THERE has been a pattern of allegations that forensic audits are being used to confirm a predetermined outcome. Police official Robert McBride and trade unionist Zwelinzima Vavi have recently alleged that they had been treated unfairly as a result of such reports.
KPMG is the latest name to be dragged into the sordid mess at the South African Revenue Service (SARS) — which requires a judicial commission of inquiry to unravel — prompting it to take the extraordinary step of releasing a media statement on a "confidential assignment".
Unfortunately, the media statement only added to the confusion.
In February last year, responding to questions from Business Day on the suspension of former SARS officials, the tax agency confirmed that there had been investigations that "preceded" the internal probe by Advocate Muzi Sikhakhane.
These, SARS said at the time in a written response to questions, "were done by both KPMG and independent senior counsel" and "indeed concluded and confirmed some of the findings" made by the media. The tax agency was asked why some officials had been suspended despite not being implicated in the Sikhakhane report that commissioner Tom Moyane quoted when he announced the moves against these officials.
According to KPMG’s statement this week, its reports remained drafts "until the client confirms to us that all matters have been addressed".
"A report may well be considered by KPMG to be complete or final but prior to being issued the client needs to notify us that it has been accepted by them," the statement read.
On the SARS matter, KPMG confirmed that it had submitted a "number of drafts" and received feedback from SARS. It also said it lodged its "last report" on December 4 last year, implying that the firm believed the report to be final.
It then quoted Deputy Finance Minister Mcebisi Jonas as saying the report was "still a draft and not ready for release". It is strange that after a year, KPMG and SARS are sending draft reports back and forth. Why are there so many drafts, when the client, SARS, based decisions on the report in February, but the company submits a not-so-final-last-report in December?
It is well publicised that SARS’s attorneys sent a memorandum to KPMG in August last year in which the agency ostensibly instructs it on findings and recommendations. In the memo, SARS says: "We are of the view that in general, the report should consider incorporating the following as part of the recommendations."
Can recommendations be made that were not derived from the findings of the probe?
It also highlights factual inaccuracies in the report and further "issues for consideration", saying the report did not deal with whether there was "credible evidence to make a finding of guilt" against former SARS officials Ivan Pillay and Johann van Loggerenberg and that the report does not deal with the dereliction of duty of former executive, Peter Richer.
Why would one ask an audit firm to make a finding of "guilt"?
Then at the weekend, it emerged that KPMG delivered its "last report" with a caveat: "It (the report) was not prepared for the resolution of any disputes or controversies" and it cannot be disclosed in part or full without prior consent. Yet KPMG also states in its media statement that its report expressly refers to the "limitations placed on its assignment".
It is clear that as far back as December 2014, KPMG’s report or versions of it were used for the "resolution of conflicts", disputes and controversies.
If the report was not prepared for the resolution of conflict, disputes or controversies, what was its purpose?
It is also unclear whether KPMG gave consent for its report to be leaked to the media and published as it declined to answer questions on whether this issue was raised with its client. The company responded to these questions this week, saying it would not comment further on the matter due to the strict nondisclosure agreement with its client.
At home and abroad, there are allegations that in some cases, audit reports are unwittingly used in political battles — this erodes the credibility of the reports and the companies conducting them. The danger is that they may all soon be viewed with the scepticism some of them deserve.
• Marrian is political editor