Johannesburg – KPMG SA was first alerted that all was not well with the accounts of Gupta firms it audited when the press started reporting on the landing of the Gupta’s wedding aircraft at Waterkloof Air Force Base in April 2013.
The embattled auditor’s South African CEO Nhlamu Dlomu told Fin24 in an interview that an accumulation of “red flags” in the Gupta’s accounts – coupled with media reports – eventually compelled the firm to cut ties with companies linked to the family.
The Guptas have been at the centre of allegations of state capture through their friendship with President Jacob Zuma and business partnerships with Zuma’s son Duduzane. Both the Guptas and Zuma have denied any wrongdoing.
Dlomu was promoted to the position of CEO on September 15 following the resignation of Trevor Hoole.
Dlomu said that, although she was not personally involved in the details of the work KPMG did for the Gupta firms, from what KPMG reported to its SA management team the “red flags” were not only related to what KPMG picked up in the companies’ audit files.
“It was what was happening outside,” she said.
Media coverage of the Gupta’s chartered jet landing was definitely one of the first warning signs.
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“At the time there was a lot of publicity in the media, journalists were writing stories on the plane landing,” she said. “There were specific incidents where this family got highlighted in the media, [another] example of a red flag.”
“At that point, you do ask yourself, what could be happening? And factually what do I need to understand?”
She said an accumulation of red flags over time could help an auditor in making the decisions to dissociate itself from a client.
“There were things that happened during the servicing of the client that became real red flags, some of which I can’t go into because it is confidential information and I don’t have enough facts,” she said.
Not met with SARS
South African Revenue Service (SARS) commissioner Tom Moyane earlier lashed out at KPMG, expressing his dissatisfaction in a letter to Parliament on how the firm handled its controversial investigative report into the so-called SARS ‘rogue unit’.
In a media briefing, Moyane said that SARS would be taking legal action against KPMG, following its decision to retract parts of its report.
Dlomu said KPMG had indicated that the firm intended to meet with SARS, but to date hadn’t been able to.
“We haven’t had that discussion,” he said.
Losing clients
Fin24 understands that KPMG SA has lost around 3% of its clientele. Foschini, Munich Re of Africa, Sasfin, Sygnia Asset Management, AVI, Hulisani and Telkom are some of the companies that have either stopped using the services of, or refrained from assigning new work to the auditors.
“It takes a lot of time to build the relationship [with a client],” she said. “Each and every client of ours matters to us.”
It was safe to say the majority of clients were sticking with KPMG, she added. “But they have asked questions to ensure they are happy with our quality.”
Dlomu said KPMG SA had not identified job cuts as a result of loosing clients. The auditor was focusing on retaining clients at the moment, rather than the clients it had lost. “If we are to retain jobs, we must retain our clients,” she said.
Repairing the trust
On Monday KPMG announced its new executive leadership team, just short of a month after its former top management structure was cleared out.
Dlomu said she hoped the new leadership structure would restore public trust.
She said employees were “hypersensitised” to the failures of the past. “We are doing things differently now.”
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