09/03/2018 03:11 GMT | Updated 09/03/2018 04:46 GMT

KPMG’s Gupta Auditors Could Be Stripped Of Licences Soon

KPMG has drafted in leading advocate Tembeka Ngcukaitobi to lead its legal team in the first of three inquiries it is likely to face for its work for the Gupta family.

Advocate Tembeka Ngcukaitobi (L).

KPMG has hired legal firepower by drafting advocate Tembeka Ngcukaitobi onto its team as it began fighting the first of a likely three inquiries into its role in facilitating the Gupta family's empire of corruption in Johannesburg on Thursday.

The Ntsebeza commission of inquiry headed by veteran lawyer and acting judge Dumisa Ntsebeza and commissioned by the South African Institute of Chartered Accountants (SAICA) will probe whether KPMG accountants and auditors violated the industry's ethical code of conduct.

If the eight KPMG executives axed by the professional services firm for lax professional standards are now found guilty by SAICA, they could lose their licence to practice. This is a severe sanction.

KPMG is one of five multinationals, which have been tainted by their association with the Gupta family.

KPMG is also facing a lawsuit by South African Revenue Service (SARS) staff who lost their jobs after an investigation into an alleged rogue unit was used as part of the arsenal to purge them by the SARS commissioner Tom Moyane.

KPMG has subsequently recanted the report and returned R23-million it received as fees to the tax authority but the SARS executives including former deputy commissioner Ivan Pillay have still not got their jobs back.

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A general view of the KPMG building in Canary Wharf, London.

In addition to the Ntsebeza inquiry, KPMG is also facing a more muscular investigation into its conduct by the Independent Regulatory Board for Auditors and it is likely to also appear before the Judicial Commission of Inquiry into state capture headed by deputy chief justice Raymond Zondo.

KPMG is one of five multinationals, which have been tainted by their association with the Gupta family. Yesterday the software company SAP admitted it had paid R128-million to companies associated with the Guptas in order to win big government contracts. Three executives of the South African office had been axed and the company had reported itself to the US Department of Justice.

The other multinationals, which took a Gupta dive, are Bell Pottinger, McKinsey and Multichoice.

Ntsebeza's probe into KPMG is likely to be completed by the end of April. He is assisted by a heavyweight team including advocate Vuyani Ngalwana, the CEO of the Institute of Internal Auditors Claudelle van Eck, the former Accountant-General at the National Treasury Freeman Nomvalo and Bobby Johnston, the former chairperson of the Johannesburg Stock Exchange.

The SAICA probe will scrutinise the conduct of KPMG staff who are its members. KPMG is likely to testify that it believes its staff did not engage in anything illegal and that there was no corruption in its work on various Gupta accounts. But it will confirm its internal investigation's finding that a number of staff failed in their professional standards.

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Indian businessmen, Ajay Gupta and younger brother Atul Gupta.

In September 2017, KPMG sacked seven members of its C-suite for specific failures on the Gupta accounts and, in the case of senior executives, for failing in their leadership roles to ensure that appropriate actions were taken.

They will pick up the legal bills their former staff but are not representing them at any of the inquiries.

KPMG is likely to argue that three things wrong in its dealings with the Guptas. The firm's executives worked with the family for far too long even after their own staff raised questions of the probity of the account. The second is that the account managers did not exercise sufficient professional scepticism in its dealings with the Gupta accounts. And the third is that the firm believed too much when the families executives provided answers that should have made them sceptical.

The #Guptaleaks emails revealed that KPMG did not raise a red flag when the crony family passed off expenses for a family wedding as business expenses. It also found that numerous KPMG executives including former chairman Moses Kgosana had received hospitality from the Gupta family, which may be in violation of the profession's code on conflicts of interest.