KPMG CEO Trevor Hoole, chief operating officer Steven Louw, chairperson Ahmed Jaffer and five senior executives have resigned and the auditor has withdrawn its South African Revenue Service (SARS) “rogue unit” report, local media says.
The firm however confirmed in a statement that Nhlamu Dlomu has been appointed to succeed Hoole.
“Steven and I have taken the decision to step down, in the best interests of the firm as it rebuilds and moves forward. I absolutely understand that ultimate responsibility lies with me.
“KPMG South Africa is a firm of hugely talented people and I believe it is the right thing for me to stand down and allow a new CEO to restore public trust and build a firm that once again sets the standard for quality and ethics,” said Hoole.
The following partners will be leaving the firm:
•Mike Oddy, head of audit and board member;
•Muhammad Saloojee, head of tax and board member;
•Herman de Beer, former head of forensic and board member;
•John Geel, head of deal advisory; and
•Mickey Bove, risk management partner for deal advisory.
“KPMG South Africa has decided to take disciplinary action seeking dismissal in relation to Jacques Wessels, the Lead Partner on the audits of the non-listed Gupta entities,” the firm said.
The action follows an investigation by KPMG International, which was launched after pressure mounted on the auditor as a result of the #GuptaLeaks.
The investigation looked into its work on behalf of the Guptas as well as for SARS. Its SARS report was used by the Hawks and the National Prosecuting Authority in launching an investigation into the unit, with former finance minister Pravin Gordhan being implicated in the report. However, KPMG now said it was wrong.
“To be clear, the evidence in the documentation provided to KPMG South Africa does not support the interpretation that Mr Gordhan knew, or ought to have known, of the ‘rogue’ nature of this unit,” it said.
“KPMG South Africa has contacted SARS and offered to repay the R23m fee received for the extensive work performed, or to make a donation for the same amount to charity.
“In addition to the R23m fee for the SARS report referred to above, KPMG South Africa will also make a donation of R40m into education and anti-corruption not for profit organisations. The R40m figure is based on the total fees earned from Gupta related entities to which KPMG South Africa provided services from 2002.”
Gordhan previously slammed KPMG for the report. “It’s allegations that have no foundation. They are based on a leaked document that even I haven’t seen,” he said.
“How would you like to be accused of something on the basis of a document that has not been put to you or… questions that have not been put to you, on the basis of no opportunity having been put to you to say what the facts of the matter are? One thing I would like to request from you is to stop reporting on rumours.”
The unit was accused of running a brothel and spying on President Jacob Zuma, among other things.
A #GuptaLeaks exposé in June revealed how the Free State provincial government largely picked up the tab for a lavish Gupta family wedding at Sun City. KPMG was allegedly involved in siphoning taxpayer money to pay for the affair.
“With respect to the audits of the Gupta entities, it is evident from the investigation that the audit work in certain instances, including Linkway Trading Pty Ltd, fell well short of the quality expected, and that the audit teams failed to apply sufficient professional scepticism and to comply fully with auditing standards,” KPMG said in its statement.
“Despite the deficiencies in the audit work, KPMG International found no evidence of dishonesty or unethical behaviour on the part of the audit partners and audit teams working on the audits for the Gupta group of companies. However, the investigation established that management of many Gupta entities responded misleadingly and inadequately to audit teams’ enquiries about the nature of related party relationships and the commercial substance of significant unusual transactions.
“While the firm’s last audit opinions for the Gupta group of companies were for the year ended 28 February 2015, KPMG South Africa should have resigned as auditors earlier than March 2016. KPMG South Africa regrets that its association with the Guptas and their business entities went on for far too long.”
The Guptas, meanwhile, have yet to face charges over allegations of corruption at the country’s state-owned companies, in what is called state capture. They have been accused of using their close ties with Zuma to create a criminal syndicate across these companies.
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