African financial services company Old Mutual, which has a listing on the London Stock Exchange, has announced it has appointed Deloitte as a joint auditor alongside KPMG, which has audited the company for almost two decades but has recently been involved in a string of scandals in South Africa
In a statement, the company said: ‘Old Mutual has been continuously engaging with KPMG International and KPMG South Africa on concerns regarding the ongoing challenges raised in their South Africa business.
‘KPMG has noted and discussed with us clear actions to address these challenges.
‘Until these challenges are resolved, Old Mutual believes it is prudent to appoint a joint auditor.’
KPMG South Africa has become involved in controversy over its audit work for companies connected with the Gupta family. This is now under investigation by the Independent Regulatory Board for Auditors (IRBA). Subsequently, two partners were disciplined over audit failures at a bank, and the auditor general then banned the firm from handling any public sector audits. It has also lost a number of clients, including Barclays Africa, Finbond and the South African Institute of Chartered Accountants (SAICA), which has also launched an independent inquiry.
The firm has announced a major restructuring, cutting employee numbers by around 400 and bringing in senior KPMG partners from across the firm’s international network in a bid to reshape the business.
KPMG has been Old Mutual’s auditor since 1999, and was paid £18.1m for audit services last year, plus an additional £1.8m for tax compliance, audit-related assurance, corporate finance transactions and other non-audit services, according to the 2017 annual report.
The report stated the audit committee had spent ‘significant time discussing the implications of significant and widespread concerns over certain work carried out by KPMG in South Africa relating to audits of Gupta-related entities and an investigation on behalf of the South African Revenue Service’.
Old Mutual said it had held discussions with KPMG senior management at global, UK and South African level covering contingency plans in the event that KPMG South Africa became unable to carry out its work on the group’s South African operations in the short or medium term. It had also asked for a senior UK partner to review its 2017 audit, with the review reporting this was satisfactory. KPMG South Africa said: ‘We respect Old Mutual’s decision and will work with the new joint auditor to continue to deliver the highest quality audit.’
Report by Pat Sweet
