November 15, 2018

KPMG South Africa Calls in Reinforcements, Is Dumpster Fire

KPMG South Africa VBS Mutual Bank

Uh oh:

KPMG LLP’s South African unit is flying in trouble shooters from around the globe and hurriedly meeting clients to stem any further loss of business after becoming embroiled in three evolving scandals.

Let me jump in here to say that I think I’d make a fine accounting firm troubleshooter. A Big 4 Mr. Wolf, if you will. I would appear at the door of the troubled firm and politely give orders to blood-soaked executives and smoke cigarettes in their offices while they carry out my instructions. And then I would spray them off with a hose and jet off to the next problem.

The problems that KPMG South Africa is having, though, woo boy. These clowns are doing a number on themselves:

Over the past eight months, the auditor issued a public apology for work done for the politically connected Gupta family, withdrew the findings of a report about the country’s tax authority, and interrogated staff who signed off on VBS Mutual Bank’s accounts before it failed. In meetings over the weekend in Johannesburg, directors came up with three ways to convince its customers that the audit firm still deserves its fees. That didn’t stop it losing one of its biggest clients on Tuesday, the government’s Auditor-General.

Those three things are: 1) Auditing its entire staff every two years; 2) Reviewing the quality of past audits and 3) Setting up a hotline for employees to report wrongdoing.

“We’ve reached the breaking point,” Chairman Wiseman Nkuhlu told reporters. That doesn’t sound like a Big 4 Chairman that’s had adequate media training. I have it on good authority that the U.S. firms stick their executives in a room, set it ablaze and lock in the door until they calm down and say, “This is fine” to prepare them for occasions such as this.

Anyway, more South African banks are said to be discussing their relationship with KPMG, especially after the VBS failure. So, yes, it could get worse!

[Bloomberg]

Image: iStock/Baloncici

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Here in the states, the big sexy fraud gets all the attention but there is plenty of small fraud to go around. Plus, the bright side is, we’ve haven’t seen anything yet:

“These figures are bad, but the worst is yet to come,” Hitesh Patel, a partner at KPMG, said. “It will be a number of years before the impact of the recession fully feeds through into the fraud statistics.”

So our advice would be for any of you that are nervous about layoffs, look into getting transferred to the forensic accounting practice. You won’t be out of work any time soon.
Record total of fraud cases in court – and worse to come [FT.com]

Ernst & Young Is Here to Help (For a Small Fee)!

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And because E&Y is solid like that, the firm is billing out partners and directors at discounted rates ($775/hour). I mean, ’cause, let’s face it, this thing’s a mess and E&Y is going to be working hard, working late, working weekends.
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