CECR Vol. 2 The Auditors Open Secrets July 2020

CORPORATIONS AND
ECONOMIC CRIME REPORT

THE AUDITORS
Published by Open Secrets in June 2020
ISBN: 978-0-620-88416-7
Research by: Michael Marchant and Mamello Mosiana
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THE AUDITORS
Corporations and Economic
Crime Report
(Volume 2)
CONTENTS
INTRODUCTION 05
THE BIG FOUR: A CARTEL AT THE HELM OF 09
THE GLOBAL ECONOMY
Extreme concentration 09
Evolution of the Big Four’s mandate 10
Auditors 11
Consultants 12
The independence conundrum 15
Failure by one, bonanza for another 17
AUDITING SOUTH AFRICA’S CORPORATE GIANTS: 21

STEINHOFF AND TONGAAT HULETT
Steinhoff: A Stellenbosch fraudster in the British 21
Virgin Islands
Where were the auditors? 22
No accountability 24
Tongaat Hulett: Déjà vu 24
VBS: AUDIT FAILURES ENABLE A BANK HEIST 27

Looted until there was nothing left 27
Stolen futures, sleepless nights 28
KPMG and PwC: Where were the auditors? 29
Junior auditor shut down 30
Accountability? 31
INVESTIGATION
SAA: HOW THE ACCOUNTABILITY COOKIE 33

CRUMBLES
The dodgy tender and the cover-up 35
SAA’s internal auditors 36
PwC: The external auditors 38
ENS: The forensic investigators 40
Failure upon failure 43
STATE CAPTURE AUDITORS 45

KPMG 46
Deloitte’s work at Eskom 50
THE ABSENCE OF ACCOUNTABILITY 55

Too few to fail, too powerful to jail 56
Captured regulators 56
Penalties: Deterrent or another business cost? 58
RECOMMENDATIONS 61
Separate auditing from consulting 62
Power to the regulators and transparency for the Big 62
Four
A greater role for the auditor-general 63
Prepare for the push-back 64
Don’t trust henhouse security to foxes 65
SOURCES 67
As the world
stumbles from one
crisis to the next, its
economy precarious
and its core financial
markets inadequately
reformed, it won’t
be the accountants
who pay the price
of their failure to
hold capitalism to
account. It will once
again be the millions
who lose their jobs
and their livelihoods.
1
INTRODUCTION
South Africa remains the most stubbornly unequal society in
the world. It is, in fact, the only country where the inequality
between its richest and poorest citizens mirrors the global
inequality between the richest and poorest countries.2 This
reflects domestic and global economic systems that favour the
wealthy and powerful, enabling them to escape accountability
and the rules that bind the rest of us.
While the reasons for the chasm between the 1% and the poor
are many, the crucial factor is a globalised economy, built and
maintained by mega-corporations, that entrenches the privilege
of the rich. Under a mantle of “confidentiality” and “tax planning”,
corporations and the super-wealthy contract financial-services
firms to help them avoid paying taxes on their income as the
rest of us do. The same contracts are often used to shift and hide
the proceeds of grand corruption and corporate fraud – again
enabling the theft of resources from people and states across
the globe. In the words of economist Thomas Piketty: ‘Financial
opacity is one of the key drivers of rising global inequality’. 8
INEQUALITY
Between 2011 and 2015, the real income of the bottom 10% of South African
earners fell by 25%, while the earnings of the top 1% went up by 48%.3 Wealth
inequality is even starker, with the wealthiest 3500 South Africans owning more
than the poorest 32 million.4 Inequalities of income, wealth and opportunity also
remain deeply gendered and racialised.5 Between 2017 and 2018, the billionaires
of the world increased their wealth by around $2.5 billion (R35 billion) per day.6
While these individuals can choose whether to place (or shield) their wealth in art,
property, or luxury yachts, more than 2 billion people around the world suffer from
malnutrition.7
3500 of the wealthiest South Africans

own more than the poorest 32 million.
32 million 3500
1 dot = 3500 people
05
LUANDA LEAKS
In January 2020, the International Consortium of Investigative
Journalists (ICIJ) published an exposé based on the Luanda
Leaks, a cache of more than 700 000 leaked financial documents and emails. It
showed how Isabel dos Santos – the wealthiest woman in Africa, worth around
$2 billion – had used a network of 400 shell companies in secret jurisdictions
to hide the proceeds of corrupt deals during the time her father, José Eduardo
dos Santos, was the president of Angola. Several prominent corporations, including
PricewaterhouseCoopers (PwC) and Boston Consulting Group, are implicated in
facilitating the schemes and failing to report suspicious activity. 9
There are perhaps no more important cogs in this system than

the Big Four accounting firms. KPMG, PwC, Deloitte, and
Ernst & Young (EY) are corporate giants that employ around
one million people in roughly 3 000 global offices, including
numerous satellite offices in tax havens.10 The Big Four posted
combined revenue of $134 billion in 2017.11 While the economic
impact of Covid-19 will impact them like much of the private
sector, they are cushioned by years of sustained and avaricious
profit-taking.
While the Big Four are known by most people as auditing
firms, the largest source of their revenue is actually consulting
services. In practice, this means that their big money-spinner is
providing advice to multinationals on how to set themselves up in
secrecy jurisdictions to avoid tax and transparency requirements
they might not like. At times, they also advise governments on
how to police the multinationals that avoid tax, without a hint of
concern for conflicting interests.
They are particularly good at giving this advice because they
are embedded in most of the bodies that make the tax laws in
the first place. An investigation in Europe found that, despite the
extensive evidence of the Big Four being central to facilitating
and profiting from corporate tax-avoidance strategies, ‘they
continue to be treated in policy-making circles as neutral
and legitimate partners’.12 Never mind the revolving door of
professionals moving between the Big Four and state regulators
and tax authorities.
There is also evidence that, while the Big Four increasingly
make their cash from their consulting work, their ability (or
desire) to provide accurate auditing services is in decline. We
will consider some of the most significant examples of corporate
fraud in South Africa, from Steinhoff to the VBS Bank and a
range of Gupta-linked companies: in each instance, the audit
firms consistently shrugged their shoulders and said that it is not
their job to identify fraud. In reality, the firms happily accepted
millions in fees to sign off financial statements with glaring
irregularities. They are, in many instances, part of the underlying
problem.
It is for all these reasons that this volume of the CECR
focuses on the Big Four. While they appear prominently at the
scene of many illicit schemes in the private and public sectors,
these firms largely escape scrutiny and accountability for their
actions. This report flips this script and places them at the centre
of these stories.
06 – O p e n S e c re t s : T h e Aud it ors
After considering the broader
context of why auditing firms face
a global crisis of credibility, the
report will take up four important
South African case studies:
1: The corporate
catastrophes of
Steinhoff and Tongaat
2: The role of auditors
in the VBS scandal.
Hulett.
3: The failure of
auditors and lawyers
to address systemic
4: The role of the Big
Four in contemporary
State Capture.
problems at South
African Airways (SAA)
In each case, the report studies the role of one or more of the
Big Four firms, the human cost of the scandal, and the extent
to which there has been accountability for the wrongdoing
involved.
The report concludes by exploring why the current system
fails to provide accountability for these mega-firms and their
leaders, as well as making recommendations for the reforms
required to change this.
The CECR series draws from research previously undertaken
by Open Secrets, including its investigative report The Enablers,
which examined the role of bankers, lawyers, accountants, and
consultants in enabling state capture. Co-authored with Shadow
World Investigations,13 The Enablers was submitted to the Zondo
Commission of Inquiry in February 2020.
This volume of CECR also relies on the brave work of other
activists, researchers, and investigative journalists who have
consistently exposed corporate criminality and its human cost.
Given the absence of accountability for the most powerful
corporations and their executives, this report is intended to
support a call to action. It demands equality before the law – and
that those with the most power in our society be the focus of far
greater scrutiny than is currently the case.
VOLUME 2:
This is the second volume of the Corporations and
Economic Crime Report (CECR), a series
published by Open Secrets to help shine a light
on the serious and systematic crimes committed b y
corporations, their devastating impact, and
how their impunity can be challenged. The first
volume, The Bankers, focused on the criminal
roles of private banks in South Africa from the CORPOR
ECONOM ATIONS AND
apartheid era to contemporary state capture. IC CRIM
E REPOR
THE AUD T
ITORS
In trodu ction – 07
08
THE BIG FOUR: A
CARTEL AT THE
HELM OF THE
GLOBAL ECONOMY
EXTREME CONCENTRATION
Of the 500 companies on the 2017 S&P 500 index, 497 used
the auditing and consulting services of one of the Big Four.
That amounted to 99.4% of the market share of the top 500
publicly-traded companies on the New York Stock Exchange
and NASDAQ.1 They hold a similar monopoly on the London
Stock Exchange: in 2018, all top 100 companies on the FTSE
were audited by one of the Big Four. 2
There are several important reasons for this concentration in
the industry. For one, the Big Four have the capacity to audit state
institutions and large multinational corporations. Moreover,
because auditing is a legal requirement almost everywhere in the
world, the Big Four operate as a sort of ‘state-guaranteed cartel’.3
Many large corporations also enjoy a cosy long-running
relationship with their audit firms. They might not change audit
firms over decades – and sometimes more than a century – leaving
new firms the nearly impossible task of finding substantial work.
There is also a revolving door between auditors and their clients.
In 2016, in South Africa, 25% of the JSE’s top 40 companies
appointed individuals who were previously employed by their
external auditors as chairperson of their audit committees.4
09
LONG TIME FRIENDS
In South Africa, 96% of all companies listed on the JSE are audited by one of the Big
Four firms, and the relationships are usually entrenched for long periods. Murray
and Roberts, the mining and engineering contracting firm, had employed Deloitte
as their external auditor for 117 years before it was prompted to change when the
regulator introduced a mandatory rotation of auditors. It decided to move to PwC,
a firm that itself is entering its 105th year of auditing the media giant Naspers. 5
KPMG, EY, PwC and Deloitte also do an increasing amount

