I don’t know about you but this KPMG issue is really worrying.
Originally I thought that the other Big 3 would salivate at the idea of picking up a barrage of emigrating clients – I have little sympathy for guys who get their hands stuck in the cookie jar.
Yesterday, however, it suddenly struck me that there is something much bigger going on here.
Auditing firms are supposedly the bastions of ethics, integrity and compliance. Not only are they supposed to set the bar higher than anyone else, are they also supposed to be the custodians of impeccable conduct. They are the guardians and protectors of ethical business practice.
Do they not purport to uphold business values at the highest level of integrity?
Of course they do!
And then here in SA we have unprecedented corruption that waters the eyes and one of these supposedly ethical giants are found to be cohabiting with the infamous Gupta family.
Oh, most definitely!
Here is a firm that has been around for over a century. It’s reputation extends to the very foundation of the many values that business is required to uphold. They represent everything that is good in a world of business practice. They are the ones we look up to to protect and guard us against the excesses of those that control our jobs and financial well-being. Who would doubt an audit report signed by KPMG? Who would expect anything but the very best?
But the recent revelations indicate something very different. Whether these allegations are proven is not the topic of this article. The whole issue is most disturbing. The bare truth is not as important as the fallout that this matter has had on our profession. In that vein, here are some issues to contemplate:
- KPMG’s ‘ethical’ leaders have shown that all is sacrificed at the altar of greed. Profit is the overriding motive and all other issues including decency, ethical responsibility and integrity might not be that important.
- If this is their barometer of acceptable behaviour can one not assume that there is a plethora of their clients that conduct themselves at far lesser standards and therefore at an even worse level of irregular conduct, conduct that would be unacceptable to most decent citizens of this world. In other words, if KPMG scored a 3 out of 10 on the scale of good governance, then how many of their clients are at a 1 out of 10 level? Does it not raise the frightening possibility that the level of ethics in business is virtually non-existent?
- Following from the above, is this just one more nail in the coffin of external audit? Is this not the final bit of damning evidence that the audit process is as ineffective as if it had not happened at all. Why waste millions of shareholders funds on a process that destroys value and allows those who need to be stopped to continue to plunder with impunity?
- The pathetic way in which the whole saga has been handled by the senior executive at KPMG has created more uncertainty and concern. Everyone seems to be running round finding someone else to blame. In my experience, a new big client is announced to fellow executives with aplomb. Furthermore large fortuitous consulting fees are even more valued especially if they open a doorway to bigger things. To tell a CA(SA) like me that only a few selected executives were aware of a delightful feeding trough of prospective fees is an insult to my intelligence!
- Finally, the actions of the professional bodies that represent our ethical conduct have been disappointing. Should not KPMG been suspended from proceeding any further in their professional service until a speedy investigation had been completed? Maybe that sounds a bit dramatic to us professionals but I don’t think that the average citizen would agree. At the very least should the disgraced partners not have been suspended immediately pending an investigation into their professional conduct? The professional bodies that are responsible for policing our industry and enforcing our codes have not shown much strength.
But here is the good news. The response by some elements of the business community has been exciting. KPMG is paying an unexpected penalty that is the most effective deterrent of all – migration of customers.
And as this sorry tale unfolds, a deeper level of values are being revealed. Companies who do want decency and ethics are being called out to follow in the footsteps of those who have fired KPMG.
And by the way, a tipping point is being reached where those companies who are staying with KPMG are looking like they really have something to hide. It looks like they don’t want another audit firm sniffing around their books. The whole saga s terribly worrying!
The consequences could be the demise of KPMG as we know it and, barring the awful stress that their innocent employees are facing, may this be a lesson to all those who participate in corrupt activities: YOU WILL NOT GET AWAY WITH IT!