The Chief Executive Officer of Botswana Accountancy Oversight Authority (BAOA) Duncan Majinda has raised red flags regarding the accounting giant KPMG about the strength of one of the world's biggest audit firms due to the controversies surrounding it around the world.
Appearing before the Committee on Statutory Bodies and State Enterprises, Majinda said that as the oversight body they are concerned about scandals KPMG is embroiled in particularly because it is auditing most state owned enterprises including government departments. "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 adding that almost 70% of companies in Botswana are using the firm.
Majinda said signs are already showing among the local companies which have been audited by the firm that something is not right. He said they have been monitoring KPMG scandals in neighboring South Africa where most of the companies including government entities have cut ties with the accounting firm. KPMG is currently involved in the VBS Mutual Bank scandal in South Africa, which the audit firm had given a clean bill of health in 2017, just months before it collapsed in March 2018.
On its collapse it was discovered that almost R2bn ($137m) had been siphoned out of the bank through corrupt activities at the lender. The two KPMG partners that had been responsible for the VBS audit have now left the firm. Investigators hired by South African Reserve Bank have recommended that the central bank and National Treasury of South Africa file an auditor's liability claim against KPMG to recover damages stemming from VBS's collapse.
The firm's South Africa operation has already had a tough year after the corruption surrounding the billionaire Gupta family came to light. Majinda said that looking at the current state enterprises' books it is clear that the situation is getting worse especially the audited books which had been unqualified but later turned out that there has been some corrupt practices.
Of recent most of state owned enterprises have been followed by controversies especially how they conduct their business and use of funds especially the fund orders. Majinda put the blame on internal auditors who he accused of doing shoddy jobs and depending too much on external auditors. "Auditors are the heartbeat of the company and if they are not doing a good job state owned enterprises will always be caught in financial scandals," he said, adding that as the oversight body they are worried about billions that government pours into state owned companies with no returns.
Another concern for the auditing oversight board is the dominance of the international firms in the market with the locals being pushed aside. Majinda said there is need for an affirmative action to empower local audtiors as the country has enough qualified accountants. "We have seen situations where books audited by local firms were looked at with disdain, a clear indication that we need to empower the local auditors," he said.