Scandal-hit KPMG SA upbeat about restored reputation

By Roxanne Henderson

(Bloomberg) – KPMG South Africa is winning back customers and no longer bleeding staff as the auditing firm rebuilds an image tarnished by a series of scandals.

“The market is beginning to acknowledge and accept the changes that we have made,” Chief Executive Officer Ignatius Sehoole said in an interview at KPMG’s Johannesburg office. More companies no longer fear they are “taking a risky bet by doing business with us. Everyone is also concerned about their own reputation”.

The firm has secured a number of new mandates in industries such as telecommunications, mining and information technology, he said. KPMG has spent the past two years increasing the independence of its board, adding layers of security to its auditing processes and reviewing the risk profiles of clients, the CEO said.

A third of KPMG South Africa’s R3bn ($204m) in revenue has evaporated since late 2017, when the company came under increasing fire for work done for a politically connected family accused of plundering the South African government’s coffers. The company also audited a bank that collapsed due to alleged fraud and published a misleading report on the nation’s revenue service.

The company’s workforce has dropped by about 1,000 over the past two years to roughly 2,000 people after clients including Absa Group, the country’s third-largest bank, South Africa’s Auditor-General and clothing retailer The Foschini Group terminated KPMG as their auditors. The firm’s push to reform has seen it part ways with even more clients, while also turning down some new assignments that fall outside its revised risk assessment criteria, Sehoole said.

“In that process we are probably seen to be quite schizophrenic,” he said. “We lost quite a number of clients so we are in a space where it is expected that we are looking for more. We are heartened by the fact that our remedial actions are starting to be recognised in the important quarters, by old and new clients, industry bodies, government and by civil society.”

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