By Felicity Duncan
The pain continues for scandal-tainted KPMG as Nedbank becomes the latest South African client to drop them – Nedbank announced on Monday that it would be switching its auditor to Ernst & Young. KPMG said it was disappointed by the decision but accepted it as part of an ‘industry move to mandatory audit firm rotation.’
Personally, I don’t think Nedbank’s decision was motivated by a desire to regularly rotate auditors. I think it was a pre-emptive strike against having the Nedbank brand associated with KPMG, which is not terribly popular in South African business circles these days (or UK circles, or US circles).
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Both Nedbank and KPMG operate almost entirely on something profoundly intangible – trust. Customers of Nedbank must trust that the bank will give them their money back when they need it. And KPMG’s customers must trust that they are getting the honest audit they’re paying for. If Nedbank were to stick with KPMG as an auditor, they may come in for suspicion along the “what do they have to hide?” line. Better to avoid the risk of brand damage by taking its audit business elsewhere. It’s going to be a long road ahead for KPMG to rebuild the trust it has squandered.
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