Nowhere to hide for KPMG – UK probe begins

CAPE TOWN — KPMG, whose reputation in South Africa is almost terminally tarnished following its controversial "rogue unit" report that shored up Zuptoid SARS capture and its silent audit complicity with Gupta-family companies, is being probed in the UK. This follows a 2018 quality report by the UK's Financial Reporting Council, FRC, that around 50% of audits done by KPMG were below standard, in particular its work for the now defunct construction company Carillion. Carillion went belly-up after several profit warnings, write downs and losses. In South Africa, KPMG raised no red flags over the VBS bank heist, nor did it sound any warnings during its decade-long audit of Gupta-family companies. KPMG's SA CEO, Trevor Hoole, COO, Steven Louw, Chairperson Ahmed Jagger and five senior executives resigned after the 'rogue SARS unit' report was thoroughly discredited. The latest probe is part of the UK's overhaul of audit firm regulation and oversight, KPMG's highly suspect recent track record believed to be indicative of slack standards industry-wide. – Chris Bateman.UK watchdog to review conduct, governance at KPMG audit unit.By Nina Trentmann ___STEADY_PAYWALL___.The UK watchdog for accounting and audit on Tuesday launched an independent review into the governance, controls and culture at KPMG LLP's UK audit unit.The Financial Reporting Council will examine KPMG's risk management, its controls and the behaviour of partners and other employees in the audit practice. This first-of-its-kind review will be conducted by A&O Consulting, the consulting arm of Allen & Overy LLP, on behalf of the FRC, a spokesman for the regulator said.The FRC will also assess whether KPMG is capable of delivering high-quality audits in the UK. A 2018 quality assessment the FRC conducted found that around 50% of audits done by KPMG were below standard, the FRC said."As one of the UK's major audit firms, it is vital that investors and others have confidence in its ability to perform its core work to the highest standards," the spokesman said.The review comes on the back of two existing investigations into KPMG's work for now-defunct construction company Carillion PLC but also addresses issues outside of Carillion. "It is more than [Carillion]," the spokesman said.Carillion entered liquidation proceedings in January 2018 following several profit warnings, write-downs and losses. Its fall has contributed to concerns about the quality of statutory audits in the UK.Read also: UK MP's order break-up of Big Four accountancy firmsThe review will be concluded during the course of this year and could result in recommendations for changes at KPMG, the FRC said. "KPMG will be very keen to address any concerns raised," the spokesman for the regulator said."We are cooperating fully with the various inquiries currently under way, engaging actively with the reviews of the audit sector, and, where we can, we are moving ahead and taking action ourselves," a KPMG spokesman said. Tuesday's review is a voluntary process and one that KPMG believes will become increasingly common in the audit sector, he said.KPMG in October stopped accepting non-audit work for existing audit clients listed in the FTSE 350 in a bid to remove potential conflicts of interest, the spokesman said. "We anticipate that the vast majority of existing projects will have concluded by the end of 2019," the spokesman said.The review comes ahead of significant changes to the UK's audit regulation, as part of which the FRC will be folded into a new oversight body called the Audit, Reporting and Governance Authority.The new regulator is expected to be operational in 2020 and will be a statutory body that sets high standards of statutory audit, corporate reporting and governance, UK Business Secretary Greg Clark said in March.It will regulate the biggest audit firms directly and be given a bigger toolbox for sanctions, including new powers to require "rapid explanations" from companies and publish reports about a company's conduct and management, Mr. Clark said.Write to Nina Trentmann at Nina.Trentmann@wsj.com

Nowhere to hide for KPMG – UK probe begins

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