KPMG South Africa announces it will cease non-audit services for its listed clients
CEO Ignatius Sehoole says that this act will remove any perception of conflicts of interest.
KPMG South Africa yesterday announced that it will cease providing non-audit-related services to its JSE-listed audit clients, with effect from 31 March 2021. The audit and professional services firm will see out existing contracts, but no new contracts will be entered into from this time.
CEO Ignatius Sehoole said in an interview with CFO South Africa that while the provision of non-audit services to listed clients is highly regulated both locally and globally, with limits on percentages of non-audit services ranging from between 5 percent and 50 percent, public perception is still against providing these services to audit clients.
“Regardless of what is happening in terms of regulating those services, there is a persistent perception in the public that if you offer your audit client non-audit services, your independence is impaired and this therefore affects your executing of the audit negatively.”
The decision to cease provision of these services to listed clients was taken in light of this.
“We have a vision to be the most trusted and trustworthy financial services firm, and we’re working very hard at this,” says Ignatius. “We think it’s through actions of this nature that you regain the public’s trust. And since serving the public interest is at the core of what we do, we believe that our actions will speak louder than words. And people want to see action. We’re continuously looking at what we can do to build the public trust.”
He acknowledges that the KPMG South Africa business will take a knock, with their estimates showing a current proportion of 5 percent of their income derived from providing non-audit services to audit clients.
“For us, it’s not an issue of revenue. It’s an issue of gaining public trust,” affirms Ignatius. “It’s an issue of pursuing our vision. We will take a knock. That knock, we believe is one of those things that happens when you take a principled stance. What’s important to us is that we believe it’s the right thing to do, even with the knocks it might bring.”
Ignatius says that to the best of his knowledge no other audit firm has taken this step.
He has been actively working to rebuild trust in KPMG following reputational damage in recent years, as well as trust in the audit profession as a whole, since his appointment in 2019.
“The roots of our profession lie in a fundamental need for trust, assurance and confidence and we are determined to take the right course of action to embed it. After the significant and market leading governance and leadership changes the firm made in the last three years, we are committed to continuing to lead the rebuilding of trust in the firm and the profession. We look forward to witnessing a positive industry shift that will result from this enhanced independence model,” said Ignatius in the press release announcing this decision.