KPMG Chairman elaborates on vulnerable points in the accounting sector

KPMG South Africa continues to relate its learnings from a turbulent period in South Africa, the latest insights coming from Chairman Wiseman Nkuhlu at the South Africa Institute of Professional Accountants Indaba in Cape Town. Nkuhlu indicated that a focus on pleasing clients interfered with the firm’s objectivity.

Debates around practices and priorities in the accounting sector are dominating public discourse in South Africa currently, in light of successive accounting scandals that have unfolded in recent years. KPMG was in the thick of the controversy over recent years, but has been gradually rebuilding its profile.

Part of this regeneration process has been highlighting the difference in approach that the firm plans to take in this fresh chapter, while another part has been to reflect on broader problematic trends within the accounting sector as a whole. Leadership at the firm has recently been vocal in both these domains.

Wiseman Nkuhlu joined the firm as Chairman in the wake of the Gupta scandal, and has since taken the reigns. Nkuhlu has been among the most outspoken regarding the firm’s new priorities and practices, and about the mistakes that contributed to its woes in the first place.

Nkuhlu has maintained that KPMGs involvement in the scandals was not a result of outright corruption, but of poorly informed policies that drove the firm into dubious areas. Earlier, Nkuhlu asserted that KPMG officials had failed to see the signs that corrupt practices might have been informing the transactions that they were engaged in. 

Now, Nkuhlu has urged that the accounting sector in general is susceptible to such mistakes, given that the priority amongst most accounting firms is to pleased and “delight” clients. This came among a number of other insights that he provided around risky practices and priorities in the accounting sector.

“There are questions about how the accounting profession can go back to its basics. How it can be more honest and more drastic when dealing with concerns about its independence and integrity as well as the quality of audits. It is also about how accounting and auditing firms define themselves - seeing themselves as commercial entities and creating a culture of the client being centric,” he said, speaking at the SA Institute of Professional Accountants Indaba.

“Very few firms talk on a regular basis about protecting the investors of a company they audit. They focus more on responding to the needs of the client. This can undermine their integrity. As assurance providers, auditors forget they are doing the work of the shareholders – and that is where the problem lies. I don't have a problem with there being large audit firms. For me, the client relationship with an auditor can create a conflict of interest. If you have been the auditor of a client for so long, you get to know the client too well perhaps.” he added.