of consulting work for the corporations they audit, as well
as for governments. They advise on anything ranging from
organisational restructuring to taxation, nuclear energy, and
military spending.6 They are also regularly seconded into the
institutions they consult for. Though this has resulted in multiple
conflicts of interest, their role as “independent appraisers” makes
them appear indispensable.
This insider influence has led some to describe the Big
Four as ‘quasi-cartels capable of influencing the paths of entire
countries through their intimate connections to the centres of
power and decision-making’.7 Professional bodies and charters
of accountants, and the appearance of regulation, grant the
profession a veneer of legitimacy.
Nevertheless, this legitimacy is under siege, given the
mounting scandals linked to the Big Four. To understand this
growing crisis of confidence, it is important to understand the
genesis of the Big Four, their chequered past, and how they are
likely to help shape the future for billions of people.
EVOLUTION OF THE BIG FOUR’S

MANDATE
Perhaps the first big turn in accountancy was the evolution
from humble “bean-counters” to the facilitation of global
industrialisation and international trade. These accountants
would spread double-entry bookkeeping as an essential
component of capital.8 The impetus behind the establishment of
the first accounting firms was the first industrial revolution in
the 19th century, which created the need for manufacturers to
develop company valuations to sell stock and create a financial
market. 9
However, modern accounting and auditing also developed
as a means to guard against corporate malfeasance and fraud.
Accountants took on the role of independent auditors after
widespread fraud and “creative accounting” caused the creation
and collapse of Britain’s railway mania in 1849.10 William Welch
Deloitte, to whom the present-day Deloitte traces its origins, was
the independent accountant called in to audit Britain’s Great
Western Railway.11 Several accounting firms emerged at this
time, particularly in the City of London, in a so-called ‘golden
era of accountancy’.12
These firms’ accounting methods were then transmitted
throughout the British empire. In 1880, Queen Victoria
issued the first Royal Charter for Accountants.13 In 1894,
South Africa acquired its own charter and the South African
Institute of Chartered Accountants (SAICA) was established in
Johannesburg.14 This process was part and parcel of colonisation
and served to subject Britain’s colonies to British laws in order
to protect their economic interests. Accountants thus ‘directly
helped the process of accumulation of capital in favour of the
capitalist interest in colonial societies. 15
Accounting firms have always been central to accumulation
strategies of the powerful. In the modern financialised economy,
they have become even more important. As they increasingly
took on additional functions, particularly as consultancies,
they have moved further and further away from the mandate of
deterring malfeasance.
After a period of state-led economic policy following World
War II, characterised by high tax rates, government spending, and
regulation, the 1980s saw a resurgence of free-market ideologues
led by Margaret Thatcher and Ronald Reagan.16 Their policies
at home rapidly slashed corporate taxes and regulations. These
Financialisaton refers to the ideas were also proliferated throughout the global South by the
‘increasing role of financial
motives, financial markets,
policies of the IMF and the World Bank, opening up markets for
financial actors and financial Western corporations to profiteer, often at the expense of public
institutions in the operation of services.
the domestic and international
economies’. These radical free-market ideas, coupled with new
18 technology and the ease of moving money, prompted the rapid
financialisation of the global economy. 17
In a financialised world, accountants are indispensable. They
provide consulting services, including tax advice, financial risk
management, and financial management advice, amongst other
things.19 They act as both monitors and spurs of the financialised
global economy.
AUDITORS
The Big Four are primarily known for providing auditing services.
South Africa’s Independent Regulatory Board for Auditors
(IRBA), separates auditor’s services into three categories:
■ internal audit services. Internal auditors work in-house.

They develop risk and compliance services, and review and
monitor internal financial controls and policies.20 Internal
audit services may or may not be outsourced to a Big Four
firm.
■ external audit services. External auditors are brought in
from outside, and are responsible for reviewing a company’s
financial statements; providing assurance services, such
as ‘regulatory reporting, sustainability, compliance and
performance reporting’;21 and signing off whether the
financial statements fairly reflect the financial reality of the
company. 22
■ forensic audit services. These services are procured when
an audit is deemed unsatisfactory, often on the suspicion
of malfeasance of some sort.23 The main role of forensic
auditors is to investigate irregularities and alleged fraud,
and to consider whether audit systems have failed and if
laws and regulations have been breached.24 Forensic audits
often involve one member of the Big Four investigating the
questionable work of another member.
In this way, external auditors are responsible for publicly

declaring whether a company’s financial statements are
legitimate. Investors and the public rely on these declarations
to judge the state of a company and make investment decisions.
The gravity of auditors’ failures in this duty is best illustrated
by the losses experienced by investors – including pensioners
and pension funds – in firms such as Steinhoff, where external
auditors missed glaring inaccuracies in the financial statements.
Th e Big Fou r – 11
The role of internal auditors requires equal scrutiny. Internal
auditors are much closer to the management and governance
systems of the company, and thus are better placed to spot
fraud and weak internal controls. Yet there are essentially no
legal requirements to ensure that internal auditors are held
accountable.25 There may also be conflicts of interest where the
firm providing internal audit services might avoid “rocking the
boat” with a client who employs their other services and pays
lucrative fees.26 Given that internal auditors are required to assess
and develop the efficacy of internal governance and controls,
their failure can have grave consequences, as will be discussed in
the case study of SAA.
CONSULTANTS
The core business of the Big Four has increasingly moved to
“professional services”. It is their role as consultants and tax
advisors that has cemented their place in the global financial
economy. These services may also include the establishment of
secretive trusts to obscure the link between people and their
assets, the setting up and selling of shell companies, and advice
about secret jurisdictions and tax havens.27 Despite the obvious
loopholes for malfeasance and tax evasion, such trusts and other
offshore services are usually legal.
The latter half of the 20th century saw the rise of global
“secrecy jurisdictions” – countries and cities that created legal
frameworks for wealthy individuals and corporations to escape
both taxes and the rule of law in their own countries.28 These
secrecy jurisdictions have become havens not just for tax-
dodging multinationals, but also for a global criminal elite of
fraudsters and kleptocrats. In South Africa, we know too well
that the proceeds of the crimes of state capture have long been
siphoned through Dubai and Hong Kong on behalf of the Guptas’
enterprises by local branches of global banks. 29
According to the Tax Justice Network’s Financial Secrecy
Index, between $21 trillion and $32 trillion of private
financial wealth is located, untaxed or lightly taxed, in
secrecy jurisdictions around the world. This drains resources
from poor countries and channels it to wealthy ones. Foreign
aid receipts are eclipsed by the resources lost to tax avoidance
and grand corruption.30 This system that siphons money out of
developing countries into the hands of private shareholders has
been described as ‘colonisation by other means’. 31
Accountants are not unwitting participants in these dubious
schemes. Research by the Financial Action Task Force (FATF)
in 2018 found that accountants who were involved in setting up
corporate vehicles to obscure beneficial ownership were most
likely to be directly and knowingly complicit in the scheme to
disguise ownership to obscure a crime.32 The study found that
‘accounting professionals represented the highest proportion
of scheme designers and promoters in the case studies, and
were more likely to promote their own scheme to prospective
clients than to simply facilitate a scheme designed by their
client’. 33
In every tax haven,
the Big Four ‘are the
constant feature…
Without one of those
firms or all of those
firms being present,
you really will not have
34
a tax haven’.
This reality is borne out
by the implication of
these firms in countless
public scandals.
An instructive example is the $456 million (nearly R10 billion)
fine imposed on KPMG in 2005 for “tax-shelter fraud”. Between
1996 and 2003, according to the United States Department of
Justice, KPMG defrauded the US tax authority by designing,
marketing and implementing illegal tax shelters.35 KPMG
concocted transactions for wealthy individuals and filed false
and fraudulent tax returns that claimed phoney tax losses.
KPMG personnel also failed to register the shelters with the US
tax authorities, as is required by law. According to the firm, this
scheme generated at least $11 billion (over R200 billion) in fake
tax losses. 36
A former KPMG partner admitted to the scheme and to
senior partners’ knowledge of it, stating:
‘I wilfully aided and abetted the evasion of taxes…

