Saturday, December 9, 2023

Government jittery over KPMG misconduct allegations

The was panic at the government enclave last week following reports that liquidator, John Little is accusing KPMG Botswana of misconduct in signing off the books of Kingdom Bank Africa Limited (KBAL) which is currently under liquidation and has filed a law suit of close to P200 million against the audit firm on behalf of creditors.

Following reports carried exclusively in the Sunday Standard, the Office of the president last week summoned KPMG management to come and explain media reports that it has been fingered in what could potentially be the biggest accounting scandal in the history of Botswana, it has emerged.

KPMG denied any wrong doing and informed the Office of the President that ithas filed a defence against the P 200 million law suit. KPMG insisted that it was not responsible for the KBAL’s bankruptcy and will defend the allegations by the bank,” said a source at the government enclave.

 The issue has also become a subject of intense discussion and scrutiny within government and the intelligence community. KPMG provides audit services to a number of government parastatals and public state enterprises and it is understood that the recent reports have brought a lot of anxiety at the government enclave.

The Auditor General has also written to the Botswana Accountancy Oversight Authority (BAOA) demanding the names of all parastatals and public enterprises that KPMG offers audit service to.  In turn, BAOA wrote to KPMG requesting that it furnish it with names of parastatals and state enterprises that it provides services to.

There are even claims that the Auditor General intends to conduct an investigation into the audited accounts of parastatals and state enterprises audited by KPMG and map a way forward.  “It is not clear what could have informed the Auditor General to request for list of entities but it could be because BAOA is a regulator for auditors and audit firms and other entities that Government has an interest in like parastatals and other significant entities,” an insider at government enclave said.

 Botswana’s accounting regulator confirmed this week that it was closely following the lawsuit against KPMG. The Botswana Accountancy Oversight Authority became aware of the court case through media reports and is monitoring developments said Ndulamo Ntopo, a spokesperson for the regulator. A source close to the regulator however informed the Sunday Standard that BAOA had ‘picked up’ the issue involving Kingdom Bank Africa Limited and KPMG during one of the reviews indicating some irregularities in the manner in which KPMG had been auditing the bank.

Ntopo told Sunday Standard that only one audit practice review of KPMG has been conducted in 2015 ÔÇô after the collapse of Kingdom Bank Africa Limited – and detailed recommendations were sent to the firm. She confirmed that BAOA has submitted a list of KPMG’s Public Interest Audits Clients on the BAOA database to the Office of the Auditor General.  “However, due to confidentiality undertakings, we are not able to provide any names related thereto,” she said.  Responding to Sunday Standard queries, the Auditor General said it was unable to comment but could not provide reasons why it was constrained to provide a comment.

Government spokesperson Jeff Ramsay claimed ignorance when asked to comment on what could have prompted the Office of the President to summon the management of KPMG. “I’m not aware of the meeting,” Ramsay said.

Senior Partner at KPMG Nigel Dixon-Warren confirmed that they have since submitted the list as per the request to BAOA. “We have received a request from BAOA to provide a list of Public Interest Entities that KPMG provides external audit services to. Public Interest Entities are defined in the regulations to the Financial Reporting Act, and include amongst others parastatal entities, listed companies, banks and other significant entities as defined,” he said.

Warren-Dixon added that “We are advised that the purpose of this request is for BAOA to update their records following promulgation of the regulations referred to above. It is our understanding that this request has been sent to all audit firms registered with BAOA.

Asked to comment on allegations that during one of the reviews by BAOA one of the KPMG partners failed the review, Warren Dixon said “The results of reviews by BAOA are confidential between the KPMG and BAOA. We would be happy to respond to your question should BAOA confirm that we are able to do so.”

On allegations that BAOA had ‘picked up’ the issue involving Kingdom Bank Africa Limited and KPMG during one of the reviews indicating some irregularities in the manner in which KPMG had been auditing the bank, Warren-Dixon said “ This matter is subject to a process in the High Court, and we are therefore unable to comment.”

The audit firm is accused of signing off the financial statements of Kingdom Bank of Africa Ltd. as a going concern even though the lender’s liabilities exceeded its assets as far back as 2011 before its liquidation in February 2015.


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