Saica's progress on the Ntsebeza Inquiry recommendations

Freeman Nomvalo, Saica CEO

The inquiry considered the conduct of Saica members employed by KPMG between 1 January 2013 and 15 September 2017 to establish if there were transgressions of Saica’s Code of Professional Conduct and other relevant laws and policies. The inquiry released its report to Saica in December 2018, which contains prima facie evidence of non-compliance with the code on the part of certain members. Since then, Saica has sought legal advice on how to implement the main recommendations in the report.

“The inquiry was instituted pursuant to Saica’s Constitution which obliges us to ensure that our members maintain a high standard of professional behaviour, preserve the integrity and status of the profession, take steps to prevent or stop dishonourable conduct by its members, and take disciplinary action against members, where appropriate,” said Freeman Nomvalo, Saica’s chief executive officer.

Disciplinary processes

Saica has taken the following action to date:

The leadership of KPMG at the time of the Gupta audits and the Sars investigation

The Saica Code obliges the leadership of a firm to establish and implement oversight mechanisms to ensure that its employees adhere to certain fundamental principles, namely independence, integrity, objectivity, competence, confidentiality and professional behaviour. It should be noted that the focus of Saica action in this regard can only be directed at its members and not the firm itself.

“The Ntsebeza Report points to endemic and systemic failures of oversight, risk management and quality assurance at KPMG during the period 1 January 2013 until 15 September 2017. Saica understands that KPMG has since undertaken significant corrective measures to address its leadership, oversight, policies and risk management procedures,” Nomvalo added.

“Saica is compelled to take action against our members for breaches of the code. However, our by-laws do not allow us to pursue primary disciplinary proceedings against members who are also members of the Independent Regulatory Board for Auditors (IRBA), unless that body has declined to pursue them itself. Most of the former KPMG leadership fall into this category and Saica is therefore, according to its by-laws, obliged to wait for formal confirmation from IRBA as to whether it will proffer charges against implicated members. IRBA is also the body responsible for investigating the conduct of KPMG as a firm. Saica is working closely with IRBA and assisting them where possible.”

Senior KPMG staff responsible for the Gupta audits

Three Saica members were directly responsible for the Gupta audits.
Jacques Wessels, the engagement partner on many of the Gupta audits, faced a disciplinary hearing instituted by IRBA, which found that he had contravened numerous provisions of its code of conduct. On 1 March 2019, IRBA cancelled Wessels’ registration as a registered auditor. Following this finding, a Saica Disciplinary Committee (DC) was convened to determine the appropriate sanction to be applied against Wessels as a CA(SA). The DC issued its sanction, which is published in full in Accountancy SA. In essence, the DC decided to cancel his membership of Saica, which means that he is no longer able to use the CA(SA) designation.

Draft charge sheets have been issued in respect of two other members involved in the Gupta audits. Saica’s Professional Conduct Committee (PCC), in a process not open to the public, is now required to request these members’ representations and discharge its obligations in terms of By-law 19. Saica is unable to comment further on the processes in respect of these two members at this stage.

Senior KPMG staff responsible for the Sars report

Two Saica members were among the senior KPMG employees directly responsible for the Sars Report. The first is also a member of IRBA. Saica awaits IRBA’s decision as to whether it plans to proceed with disciplinary charges. The second Saica member involved has been referred to the PCC in terms of By-law 19. As the PCC process is a closed preliminary process, Saica is unable to offer further comment at this stage.

“Saica notes with concern the allegations regarding the alleged misstatements in the financials of Tongaat Hulett which have been widely reported on in the media, as well as other incidents involving Eskom, South African Airways, and the dismissal of Old Mutual’s chief executive officer. The Steinhoff matter has also been widely covered in the media since December 2017 and following Steinhoff’s release of the summary PwC investigative report in March 2019, Saica has been able to intensify its own investigations into the conduct of its members who were allegedly involved.”