to help wealthy taxpayers significantly and illegally
reduce their tax liability to the U.S. Internal Revenue
Service so that they could keep the money for
themselves instead of paying the taxes they owed,
and also so that KPMG and other entities could earn
significant fees … [Schemes] were… designed and
approved by senior partners and leaders at KPMG
and other entities to allow wealthy taxpayers to claim
phony losses on their tax returns through a series of
complicated transactions.’ 37
Despite this damning admission, KPMG received a deferred

prosecution and paid a sum far smaller than the profits they
made from the scheme. This slap-on-the-wrist approach to
accountability for unlawful conduct by the Big Four is typical,
and it entrenches a system of impunity.
It should, therefore, be no surprise that similar stories
implicating other members of the Big Four are common. Ernst
and Young (EY) paid $123 million to US regulators in 2013
after admitting that, between 1999 and 2004, its senior partners
had been involved in developing, marketing and defending tax
avoidance schemes to dodge taxes worth $2 billion. 38
Also in 2013, Action Aid revealed a confidential Deloitte
document that encouraged investors to use Mauritius to
escape taxes. The document, titled ‘Investing in Africa through
Mauritius’, makes clear Deloitte’s plans to reduce the tax burden
of its wealthy clients at the expense of African states, including
reducing capital gains tax to zero. 39
In 2014, PricewaterhouseCoopers (PwC) was found to
have negotiated over 500 deals with the tax authorities in
Luxembourg, a notorious tax haven, on behalf of over 300
multinational companies. These secret deals allowed for loans
to be directed to shelf companies that were specially set up by
PwC in Luxembourg to allow the companies to pay tax at a rate
below 1%. 40
These examples illustrate a culture of institutional behaviour
that has normalised skirting the rules and placing profit above
principle for the sake of consulting clients.41 Poor practices
thrive when organisational incentives are incongruent with the
public interest. This is one of the findings of the Auditing for
Accountability report, based on a 2020 investigation by a group
of European academics into the causes of audit failure in the
United Kingdom. The authors note that the primary incentives
for professionals in the industry prioritise firm performance
(predominantly linked to consulting revenues) and maximise
the related bonuses for partners. 42
THE HUMAN COST

These tax avoidance schemes of the Big Four detrimentally impact both the poorest
countries and those who live in poverty in wealthier nations. In both instances, the
loss of tax revenue constrains state spending on social development and essential
services, undermining elected governments and depriving people of jobs and
access to services such as healthcare, education and pensions.43 Despite this, their
work is cloaked in the language of legitimacy: ‘The language that is used offshore is
very euphemistic, terms like “tax minimalisation”, “neutral taxation”… [I]t actually
means “no tax”… [A]ll this language is used to make people feel comfortable. As
though they are managing the environment and making choices that are legitimate
and proper. Actually, they are trying to get around the law’.44
THE INDEPENDENCE
CONUNDRUM
Putting aside for a moment the deleterious effects of the
‘consulting’ work described above, there is a further consequence
of the growing importance and profitability of the advisory side
of the Big Four’s business.
With consultancy now making up around two-thirds of
their income, these firms have to strike a balance to avoid facing
an “independence conundrum”.45 That is, the commercially
lucrative consultancy services ought not to compromise the
credibility of the auditing side of the firm.46 Unfortunately,
evidence increasingly suggests that the Big Four have repeatedly
failed to strike and maintain this balance. 47
A notable decline in the quality of audits performed by the
Big Four illustrates the shift towards professional services.48 In
2019, the UK’s regulator, the Financial Reporting Council (FRC),
reported that none of the Big Four had surpassed the 90% target
that classifies audits as good quality.49 The quartet’s inability or
reluctance to flag suspicious financial statements has resulted
in job losses, the failure of several large corporations, and vast
losses for pensioners and other investors. Deloitte’s conduct at
Steinhoff and Tongaat Hulett, as discussed in the next section,
are South African examples of a global phenomenon.
In some cases, audit failure has contributed to corporate
implosion and global financial crises. In 2001, the collapse of US
energy giant Enron revealed massive corporate fraud. Its auditor,
Arthur Andersen, had become deeply embedded in Enron but
failed to report the company’s overstated profits and money-
laundering by executives.50 When US investigators started
closing in on the vast fraud at Enron, Arthur Andersen’s senior
audit partner on the project ordered the immediate destruction
of physical and electronic documents. 51
Enron filed for bankruptcy in 2001, costing employees and
investors billions. Its insolvency was so complex that PwC’s
administration of the firm only ended in 2015.52 For its part,
Arthur Andersen was convicted in 2002 of obstruction of justice
linked to the destruction of documents. This was overturned by
the US Supreme Court on a technicality in 2005, but by then the
one-time accounting heavyweight was defunct. 53
Despite what should have been a crucial
learning curve for the auditing industry
and their regulators, audit firms have continued
in many instances to rubber-stamp inaccurate
financial statements, aiming to please clients rather
than preserve the interests of shareholders and, ultimately, of the
economies in which the public and private companies they audit
operate.
This was the case in 2008, when the Lehman Brothers
investment bank declared bankruptcy. From 2001 until its
collapse, Lehman Brothers employed EY as its independent
external auditor.54 However, because the firm maintained a
long-term relationship with the bank, EY also provided advisory
services. During its tenure at Lehman, EY oversaw a process
in which the bank began using “Repo 105”, an unorthodox
financing transaction that allowed the bank to look like it was in
better financial health than it really was.55 EY not only failed to
disclose this to the board of Lehman but failed to flag impaired
assets in its liquidity pool.56 EY also did not inform the bank’s
audit committee of a crucial whistle-blower’s concerns about
their finances. 57
Along with other financial institutions, Lehman was involved
in the sub-prime mortgage scandal that precipitated the global
financial crisis, as well as the repossession of the homes of millions
of people who were swindled by the banks. Lehman’s collapse,
which resulted in 25 000 jobs lost in the US and its international
offices, was a key event in the economic downturn and the
government’s eventual massive bailouts to prevent further bank
failures.58 The financial contagion led to extensive job losses, an
economic downturn, and enforced austerity across the globe.
Lehman Brothers became a symbol of the interconnectedness
of the global economy and the unbridled impact of mega-
corporations on the livelihoods of ordinary people.
Neither EY nor Lehman has been sufficiently held to account
for their conduct. EY settled one case, with the New York
attorney-general, for $10 million, and another class-action suit
brought by investors for $99 million.59 Despite these payments,
EY has not admitted any wrongdoing and has not divulged the
full extent of its advisory services for Lehman Brothers.60
These examples provide insight into the devastating
consequences of audit failure. In many instances, the failures were
made by auditors who had become deeply embedded in their $
client’s firms and provided a range of non-audit services. We will
return to the issue of splitting the auditing and consulting arms
$
of these firms in the recommendations at the end of this report.

