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KPMG drops non-audit services from its menu for listed clients

Audit firm, KPMG, will no longer offer non-audit services to its JSE-listed clients, in an attempt to repair its tattered reputation, and that of the profession in general.
KPMG drops non-audit services from its menu for listed clients

In 2017, the firm admitted to fabricating a report on a non-existent rogue unit within the South African Revenue Unit (Sars), working for the Gupta family and covering up irregularities in auditing the collapsed VBS Mutual Bank. The fallout resulted in at least eight of its executives, including CEO, Trevor Hoole, resigning. KPMG was also fired by many of its big corporate clients.

KPMG took a number of reparative steps after the scandal, including appointing independent non-executive directors, and doing away with partners at board level. It also promised to contribute to compensation to Sars employees implicated in its misleading report.

“The provision of non-audit-related services to our audit clients, while technically permissible under current laws, regulations and International Federation of Accountants principles, understandably creates challenges in the public perception of auditor independence,” KPMG SA chief executive Ignatius Sehoole said in a statement.

Saica reaction

Breaking up audit and non-audit operations in the interest of enhancing transparency and improving auditor independence is something that has long been a contentious issue in the marketplace and debate among stakeholders in the audit and broader accounting profession.

“The South African Institute of Chartered Accountants (Saica) welcomes the decision taken by KPMG as it will no doubt remove any perception of conflicts of interest with their audit work for listed entities, and this is an important step in the journey to the restoration of trust in the profession.

"Robust engagement among all stakeholders in the profession remains necessary and all stakeholders have a role to play. Saica will continue to engage with affected role-players to ensure not only the reputation of members of the audit profession is restored and upheld, but that the public gain confidence that the audit profession operates in the public interest," says Saica CEO, Freeman Nomvalo.
Read more: KPMG, rogue unit

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