no tolerance‚ however, of any conduct that compromises our reputation and we have moved decisively to deal with the situation.”
KPMG has experienced serious turbulence over the past year or so following the exposure of its role in the South African Revenue Service (KPMG) saga. This caused the firm to reshuffle its top leadership last year.
And so KPMG has issued another statement trying to arrest declining confidence. It said “Since last September KPMG has already taken significant steps to change the firm. These include changes to governance, to leadership, significant changes to improve quality and risk management and to our client portfolio and the work we do in the market.
“We recognise that each of these measures can only be part of our continuous effort to rebuild public trust. The departure from the firm this week of two partners, as part of the ongoing investigation by Bowmans into events at VBS, is a reminder how much more needs to be done to reaffirm the public’s trust in KPMG.
“We are putting quality and integrity at the heart of our mission. Everything we do – in terms of the business we do, the clients we work with, and how we do our business – will be shaped by how they serve these two principles.
“As part of this, we are implementing the following immediate additional steps:
1/ Integrity – we have commenced an expanded process of Integrity and background checks of all partners (and their spouses/partners).
The process will be coordinated by KPMG International using the expertise of an external firm and the findings will be reported directly to the Board Quality and Risk committee.
2/ Quality –a new programme of extensive quality file reviews has commenced and will run over the next several weeks. These reviews will cover all audit partners. This program will be in addition to other internal and external reviews that have been carried out to date.
“The purpose of this new program is to assess the commitment to quality and professionalism of our engagement teams. These reviews will be conducted by experienced KPMG partners from elsewhere in our network and will be overseen by a board committee of majority independent non-executive directors.
3/ Governance – we will appoint additional non-executives on the Board to ensure that independent scrutiny is built into the DNA of the firm at the highest level.
4/ Implementing a “Speak Up” program. This is an immediate, expanded initiative that will sit alongside normal whistle-blowing policies. We will be encouraging colleagues over the next 30 days to speak up if they believe they have any information of relevance to the quality and integrity of the firm’s work.
“In addition to the immediate steps outlined above, we intend to make further changes to our business. We are well advanced in thinking through these and expect to communicate further in the coming weeks,”
Dlomu said “We realise that to build a KPMG that we and South Africa can be proud of, one that has quality and integrity at its heart, we must be prepared to adopt and embrace significant change to our culture and partner conduct. Some of the steps we are taking are not easy, but we are in a position where such measures are unavoidable requirements to rebuild trust.
We are more resolved than ever to take the necessary steps to restore the firm to health. And we will not hesitate to act decisively when issues are identified.”
New KPMG South Africa chairman Wiseman Nkhulu said “We recognise that we have damaged the trust of key stakeholders and that further and deeper changes are needed to regain that trust. We must reassure the public and our clients that we are totally committed to the standards they expect. The initiatives we are announcing today, taken with extensive measures already underway, will help restore the reputation KPMG previously enjoyed. We have a responsibility and a duty to rebuild the firm, and the leaders of the firm will stand together to achieve this.”