$
EY IMPLICATED IN ANOTHER SCANDAL

In April 2020, a UK court ordered EY to pay $11 million to Amjad Rihan, a former
EY partner, after it found that Rihan was forced to resign after exposing money-
laundering and compliance failures by EY client, Kaloti, the largest gold refinery in
the United Arab Emirates.61 According to the judgement, ‘EY colluded with Dubai
authorities to cover up the damaging findings that Kaloti Jewellery International was
involved in laundering billions of dollars in cash’.62
FAILURE BY ONE, BONANZA FOR
ANOTHER
While the failure of an auditor to identify fraud and irregularities
can have awful consequences for the public, it is an opportunity to
cash in for those selected to clean up afterwards. Indeed, there is
perhaps no clearer evidence of the Big Four’s monopoly than
this recurring pattern in which one Big Four firm is brought
in to pick up after another member of has made a “mistake” or
been implicated in criminal activity – regardless of whether it
has an identical track record.
For example, and as discussed in the case studies below,
PwC was contracted to undertake forensic investigations at
both Steinhoff and Tongaat Hulett after Deloitte failed to report
suspicious activities and fraud at both corporations. PwC earned
millions in fees for this work. Yet, PwC itself has been implicated
in nearly identical failures elsewhere.63 Notably, in 2007, PwC
was fined $225 million for failing to flag an overstated profit of
$5.8 billion at Tyco, the former security systems company. When
it was brought to light, the fraud ultimately cost investors an
estimated $10 billion. 64
On some rare occasions, none of the Big Four can be hired
for the forensic investigation – because they are all implicated.
In what is considered the biggest financial crime of the century,
Danske Bank’s Estonian branch was found to have laundered
over €200 billion for corrupt and organised
criminal groups, mostly from Eastern Europe.
In February 2019, allegations surfaced that
Swedbank was implicated in the Danske scandal. It
hired EY to investigate some of these allegations. Five days later,
it had no choice but to fire EY when it emerged that the latter was
under investigation for its own role in the Danske scandal. EY
had allegedly failed to alert authorities to irregularities in Danske
Bank’s 2014 annual report.65 Swedbank would learn that it could
not rely on the services of any of the other Big Four firms.
Between 2010 and 2014, Danske Bank itself had switched
between Grant Thornton, PwC, KPMG, Deloitte and EY,
ostensibly to ensure quality by rotating auditors.66 Not one
of these firms identified or reported the extensive evidence of
money laundering and suspicious transactions through Danske’s
Estonian branch. They all signed off unqualified audits.67
When challenged, many argued that their job is not to look
for laundering. But regulators and financial experts responded
that the Bank’s extensive money-laundering systems resulted
in the kind of massive profit margins and rapid transactions at
small branches that should raise the suspicion of any competent
professional auditor. 68
The systemic problems that define the auditing industry have
been described here with global examples. South Africans have
felt the consequences of such failures much closer to home. Each
of the Big Four firms has been implicated in South Africa’s most
infamous economic crimes, from corporate fraud to the grand
corruption that defined state capture. We turn to these case
studies now.
THE AUDIT RAP SHEET
96% OF ALL COMPANIES LISTED ON THE JSE ARE AUDITED BY ONE
OF THE BIG FOUR, WHICH HAVE BECOME SOME OF THE BIGGEST
COMPANIES IN THE WORLD. YET THEY ARE ALL IMPLICATED IN
SCANDALS IN SOUTH AFRICA AND AROUND THE WORLD.
• PwC acted as auditor and consultants for Sonangol, the Angolan government owned
oil company which was used by Isabel dos Santos to secret away billions from the
Angolan fiscus through a network of 400 shell companies.
• In 2014, PwC was found to have negotiated over 500 deals with tax authorities in
Luxembourg which allowed companies to pay tax at a rate below 1%.
• In 2007, PwC was fined $225 million for failing to flag 2

an overstated profit of $5.8 billion at US firm Tyco. This
fraud ultimately cost investors an estimated $10 billion.
• PwC failed to identify major misstatements while the

external auditors at SAA. PwC and its partner, Nkonki,
earned R19 million for their work at SAA, but were
only fined R200 000 for failing to disclose SAA’s non-
compliance with legislation.
• In 2013, a Deloitte document was leaked. It encouraged investors to use

Mauritius to escape taxes, as part of a package to reduce the tax burden of its
wealthy clients at the expense of African states.
• Deloitte failed to report suspicious activities and fraud at both Steinhoff and
Tongaat Hulett. The Steinhoff fraud resulted in an overnight loss of R120 billion,
to the detriment of 948 pension funds. The Government Employees Pension Fund
(GEPF) alone lost over R21 billion. Tongaat’s “accounting irregularities” meant
that the company’s assets were overstated by R10 billion.
• Deloitte’s audit of African Bank failed spectacularly in 2014. Deloitte missed red
flags in the overstated future cash flow predictions for the Bank and ignored
the red flags raised in their own internal reports.
• Deloitte earned R207 million in fees for an Eskom tender based on an irregular
contract. In March 2020, Deloitte agreed to pay back R150 million, which allowed
them to keep over R57 million earned between April 2016 and September 2017.
Sometimes, all of the Big Four are implicated in a single
scandal. Each of the Big Four acted as external auditors
for Danske Bank at some point between 2010-2014. This
was the period in which the bank was used to launder
200 billion euros for organised criminals and authoritarian
governments in Eastern Europe.1 They all gave unqualified
audits.
• EY paid $123 million to US regulators in 2013 after admitting that, between 1999
and 2004, its senior partners had been involved in developing, marketing and
defending tax avoidance schemes to dodge taxes worth $2 billion.
• EY acted as auditors and consultants for Lehman Brothers and did not raise red
flags over questionable accounting practices at the bank nor act on a whistle-
blower’s report. The fraudulent practices led to Lehman’s collapse in 2008, viewed
as one of major catalysts of the Great Recession.
• In April 2020, a UK court ordered EY to pay $11 million to
Amjad Rihan, a former EY partner. Rihan was forced to resign
after exposing money-laundering and compliance failures by
EY client, Kaloti, the largest gold refinery in the United Arab
Emirates.
4
• KPMG was fined $456 million (nearly R10 billion) in 2005 for
“tax-shelter fraud”. Between 1996 and 2003, it concocted
transactions for wealthy individuals and filed false and
fraudulent tax returns that claimed phoney tax-breaks. The
scheme cost the US fiscus $11 billion (over R200 billion).
• KPMG auditor, Sipho Malaba, failed to raise any red flags in VBS statements
and provided a falsified regulatory audit opinion. VBS’s failure had catastrophic
consequences for its poorest depositors, stokvels, and municipalities.
• In 2015, KPMG produced the erroneous and fictitious “rogue unit report” for SARS.
This report was used to fire over 50 senior SARS officials and it was a contributory
factor in diminishing SARS’ capacity.
• KPMG provided tax-advisory services to and audited Linkway Trading, a Gupta shell
company. Linkway was used to launder money from the Estina Dairy Farm. KPMG
earned R40 million rand for its work.
19
Every year for 20 years,
Deloitte concluded that
Steinhoff’s financial
statements ‘fairly present,
in all material respects,
the financial position of
the company’. Until 2017,
they were apparently
oblivious to the billion-
rand hole in the company’s
finances. When they finally
did refuse to sign off the
statements in November
2017, thereby precipitating
exposure of the true extent
of the rot at Steinhoff, it
was too late.
20
AUDITING
SOUTH AFRICA’S
CORPORATE GIANTS:
STEINHOFF AND
TONGAAT HULETT
STEINHOFF: A STELLENBOSCH
FRAUDSTER IN THE BRITISH
VIRGIN ISLANDS
“Accounting irregularities.” This phrase can cover all manner of
sins. On 5 December 2017, the board of retail giant Steinhoff
announced they had discovered ‘accounting irregularities
requiring further investigation’1. We now know that a
subsequent PwC investigation uncovered sophisticated schemes
perpetrated by former CEO Markus Jooste and his friends
to grossly enrich themselves while defrauding the company
and its shareholders, including nearly 1 000 pension funds.2
Steinhoff had misrepresented its financial position to investors
and the public for years. At the announcement of the so-called
“irregularities”, R120 billion in value disappeared overnight,
as investors frantically sold their stock in the company.3
Millions of South African pensioners lost out.
21
The story of how Markus Jooste pulled off South Africa’s largest Self-dealing occurs when
a corporate officer or other
corporate fraud is deeply linked to the secretive offshore havens fiduciary acts in their own
of the financial world. While the details are complex, the basic best rather than in the best
interest of their clients, firm or
story is that Jooste was the beneficiary of deals between Steinhoff shareholders. Self-dealing may
and numerous companies in which he had a hidden stake. In take many forms but generally
many cases, he had obtained his hidden stake in the company just involves a conflict of interest,
and often involves an individual
before Steinhoff purchased it at a premium.4 In others, Steinhoff benefiting from a transaction
sold properties to companies linked to Jooste or his friends, and that is being executed on
behalf of another party.
then overpaid to buy them back. For at least a decade, these
“self-dealing”5 transactions made a fortune for Jooste and his
friends, including members of the Steinhoff family. According to
the book Steinheist, written by Financial Mail editor Rob Rose,
‘Insiders agreed the likely upshot was that the friends got rich
and Steinhoff ’s balance sheet was artificially inflated’. 6
Jooste was able to hide his interest in the companies involved
because the corporate vehicles were set up and fronted in tax
havens and secrecy jurisdictions like the British Virgin Islands
(BVI). Jooste’s fixers even bought a shelf company in Bermuda
from the notorious Panamanian law firm and corporate services
provider Mossack Fonseca, which was exposed in the Panama
Papers as being at the centre of secretive offshore finance.7
Because the ownership of these companies was secret, their
dealings with Steinhoff would not be reported as being between
“related parties”, as they should have been.
PENSIONERS BEAR THE BRUNT

