AVI to Terminate KPMG as Auditor in Wake of Gupta Scandal

(Bloomberg) -- AVI Ltd., a South African distributor of consumer goods, will stop using KPMG LLP as an external auditor after the accounting firm admitted to falling short of its own standards when doing work for the politically connected Gupta family.

“The board of AVI has considered the information relating to KPMG and certain of its past activities that is currently available to it, and has concluded that it is appropriate to give notice to KPMG,” the Johannesburg-based company said in a statement on Friday. “The termination will be effective on the close-out of all matters pertaining to the 2017 financial year-end audit.”

AVI, which has a market value of 34 billion rand ($2.5 billion), becomes one of the largest South African companies to drop KPMG after Munich Re of Africa, Sasfin Holdings Ltd., Sygnia Asset Management and Hulisani Ltd. announced they will stop using the firm's services. The country's biggest banks and largest insurer are also reviewing their continued use of KPMG.

KPMG International said last month that the local business will face an independent inquiry after an internal investigation into the work done for companies associated with the Guptas. Eight senior executives quit in the wake of the findings even though KPMG didn't find evidence of illegal behavior or corruption. The internal probe also resulted in KPMG South Africa withdrawing the findings of a report about a so-called rogue unit at the Revenue Service.

The firm is being probed by the country's regulatory body for auditors and the South African Institute of Chartered Accountants for the work it did for the Revenue Service and the Gupta family, who have been accused of using their friendship with President Jacob Zuma to wield undue influence over state contracts and cabinet appointments. The Guptas and Zuma have denied wrongdoing.

To contact the reporter on this story: Vernon Wessels in Johannesburg at vwessels@bloomberg.net.

To contact the editors responsible for this story: Stefania Bianchi at sbianchi10@bloomberg.net, John Viljoen