KPMG is catching a lot of heat over work that they performed for the gupta family in south Africa. The gupta family is accused of improperly influencing government contracts. They apparently got very cozy with the President of South Africa, Jacob Zuma. After creating a great relationship with the President Jacob Zuma they then were able to make illegal profits in the billions of rand which is the south African currency.
That news has been unfolding over the past year, but the blow up around KPMG and Mckinsey has just been growing over the past week. The main controversy is that KPMG did not conduct proper audits that could have unfolded the scandal as KPMG was the auditor of Gupta family investments for over 15 years. Their were four partners that also attended a Gupta family wedding that might have been paid with taxpayer dollars.
This is a pretty huge scandal in south Africa that has destroyed at least one company and that company was bell pottinger LLP which was a pr firm. It has also impacted McKinsey consulting.
McKinsey which is a worldwide consulting firm is also getting heat for work that they did for the Guptas as well. McKinsey is facing fraud and corruption charges whereas KPMG is not
John Veihmeyer, KPMG’s global chairman, made the following statement about the incident
“I sincerely apologise for what went wrong in KPMG South Africa. This is not who we are,” said John Veihmeyer. According to John Veihmeyr KPMG undertook an investigation of their South African firm and found that there were a number of failings in reports prepared for the South African Revenue Service by KPMG south Africa.
KPMG cleared out its South African leadership on Friday September 15 after it found that work it did for firms owned by the Gupta family “fell considerably short” of its standards. It found no evidence of crimes or corruption, however. There were 8 executives that had to leave KPMG South Africa as a result of this scandal and there are other employees that are suspended or could be suspended.
The Gupta family and President Zuma have denied the allegations.
KPMG has been losing clients this week starting on September 19, 2017. One of the clients that they lost was Hulisani which is a south African investment company. They said that they decided to fire KPMG due to the reputational risk.
Another client that KPMG lost in the region was Sygnia which is an asset manager in South Africa. There are other clients reviewing their current relationships with KPMG like Barclays Africa Group and Nedbank.
In conclusion, this huge scandal seems to be still unfolding and getting worse by the day. It is increasingly getting worse for KPMG to the point where the global chairman is getting involved and having to apologize for what occurred. It is also impacting client relationships to the point where KPMG is losing their clients. This is just another huge accounting scandal for the big 4. There have been huge controversies at KPMG, EY, Deloitte and PwC recently. KPMG alone just fired their heads of the audit practice in the US for getting a heads up regarding an audit from the PCAOB. It seems that there is a serious lack of ethics and work ethics in the accounting firms that needs to be addressed. Will the accounting firms be able to address this or will scandals continue to pop up as the lack of ethics increases.