Millions of South African pensioners were directly harmed by Jooste’s actions and
the subsequent implosion of Steinhoff. Because of the company’s apparent growth
and stability, 948 pension funds in South Africa were invested in or exposed to
Steinhoff. As a result of fraud and governance failures, the company lost 98% of its
value in just two years – and most of this happened in 24 hours in September 2017.
The Government Employees Pension Fund (GEPF), which provides for civil servants
in their retirement, alone lost over R21 billion.8 The idea that corporate criminality
is victimless is far from reality.
WHERE WERE THE AUDITORS?

A subsequent forensic investigation by PwC concluded that ‘a
small group of Steinhoff Group former executives and other
non-Steinhoff executives, led by a senior management executive,
structured and implemented… fictitious and/or irregular
transactions’, and that these practices went back ‘at least a
decade’9 and helped ‘boost profit’ by over R100 billion. Steinhoff
was described by investor Karin Richards as ‘in effect just a giant
Ponzi scheme’10. So how did the auditors not spot what was
going on?
Steinhoff listed on the JSE in September 1998. From then
on, Deloitte (at the time, Deloitte & Touche) was the company’s
external auditor, signing off the annual financial accounts. Every
year for 20 years, the Report of the Independent Auditors held
Deloitte’s assurance that Steinhoff ’s financial statements ‘fairly
present, in all material respects, the financial position of the
company’11. Until 2017, they were apparently oblivious to the
billion-rand hole in the company’s finances. When they finally
did refuse to sign off the statements in November 2017, thereby
precipitating exposure of the true extent of the rot at Steinhoff,
it was too late.
In its dramatic reconstruction of the week that Steinhoff ’s board
first discovered Jooste’s deception and the company collapsed,
Rob Rose’s Steinheist captures some remarkable insights into
Deloitte. For one, when Deloitte first told Steinhoff chairperson
Christo Wiese that they suspected fraud and misrepresentations
in the company accounts, Wiese immediately pointed out that
most of the evidence had been available in the previous years’
accounts, on which they had signed off.12 Had they been wrong
then? They could only admit they probably were. The Steinhoff
board later found that both the 2015 and 2016 financial
statements needed to be restated. 13
Secondly, Deloitte had demanded that Steinhoff institute
a forensic investigation before it would sign off the accounts.
Wiese summoned Markus Jooste to the meeting and, after an
Professional scepticism: hour or so of smooth talking, Deloitte’s representatives were
Professional scepticism refers
to ’an attitude that includes a
willing to withdraw their demand, subject to being given certain
questioning mind, being alert to documents.14 Although they changed their minds a day later, the
conditions which may indicate momentary willingness to back down – despite what must have
possible misstatement due to
error or fraud, and a critical been significant evidence of wrongdoing – is instructive.
assessment of audit evidence’.17 This window into the relationship between a company and
its auditors reveals factors seen in countless examples of auditing
failure. Deloitte was entrenched in a decades-long relationship
with a corporate giant run by a small group of executives who
were happy to settle deals with a handshake at the expense
of effective governance and accountability. It only acted and
refused to sign off financial statements when the evidence was
overwhelming.
In 2018, Deloitte stated that, while they accepted the need
for an investigation by the Independent Regulatory Board for
Auditors (IRBA), they remained ‘confident in their conduct’ at
Steinhoff. 15 Deloitte defends itself on the basis of the questions
they raised about the 2017 accounts. It should be noted that this
only occurred after a criminal investigation related to possible
fraud had commenced in Germany and other evidence of
fraudulent transactions was overwhelming.
Another defence – one that the Big Four trot

out every time they are caught in a crisis – is
that they rely on the honesty of their corporate
clients. If this is the case, it is hard to see what
function an auditor plays: the public does not
need an auditor to report what a CEO says about
the company. The dilemma for firms like Deloitte
is to admit either their complicity in corporate
fraud and governance failure or that they were
hoodwinked by the executives. Neither fills the
16
public with confidence or explains why their work

generates such extortionate fees.
Given what is now public knowledge, it is hard to accept
that an alert external auditor, using the proper standard of
professional scepticism and common sense, and with insight
into all of Steinhoff ’s accounts, should not have raised red flags
earlier.
Auditing South Africa’s Corporate Giants: Steinhoff and Tongaat Hulett – 23

NO ACCOUNTABILITY
While investors and pensioners suffered huge financial losses in
the Steinhoff debacle, it has been a bonanza for another member
of the Big Four and a range of other consultants. In 2018, Steinhoff
paid R2.4 billion in advisory fees alone, much of which went to
‘creditor advisers’18. It paid another R1.3 billion in 2019, over 10%
of which went to PwC for the forensic investigation and other
accounting fees. Steinhoff expects these fees will continue. 19
Despite the PwC report, efforts to hold anyone to account –
Jooste, other executives, or the auditors – have been slow. When
Jooste eventually did appear before parliament in September 2018,
he was evasive and refused to accept any responsibility or to answer
questions about those who assisted in setting up his offshore
network.20 He had clearly come ‘well prepared to obfuscate and
deflect blame from himself ’. 21
South Africans are increasingly frustrated with the ability of
corporate titans like Jooste to avoid accountability. One crucial
factor is the manner in which the state institutions tasked with
accountability for economic and financial crimes have been gutted
by interference by political and corporate elites in recent years.
The obstruction of political will and technical capacity in the
police service’s Directorate for Priority Crime Investigation
(the Hawks) is just one example. Such institutional weakness is
a windfall for former Steinhoff executives and other corporate
crooks.
It has been confirmed that the IRBA is investigating Deloitte’s
conduct at Steinhoff, although the investigation was paused
pending the restatement of the financial reports. 22 However, the
sanctions imposed by the IRBA are notoriously light compared
to the cost of the errors. It is also very rare for the audit firm, as
opposed to the individual auditor, to face any hard accountability.
Steinhoff ’s European investors may well be the first to demand
that Deloitte account for what happened at Steinhoff. VEB, a
Dutch shareholders association, has filed a lawsuit against Deloitte
in a court in the Netherlands. They are claiming damages from
Deloitte, alleging that the auditor ‘seriously failed in its statutory
task’ by signing off the financial statements prior to 2017. 23
TONGAAT HULETT: DÉJÀ VU

