Carrim: Risk of losing operating licence not enough to punish auditors

Yunus Carrim asked the regulator’s Chief Executive Bernard Agulhas whether he was allowed to refer cases for prosecution.

FILE: Yunus Carrim. Picture: GCIS

CAPE TOWN – The Chairperson of Parliament’s Standing Committee on Finance wants auditors found guilty of wrongdoing by the industry watchdog to face prosecution in court.

During a meeting between lawmakers and the Independent Regulatory Board of Auditors (IRBA) on Tuesday, the committee’s chairperson Yunus Carrim said the risk of losing a licence to operate is not enough to keep auditors in check.

One of the regulator’s high-profile cases is an investigation into KPMG’s audit of the Gupta-owned Linkway Trading, a company that played a crucial role in allegedly channelling public funds from the Free State government to pay for a lavish Gupta family wedding at Sun City in 2013.

Carrim asked the regulator’s Chief Executive Bernard Agulhas whether he was allowed to refer cases for prosecution.

“And we’d urge Agulhas to consider in any matter before you that they proceed and referring the matter for an investigation into the SAPS for possible prosecution by the NPA and good luck with that.”

Agulhas responded.

“Thank you chair on your recommendation, they are dearly noted.”

The state-funded regulator has the power to register, monitor and sanction auditors. But it concedes that fines of around R200,000 are not enough to deter poor conduct.

Carrim says the committee will have to wait for the IRBA for auditors to conclude its investigation into KPMG before starting their own.

He says the board has better capacity and skill to investigate the firm's conduct from an auditing perspective.

Carrim says Parliament will in the meantime look at what they can do within their mandate to deal with KPMG’s role.

“They’re legally mandated to investigate these issues. They have the capacity and skills and they will finish their report it seems to me before we begin to look at our role in respect of the auditors of KPMG in this regard.”

Meanwhile, Agullas says it will broaden its investigation into the conduct of KPMG to possibly include the auditing firm’s investigation of the Sars so-called rogue unit.

“We called for a meeting with the new leadership locally but also the global leadership and after our meeting, they did actually look into the matter and tried to cooperate a little bit better, which they have been doing.”


Meanwhile, the IRBA on Tuesday told Parliament that KPMG has not fully cooperated with its investigation.

The regulator was responding to a question from the Democratic Alliance (DA) about whether it had received all of the documents it requested from the auditing firm for purposes of its probe.

Although KPMG cut ties with Gupta-owned businesses last year, the firm’s 2014 audit of Linkway Trading is now under the microscope after leaked emails exposed a cosy relationship between KPMG’s former CEO and the influential family.

Agulhas told Parliament’s Standing Committee on Finance that KPMG was initially not forthcoming with information, but the situation has since improved, barring some outstanding documents.

“After we have met with leadership, the local leadership and the international leadership, they have given us the commitment that they will cooperate.”

According to DA Member of Parliament David Maynier, Agulhas’ explanation suggested KPMG was not fully cooperating.

“Would you agree KPMG South Africa has not fully cooperated, yes or no?”

Pressed by Maynier for a short answer, Agulhas responded and said: “In terms of the way that honourable Maynier described the question and posed the question, the answer is no.”

KPMG audited Linkway Trading, a company allegedly involved in the diversion of public funds from the Free State government to pay for a lavish Gupta family wedding.

The auditors that attended the wedding are also under investigation.

Meanwhile, chairperson of Parliament's Standing Committee on Finance says the committee is not equipped to carry out a full-scale investigation into intelligence and auditing matters in the KPMG scandal.

Carrim says because the report involves both intelligence and auditing matters, the intelligence committee would have to be involved.

(Edited by Leeto M Khoza)