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UPDATE 2-Pressure grows on KPMG as Munich Re Africa drops it as auditor

Tue 3rd October, 2017 5:37pm
* Munich Re cites reputational risk for cutting KPMG ties 
    * Regulator to fast track inquiry into KPMG 
    * Major bank gets demands from big clients to drop KPMG 
 
 (Recasts with Munich Re) 
    By Tiisetso Motsoeneng and Ed Cropley 
    JOHANNESBURG Oct 3 (Reuters) - The African arm of Germany's 
Munich Re  MUVGn.DE  has dropped KPMG as its auditor, the latest 
company to distance itself from the accountancy firm entangled 
in a scandal involving friends of South African President Jacob 
Zuma. 
    KMPG  KPMG.UL  sacked its South African leadership last 
month after it found work done for companies owned by the Gupta 
family - a trio of Indian-born businessmen with close ties to 
Zuma - "fell considerably short" of its standards.  urn:newsml:reuters.com:*:nL5N1LW2CC 
    "It is well known that KPMG has faced some reputational and 
credibility challenges," Munich Re Africa's CEO Nico Conradie 
told Reuters. "I don't want to accuse them of anything but we 
just felt that it would be better for us if we are dealing with 
a new auditor in 2018". 
    Munich Re's decision was taken last Friday, Conradie said, 
weeks after the reinsurer's director, Iraj Abedian, quit, 
protesting over the board's decision to wait for the outcome of 
KPMG's internal investigation before taking any action.  
    Sasfin  SFNJ.J  and Hulisani  HULJ.J , both relatively small 
companies based in Johannesburg, said last month they would drop 
KPMG as their auditor, while the South African parliament has 
also said it would no longer use the firm.  urn:newsml:reuters.com:*:nL5N1M02BL 
    Big financial clients such as Barclays Africa  BGAJ.J  and 
Standard Bank  SBKJ.J  are considering too whether to ditch one 
of biggest and most influential names in accounting. 
    A source with knowledge of the matter at one of South 
Africa's big four banks said the bank had received letters from 
major South African clients telling it to cut ties with KPMG.  
    The bank's response was to tell KMPG it had to show it had 
"done everything in its power to cut out the rot," including 
commissioning a fully independent external audit rather than the 
internal review it has conducted so far. 
    "The basic message is 'You guys can't mark your own 
homework'," the source said. 
    But the South African central bank has told the big four 
lenders they cannot fire KPMG because it might undermine 
financial stability, two sources told Reuters last week. 
 urn:newsml:reuters.com:*:nL8N1MA2DT 
    KPMG is one of several high-profile international companies 
facing questions about its work for the Indian-born Gupta 
brothers, who have been accused by an anti-graft watchdog of 
unduly influencing the awarding of government contracts. 
    The Guptas and Zuma deny wrongdoing and say they are victims 
of a politically motivated witch-hunt. The Guptas and their 
companies have not been charged with any crime. 
    KPMG, whose local unit traces its roots to Johannesburg's 
gold rush days in the late 19th century, is under investigation 
by industry watchdog Independent Regulatory Board for Auditors. 
    The regulator's chief executive Bernard Agulhas told 
lawmakers in Cape Town on Tuesday his office would fast-track 
the inquiry.  
 
 (Additional reporting by Wendell Roelf in Cape Town; Editing by 
Joe Brock and Mark Potter) 
 ((tj.strydom@thomsonreuters.com; +27 11 775 3150; Reuters 
Messaging: tj.strydom.thomsonreuters.com@reuters.net)) 
 
Keywords: KPMG SAFRICA/
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