In 2019, as Deloitte was facing tough questions about its work
at Steinhoff and African Bank, a third corporate scandal broke.
It was eerily similar to the Steinhoff story, and not just because
Deloitte was the auditor. 25
The South African sugar company Tongaat Hulett is a
corporate giant. More than 120 years old, it employs 40 000 people
in six countries in southern Africa.26 In March 2019, it announced
it was reviewing financial statements because it had identified –
yes, you guessed it – “irregularities”. By June, the share price had
AFRICAN BANK
Deloitte also faces allegations of wrongdoing in an IRBA investigation related to its
auditing of African Bank, which failed spectacularly in 2014. The IRBA claims that
Deloitte auditors not only missed red flags in the financial statements that massively
overstated future cash flow predictions for the Bank, they also ignored the red flags
raised in their own internal reports.22 At this writing, the IRBA’s disciplinary matter
against two Deloitte partners is still proceeding and Deloitte is vigorously fighting
the case.
fallen over 80% and Tongaat suspended trading on the JSE as it
became clear that the financial statements were inaccurate and
would have to be restated. Several executives, including the CEO
of fifteen years, Peter Straude, have left the company and Tongaat
has announced it will pursue both civil and criminal action
against many of them. 27
This was announced on the back of a forensic report, again
commissioned from PwC. The investigation revealed that, as
with Steinhoff, executives made numerous incorrect and likely
fraudulent misrepresentations in the financial statements.
This included misstating the value of assets; incorrectly listing
expenses as assets; declaring income from the sale of land that
had not yet been sold, and then, when some of those deals fell
through, failing to declare that.28 All of these misrepresented
the amount of profit being earned. Again, it was a catastrophic
failure of corporate governance.
PwC described all of this conduct under the nebulous and

inappropriate phrase ‘undesirable accounting practices’.
29
In December 2019, Tongaat confirmed that these

‘undesirable’ practices led to the 2018 financial statements 30
being wrong to the tune of nearly R12 billion and that the 31
company’s assets were overstated by R10 billion.
As with Steinhoff, and as is common across the globe, Tongaat
had used the same auditors for a long time. In this case, Deloitte
had provided its services to the company for more than 15 years.
Since the story broke, Deloitte has replaced all the auditors
who worked on Tongaat’s financial reports, including a senior
partner. Yet the firm is still quick to defend their work, saying
that, ‘at this stage, we have no reason to believe that any current
or previous Deloitte partner or staff member may have acted
outside of professional standards’32. Again, they do not explain
how acting within professional standards could miss such
extreme misrepresentations in financial statements.
NO DISCLOSURE
Another similarity between the Steinhoff and Tongaat case studies is that both
companies have refused to release the full forensic reports compiled by PwC and
taken refuge in legal privilege.33 This allows the companies to cherry-pick which
findings are released, and the public is denied access to the complete findings.
Given the public cost of these corporate crimes and the public interest in truth and
accountability, it is anathema to transparency and accountability that these reports
remain locked away behind closed doors.
The IRBA is also investigating Deloitte’s conduct at Tongaat. This

make’s the decision of IRBA’s board at the end of April 2020 to
appoint Jenitha John as the new CEO all the more concerning.
John was the non-executive director who headed Tongaat’s audit
committee for nine years up to May 2019, precisely the period
when Tongaat’s accounts were a fiction and investors were lied
to.34 The conflicts of interest are serious. John must now lead an
organisation tasked with investigating the Deloitte auditors that
reported to her as head of the audit committee. It also remains
possible that SAICA (the South African Institute of Chartered
Accountants) will investigate John for her role in during this
period.35 While Finance Minister Tito Mboweni has announced
that he will review the process that led to John’s appointment,
John took up the position on 1 June 2020.
Auditing South Africa’s Corporate Giants: Steinhoff and Tongaat Hulett – 25
“I don’t sleep – I’m
constantly thinking
about my lost money
and worrying about
the future. I feel
like I could just die
because of the pain
I’m feeling right now.
I’m heartbroken.”
1
Tshinyalani Mudau
59-year old breadwinner who may
never recover R500,000 saved over
25 years that she lost to the VBS heist.
26
VBS: AUDIT
FAILURES ENABLE
A BANK HEIST
LOOTED UNTIL THERE WAS
NOTHING LEFT
VBS was also a case study in The Bankers, the first volume of
CECR, published in 2018. Grand corruption and crime are often
enabled by bankers, lawyers and accountants, but VBS was a
case of banking executives themselves looting the bank. And not
just creaming some money off the top, either – the entire bank
was essentially stolen. Now that we know the full extent of what
some have termed an ‘industrial-scale looting exercise’,2 a crucial
question lingers: how did the professional internal and external
auditors not spot conspicuous irregularities in the financial
statements?
VBS was set up as a building society in 1982 in what was,
under apartheid, the Venda Bantustan and became a mutual
bank in 1992. By the time of its implosion, it served tens of
thousands of depositors in Limpopo province, including many
poor and working-class people. It was placed under curatorship
as a result of a liquidity crisis in March 2018, but some hoped the
bank could still be saved. By November, these hopes were dashed
and the final liquidation order was granted by the High Court.
The bank could not be saved because it had been looted
into insolvency. An independent report, commissioned by the
South African Reserve Bank and authored by senior advocate
Terry Motau, found that 53 individuals and other entities had
benefited from VBS money to the tune of just under R2 billion.3
27
In November 2019, the bank’s liquidator announced that
R800 million more than initially thought was stolen – making
the total as much as R2.7 billion.4 The deposits of everyday South
Africans had been looted by bank executives to pay for luxury
cars, multiple properties and various personal vanity projects. 5
Stolen cash was also used to bribe those who were responsible
for oversight to look the other way. Two officials of the Public
Investment Corporation (PIC), Ernest Nesane and Paul Magula,
were placed at VBS as non-executive directors for the specific
task of guarding the PIC’s investment at the bank. Instead, the
two accepted nearly R30 million in cash and loans in exchange
for their silence. 6
In order to plug the holes left by the looting, cash-strapped
municipal officials also received “inducements” to unlawfully
place municipal deposits with VBS. These municipalities –
themselves in desperate need of funds for the provision of key
services to their residents and to pay their staff – lost around R1.6
billion.7 Former Chief Financial Officer at VBS, Philip Truter,
is also alleged to have generated fictitious deposits in the bank’s
IT system while the real deposits were being siphoned out.8
Between 2015 and 2018, Truter received at least R5.8 million in
cash, bonds and vehicle finance from VBS bank. 9
BRAVE CFO DOES RIGHT

Mariette Venter was the acting chief financial officer of the Capricorn Municipality in
Limpopo. Taking a stand against suspicious and unlawful conduct, she forced VBS
to return the municipality’s funds, despite being subjected to bullying by the mayor,
amongst others, and was afterwards unfairly suspended.10 But Capricorn, unlike
many Limpopo municipalities, was not financially crippled when VBS failed. Venter
told journalists:
“As a chartered accountant, you get one

chance. One chance to do the right thing.
Once you have thrown that away, it is gone.” 11
STOLEN FUTURES, SLEEPLESS

NIGHTS
In early 2019, former VBS chairperson Tshifhiwa Matodzi was
allegedly trying to hide his Ferrari from liquidators and to
stop them selling his R7 million mansion.12 They had already
secured and were planning to sell at least four other luxury
vehicles Matodzi owned. It is little surprise he was sitting on so
many luxury assets: Motau’s report alleges that Matodzi was the
number one beneficiary from the looting of VBS – taking R325
million. 13
At the same time, Tshinyalani Mudau was having sleepless
nights for very different reasons. The 59-year-old breadwinner
lives in Tshiulungoma, a small village in Limpopo. She told
journalists,
“ I don’t sleep – I’m constantly thinking about

my lost money and worrying about the future.
I feel like I could just die because of the pain
I’m feeling right now. I’m heartbroken.” 14
Mudau opened a savings account with VBS in 1993. Working as
a machine operator, she saved R600 000 in 25 years. She planned
to use it for her children’s university fees and to complete
renovations on her house. She has only been able to recover
R100 000, and does not know if she will ever get the balance of
her savings returned to her.
This is the situation of many VBS depositors. The assets of
five executives have since been sequestrated to recoup some of
the stolen funds, but there have been no prosecutions to date.15
The government provided relief to the most vulnerable by
guaranteeing the first R100 000 for individual and small retail
depositors. However, this was not only a further burden on
the strained fiscus; it also meant that these victims of the VBS
looting were compensated with taxpayers’ money.
In addition, more than 300 of the retail depositors with
balances above the R100 000 ceiling were small savings clubs,
burial societies and stokvels,16 whose members rely on them for
a range of expenses and may have urgent need to access their
money. Now they must wait with all the bank’s other creditors
for the recovery process to conclude, and the Reserve Bank has
confirmed it is uncertain as to whether and how much they will
ever receive. 17
KPMG AND PWC: WHERE WERE

