KPMG Credibility Questioned in Parliament
While finance minister Thapelo Matsheka only hinted at the possibility of KPMG’s contract with the Bank of Botswana being reviewed, concern is growing that the reputation of the auditing firm is becoming too hot to handle. Staff Writer LETLHOGILE MPUANG reports
Audit firm KPMG could lose out on business from government and state owned enterprises as a result of serious reputational damage. In recent years, the firm has been embroiled in some of the country’s biggest financial scandals ever.
In the latest turn out of events, MPs of the Umbrella for Democratic Change (UDC) have demanded answers from government about why they continue to engage the auditing firm despite its documented series of scandals both in Botswana and around the world.
The lawmakers have questioned the firm’s role as the external auditors of the Bank of Botswana (BoB) in connection to the P100 billion that is allegedly missing at the Bank of Botswana (BoB) in theft that allegedly happened between 2009 and 2018. Former president Ian Khama and former spy chief Issac Kgosi have been named as allegedly having had a huge a hand in this crime. They have all denied the allegations.
Though the newly appointed Minister of Finance and Economic Development Dr Thapelo Matsheka could not comment on the firm’s role in connection with the P100 billion, he confirmed that KPGM remains the central bank’s external auditors until 2020, having first been contracted in 2011.
“Mr Speaker, KPMG are the current external auditors of the Bank of Botswana,” Matsheka said. “In line with the bank’s procurement policies, KPMG were first appointed to the bank’s statutory auditors for a five-year period running from 2011 to 2015 reviewed annually. Subsequently, KPMG were appointed for a second and final five-year term from 2016 to 2020.”
He added that there had not been any undertaking at executive management or board level to discontinue with the firm despite awareness of these concerns. “As indicated, KPMG won a tender to provide audit services for the period from 2016 to 2020,” Minister Matsheka continued.
“On an annual basis, the service they provide to the bank is reviewed by the Auditors Committee of the Board. Further, this is in line with the mandatory audit rotation recommended by the Botswana Accountancy Oversight Authority (BAOA), which is a maximum of two terms or five years. I am aware that there has been wide negative media coverage concerning KPMG. However, these are subject to evaluation and determination of relevance to appointment by the respective appointing authorities on the basis of criteria for evaluation.
“Mr Speaker, public bodies have internal processes through which governance risks are evaluated and appropriate decisions are made, including the appointment of external auditors and other services providers. All allegations made or any reports that are negative are actually subjected to an evaluation criteria to determine the impact of damage that can be caused to the institution under audit.”
But the minister hinted at a possible of change of external auditors at BoB. “I can assure the member that as it is actually a requirement to rotate auditors, if there are any challenges around the authenticity of the reports, those should be discovered,” he said.
KPMG have in recent years been accused of producing fraudulent financial results for several companies. Forensic, financial and legal investigations were instituted after auditors PWC found Choppies Enterprises Limited to have been engaged in secretive financial dealings where the company transacted with related parties without disclosure. Choppies’ financial reporting methods were also found by PWC to have been non-complaint with International Financial Reporting Standards (IFRS). Before PWC came on board, KPMG were Choppies’ external auditors.
In 2017, liquidator of Kingdom Bank Africa (KBAL), John Little, accused KPMG Botswana of misconduct in signing off the books of this bank that collapsed a few years ago and filed a lawsuit of close to P200 million against the accounting and auditing firm on behalf of creditors.
In October last year, the Chief Executive Officer at BAOA, Duncan Majinda, also raised deep concerns about KPMG’s dealings before the Committee on Statutory Bodies and State Enterprises in Parliament. “I have even talked to the Office of the President that the company must be monitored and look at how they have been doing books as it shows that we might be sitting on a ticking financial bomb,” he said.
Majinda noted that almost 70 percent of companies in Botswana were using the firm.