Monday, October 9, 2017

Telkom suspends new business with KPMG South Africa

Telkom, South Africa's largest landline operator, won't award any new business to KPMG's local unit pending the outcome of an investigation into the firm by the country's accountancy body.

Any contracts underway with the auditor and consulting firm will be completed and their expiration dates will stand, the Pretoria-based company said in an email to all staff seen by Bloomberg.

A further decision will be made when the probe by the Independent Regulatory Board for Auditors into work for the politically connected Gupta family has been concluded. The news was first reported on Monday by Johannesburg-based Business Report.

"The recent media reports surrounding KPMG South Africa and allegations around the conduct of some of its employees have been met with great concern," the phone-services provider told staff. "Telkom conducts a substantial amount of business with KPMG and has taken the events very seriously."

The IRBA started its investigation after KPMG released the findings of an internal report into work done for the Guptas, who are friends with President Jacob Zuma and have been accused of wielding undue influence over state contracts and cabinet appointments. The firm's probe found that the work fell "considerably short" of its own standards. The Guptas and Zuma have denied wrongdoing, while KPMG's investigation didn't find evidence of illegal behavior or corruption.

"We appreciate the fact that Telkom will wait until the investigation by the IRBA has been concluded," KPMG spokesman Nqubeko Sibiya said in an emailed response to questions. "We ask our clients and the public to wait for the outcome of the IRBA investigation and the independent inquiry."

Standard Bank Group Ltd., Africa's largest lender, said on Friday it would terminate KPMG's services if the auditor didn't provide "satisfactory explanations" and make clear that action had been taken to avoid repeat offences. Munich Re of Africa, Sasfin Holdings Ltd., Sygnia Asset Management and Hulisani Ltd. are among companies that have already stopped using the accountancy firm. AVI Ltd. said Friday it will stop using KPMG once its 2017 financial year-end audit is completed.

The scope and estimated duration of KPMG's independent inquiry are due to be announced on Thursday, and the findings will be made public.

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