THE AUDITORS?
The primary beneficiaries of the looting of VBS were its executives
and their friends, including politicians. However, as noted by
many financial commentators, this was an unsophisticated
heist. Not only was money looted straight out of the bank’s cash
reserves, but payments were made to obviously related parties
without the necessary reporting. This required VBS to publish
fraudulent misrepresentations in their 2017 annual statements
and their monthly regulatory reports to the Registrar of Banks. 18
The annual financial statements were signed off as an accurate
representation by KPMG. At the time, in 2018, KPMG was
reeling from the avalanche of evidence showing that it had not
only failed to report irregularities at Gupta firms implicated in
state capture for a period of 10 years, but had helped one firm to
hide a payment for the infamous Sun City Gupta wedding using
public funds from the Vrede Dairy Project in the Free State.19 We
will return to this below.
In March 2018, the minister of finance placed VBS under
curatorship. The appointed curator immediately found that the
bank could not confirm the existence of nearly R1 billion in cash
deposits. He also flagged deficiencies in the management of the
financial systems, as well as fraudulent transactions between
VBS and related parties. He could not understand how a senior
KPMG auditor had signed off the financial statements without
reporting a single transaction to the IRBA or raising any other
red flags.20 The annual financial statements had to be withdrawn
as they were completely inaccurate.
It turned out that this was not a case of an auditor being
hoodwinked by its client. KPMG’s lead auditor on the VBS
account, Sipho Malaba, is alleged to have covered up the
crimes. Motau’s report concludes that Malaba ‘gave an
unqualified audit opinion in circumstances where he knew the
financial statements were misstated. He also gave a regulatory
audit opinion which he knew to be false’.21 In plain words,
Malaba lied.
V BS : Au dit Failu res En able

a Ban k H eis t – 29
Malaba was a long-time KPMG employee, having completed
his articles at the firm nearly two decades prior and then rising
to become a partner. Although he earned around R2.5 million
a year (after tax, and including profit share from KPMG), he
apparently wanted more. It is estimated that he reaped up to R34
million in exchange for assisting in the cover-up at VBS. 22
This was done predominantly through loan facilities

that were extended to Malaba’s companies and
to himself in his personal capacity. This included
loans for three luxury vehicles through VBS’s special
financial scheme for employees and shareholders, 23
for which Malaba did not qualify. The loans turned

into gifts as Malaba would invariably reverse the
debit orders, and VBS would not follow up to pursue
repayment.
Under the weight of the evidence presented by Terry Motau,
Malaba eventually admitted that he had indeed ‘unduly
benefitted’ from his relationship with VBS.24 Malaba later
slammed Motau’s report as ‘biased’ and ‘inaccurate’, indicating
in October 2018 that he would challenge the report.25 We have
found no public record that he has indeed followed this course.
Malaba and another partner, Dumi Tshuma, resigned from
KPMG as soon as the allegations emerged, and KPMG later
reported Malaba to the police and said that they supported
criminal action against him.26 KPMG also stated that “Lessons
have been learned and decisive action has been taken”.27 Given
the recidivist history of firms such as KPMG (consider their
complicity in alleged crimes of state capture discussed below), it
is unclear what lessons have indeed been learned.
In 2019, Malaba and Tshuma sued KPMG for R30 million
each for damages they claim emanated from the firm’s statements
about their conduct. 28
JUNIOR AUDITOR SHUT DOWN

KPMG may wish to shield themselves from scrutiny in this case
by claiming that only a few individuals acted illegally. Motau’s
investigation points to a more complicated story. In what is now
a recurring theme in auditing failures around the globe, one
junior auditor did in fact spot trouble at VBS. He soon learned
that silence was the order of the day, even if the irregularities
could not be explained.
Zondi Nduli, a third-year audit clerk at KPMG, was simply
doing his job when he compared the amount of cash that VBS
claimed in their draft financial statements with the amount
reflected in the actual bank statements. He found a R700 million
overstatement in the financial statements.29 When Nduli asked
VBS to provide documents to explain this, the bank’s officials
were, of course, unable to.30 Sipho Malaba, the senior auditor,
was called in to clean up the situation.
Testifying under the promise of immunity, Nduli told Motau
that, when he saw the audit signed off by Malaba, he realised
that no further work had been done to clarify the glaring
problem he had seen in the cash accounts.31 Confused and
worried that he would be implicated in wrongdoing, he admits
to going back and deliberately altering his original audit note
to say that ‘specific procedures were performed by the Partner
and CEO respectively’.32 Nduli also testified that he spoke about
his concerns with both his counselling partner and counselling
manager at KPMG, but received ‘little assistance from them’.33
Motau’s report criticises the audit manager for failing to take
the opportunity to challenge Malaba on his suspicious conduct
regarding this audit.
As is apparent from this account, there was a team of KPMG
auditors working on the VBS financial statements in 2017. There
may have been a rogue auditor, but there was also a collective
failure to exercise the professional scepticism and accountability
that is required of auditors.
ACCOUNTABILITY?
In November 2018, the IRBA announced an extensive
investigation into the conduct of KPMG and Sipho Malaba at
VBS. This is an important step toward accountability. However, it
remains to be seen whether the ultimate sanction will match the
severity of the misconduct. The IRBA’s CEO Bernard Agulhas
admitted as much, but notes that they are also constrained by
government regulation:
‘The limits to sanctions are up to R200 000 per

charge. The public has expressed its dissatisfaction
and termed it a slap on the wrist. We agree. The
amount is far too low and so the act amendments
currently underway include an important change
which will allow the Minister of Finance to set the
upper limit to sanctions from time to time. This will
allow the IRBA to apply sanctions which are more
appropriate to the scale of the negligence.’
34
As we discuss later in this report, providing the IRBA greater and

more intrusive powers and ensuring its ability to enforce stronger
sanctions are essential to ensuring greater accountability for the
profession. Still, the IRBA cannot deliver criminal prosecutions.
For that, we must rely on state institutions to urgently re-build
their capacity to effectively prosecute corporate criminals.
WHAT ABOUT THE INTERNAL AUDITORS?

According to PwC COO Fulvio Tonelli, their task as internal auditors at VBS was
‘the consideration of VBS’s risk management, internal control and governance
processes.35 Identifying fraud may not have been within their scope, but the facts of
the case suggest that PwC’s consideration of risk, control and governance processes
at VBS fundamentally failed to assist the bank. This may be why the curator
immediately asked PwC to stop its work at VBS after his preliminary discovery of
the truth about the bank. The IRBA has confirmed that it is also investigating the
internal auditor from PwC.36
V BS : Au dit Failu res En able

