The financial audit is the foundation on which integrity and trust are embedded into the corporate arena and financial markets around the world. The future of the audit is a burning topic at the moment, with widespread expectations of reform of the audit process. The profession stands at a crossroads in its history, with the public interest at stake.

KPMG South Africa provides independent audit services designed to enhance the reliability of information prepared by clients for use by investors, creditors and other stakeholders, within the ambit of country-specific statutory requirements. An independent audit of financial statements contributes to investor confidence and therefore to the effective functioning of capital markets. The firm’s audit approach is based on a consistent methodology developed in compliance with the International Standards on Auditing. It includes the core principles relating to professional integrity, independence and ethical behaviour, and it is enhanced by supervision, review and consultation policies and technologies and tools.

In light of the company’s commitment to creating reform and instilling trust in the profession at large, KPMG has spent the better part of the past three years implementing reforms to its business processes. KPMG recently announced the decision to partner with the Association for the Advancement of Black Accountants of Southern Africa (ABASA) as another step towards reform – specifically aligned to transformation and building trust.

The ABASA was established in 1985 to promote the professional interests of black persons engaged in the accounting profession. The association, which has considerable depth and reach in terms of members, is committed to ensuring that every black accountant and aspiring accountant can realise their full potential and aspirations.

‘Transformation is one initiative that is not part of the global reform agenda but ranks high in South Africa, which is why, as part of a larger approach to this element of the business, KPMG South Africa recently partnered with ABASA to advance smaller, black-owned firms and, in the process, transform the auditing and accounting profession,’ according to Ignatius Sehoole, CEO of KPMG South Africa.

This was a necessary next step in the reform process in order to improve trust in the profession: reform will ultimately advocate co-audits and audit rotation, with one of the biggest obstacles to this being the lack of choice in audit firms.

The MOU signed with the ABASA will aim to improve training and exposure of smaller black-owned firms to a diverse, larger and more complex range of projects working with KPMG. The company is the first – and only – of the larger auditing firms to enter into such an agreement, focused on skills development and actively promoting and advancing the growth of small black auditing firms.

The MOU between KPMG and ABASA will facilitate the opportunity for ABASA members to work directly with KPMG as full team members on their JSE-listed (and other) client assignments. Such small firms (some with just two to four partners) would typically be unable to access and be exposed to the complexity of this work available only with large clients dominated by the big four and a handful of mid-range firms.

KPMG has established that clients are favourably disposed to this type of arrangement whereby the staff are supervised and, with their intensive training, deliver a quality of work indistinguishable from their own high standards, overseen by KPMG.

KPMG has initiated discussions with the ABASA to ensure they can be part of a platform to develop all the small firms. KPMG’s commitment to supporting training and delivering full market exposure to smaller black firms will allow them to gain stronger insight and help drive growth and development.

Following KPMG’s due diligence and internal-risk processes, team members from these smaller firms will be integrated into the KPMG teams, and will be trained on the company’s audit methodology and technology. KPMG will take full responsibility for the quality of all work delivered by the staff members and they will be required to comply with KPMG’s strict independence requirements and, as a pre-requisite, they will be provided with independence and ethics training.

Firms will be selected by an ABASA committee. The vetting process will be undertaken independently by the ABASA committee based on their own business practices and having good-standing memberships with the ABASA, the South African Institute of Chartered Accountants and the Independent Regulatory Board for Auditors. Staff members will also be subject to KPMG’s internal risk processes.

KPMG’s ambition for this partnership is to ensure black firms truly see the benefit of the partnership through their development and growth. The company’s philosophy is that transformation shouldn’t merely be a competitive edge – it should be a centrally ingrained part of the business.

Transformation is so important for this country, and such initiatives are the first of many to ensure KPMG is at the forefront of this agenda.

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