a Ban k H eis t – 31
32
INVESTIGATION
SAA: HOW THE

ACCOUNTABILITY
COOKIE CRUMBLES
In February 2014, commercial baker Simon Mantell was pleased
to receive an email from Air Chefs, South African Airway (SAA)’s
catering subsidiary, that awarded his company a tender for the
provision of savoury crackers to the national carrier. Mantell
runs Mantelli’s, a South African biscuit factory in operation since
1988, and he had personally submitted the tender 10 months
earlier. It was a small deal in the context of SAA’s then R25 billion
procurement budget, but it was significant for Mantelli’s.
His excitement was short-lived. When he responded to
finalise the supplier agreement, Air Chefs made a brisk and
unexplained about-turn. Martin Kemp, the company’s acting
CEO and Head of Strategic Procurement, told Mantell that the
process was never supposed to be a tender and that Mantelli’s
had been placed on a panel of suppliers for possible contracts in
the future.1 The tender remained with CIRO, a subsidiary of the
conglomerate holding company Anglovaal Industries (AVI) and
a long-time supplier to SAA. 2
33
Despite the best efforts of executives at SAA and Air Chefs to
blow Mantell off, the baker – a chartered accountant by training
– was determined to get to the bottom of the suspicious reversal.
His efforts prompted internal investigations at SAA, several
external forensic investigations, an investigation by Treasury,
and an investigation by the Public Protector. These findings in
turn allowed him to launch complaints to the regulatory bodies
for both internal and external auditors, and the Legal Practice
Council.
While many of these investigations were flawed or
compromised, the combined findings provide a searing
indictment not only of SAA’s executive management but, as
importantly, of the army of auditors, accountants and lawyers
working for and on contract to SAA, that systematically failed
in their professional and legal duties. These actors enabled
malfeasance and allowed poor controls at the national airline
to continue unabated. While the likes of former chairperson
Dudu Myeni have much to answer for when it comes to
governance failure at SAA, she was flanked by a squadron of
enablers who did little to stop the rot.
The current Covid-19 pandemic will undoubtedly lead to
massive changes at SAA, not least because the state can ill-afford
the airline’s appetite for endless bailouts.3 This is little consolation
to South Africans who have seen tens of billions in public money
disappear into the airline due to gross mismanagement and
corruption, with little benefit accruing to the country.4 In his
budget speech in February 2020, Finance Minister Tito Mboweni
confirmed another R16.4 billion would go to settle some of SAA’s
debts while it was in voluntary business rescue, saying that ‘the
SAA sword of Damocles has now fallen on us’.5
In the Roman legend, the sword hanging above

Damocles is held in place by a single hair from a
horse’s tail. The South African public and its airline
should not have been in such a precarious position.
Internal governance and external oversight were
meant to ensure the sustainability of the enterprise.
A responsible board of directors staffed with skilled
professionals should be supported by internal
and external auditors who identify and report
misstatements. If the systems fail, then governance
structures call in forensic investigators to assist in
cleaning up areas of the organisation that require it.
In this story, not one of these actors offered the protection and
social functions they were supposed to provide. Instead, they
created the ideal enabling environment for corruption and,
ultimately, state capture.
THE DODGY TENDER AND
THE COVER-UP
After the abrupt withdrawal of the tender award to Mantelli’s,
Simon Mantell did the obvious thing and checked with SAA and
the winning bidder that they had submitted a bid. Air Chefs’
Martin Kemp refused to answer. AVI similarly refused to confirm
or deny whether CIRO had submitted a valid tender. It would
take a year for AVI’s lawyers at Bowmans to provide a simple
yes.6 This delay remains unexplained and Mantell still questions
whether the tender was valid, given that the tender register was
backdated by a week, which could have allowed for the inclusion
of late bidders. 7
In April 2014, with the baker breathing down its neck, SAA
said that their chief audit executive would conduct an internal
investigation and they would procure an external forensic
investigation – and share the findings with Mantell - in order to
“restore confidence” in the process.8 It took just two weeks for
the SAA internal investigation to give the tender the all-clear,
finding that it did not in any way contravene the Public Finance
Management Act (PFMA). 9
The report by Indyebo Consulting10, the small firm tasked
with the external investigation, did not absolve SAA of blame,
but its drafting suggests possible meddling by SAA. The oddly
formatted independent report includes SAA’s own arguments
copied into the text between Indyebo’s findings. These sections,
usually in bold and underlined, are labelled ‘management
comments’ and ‘legal comments’ and generally defend the
tender. Mantell says that Nondumiso Medupe, Indyebo’s CEO
who signed off the investigation, told him that they had come
under ‘unbelievable pressure’ from SAA and that some of her
staff had been ‘bullied’11. This may have led to the inclusion of
these sections.
Despite that, the report to which Open Secrets has gained
access clearly concludes that the tender was irregular and that Air
Chefs’ CEO had violated Section 51 of the PFMA. 12 This section
requires a procurement system to be ‘fair, equitable, transparent,
competitive, and cost-effective’.13 Wilfully or grossly negligently
failing to comply with Section 51 is a criminal offence and an
accounting authority found to have done so can face up to five
years in prison.14 Further, SAA management failed to disclose
this significant breach in the 2014 annual financial statements.
SAA seemed dead set against revealing the content

of the Indyebo report to Mantell at the time. Mantell
says that he and his lawyer were invited to meet
with SAA’s legal team in Johannesburg on 8 October
2014. There they were handed an almost entirely
redacted version of the report. Viwe Soga, the head
of SAA legal at the time, allegedly told them that he
was an officer of the court and so Mantell would
have ‘have to trust him’ that the Indyebo report had
15
found ‘no wrongdoing at all’. Soga had chaired first
16
Bid Adjudication Committee on the tender in 2013.
SAA: How th e Accou n tability C ookie C ru m bles – 35
Although Soga, a former attorney with ENS, was correct to
assert that one should be able to trust officers of the court,
in this instance he seemingly did little to engender trust. The
Indyebo report, despite its flaws, clearly found that the Air
Chefs tender had breached the provisions of the PFMA. Could
this have been a deliberate misrepresentation by Soga to cover
up what the external investigation had found?
Mantell laid a formal complaint related to this conduct and

the matter is currently before the Gauteng Legal Practice Council.
Soga faces charges of misconduct or alternatively bringing
the attorney’s profession into disrepute.17 He is contesting the
charges and the final hearings are due later in 2020.
Subsequent investigations of the Air Chefs tender – by the
National Treasury in 2015 and the Public Protector in 2020 – have
confirmed numerous problems, including poor specifications,
unfair scoring and the failure to disqualify tenders that clearly
should have been.18 It is worth noting that the Treasury also
recommended awarding a portion of the tender and signing a
service level agreement (SLA) with Mantelli’s, but this has never
been done. 19
It would be easy to dismiss Mantell as an aggrieved baker
who lost out on a tender. However, we present this case to
illuminate a problem that seems systemic: internal and external
professionals, those who should have prevented, corrected,
detected, and reported corporate corruption at SOEs, have been
asleep at the wheel.
SAA’S INTERNAL AUDITORS

Because the airline’s budget has been disproportionately spent
on procurement, any deficiencies and malfeasance in this area
pose a very high risk to the business. This fact should be flagged
and given attention by SAA’s internal and external auditors. We
now turn to how they failed in this important mandate.
When financial misrepresentations are discovered, external
auditors are first in the firing line. It is their professional obligation
to report any material irregularities and to provide public
assurance that financial statements are a fair representation.
However, the roles of internal auditors and the chief audit
executive at state entities are also of great importance and often
overlooked. After all, the health of internal governance processes
is determined first by internal auditors.
THE ROLE OF INTERNAL AUDITORS

Internal auditors should be sufficiently independent of the entity where they
work, and their central task is to evaluate and improve ‘the effectiveness of risk
management, control, and governance processes’.20 Where there are deficiencies
in these systems, the internal auditor should assist management to improve them.
In turn, the organisation’s audit committee, under the chief audit executive, is
ultimately responsible for providing oversight and support to build an effective
and independent audit function.21 This is essential to fulfil the requirements of the
board, in terms of the PFMA, to maintain an effective and transparent system of
financial risk-management and control.
At the time of the dry-snack tender, Siyakhula Vilakazi was the

chief audit executive at SAA. He was also the audit professional
tasked with leading the internal investigation into the tender in
May 2014. It took him just weeks to confirm that the tender had
complied with the PFMA. After both the Indyebo and National
Treasury reports found the opposite and confirmed that the
tender process was beset by flaws, Mantell filed a complaint
against Vilakazi at the Institute of Internal Auditors South Africa
(IIA SA). The IIA SA is a professional body that ‘upholds and
supports the fundamental tenets of the profession – the Code
of Ethics and the International Standards for the Professional
Practice of Internal Auditing’. 22
Open Secrets has seen the sworn affidavit submitted by
Vilakazi to the IIA SA and what it reveals is shocking. Vilakazi
confirms that SAA only insourced the internal audit function
in 2012 and it was still wholly inadequate in 2014.23 This was
confirmed by an external review undertaken by Outsourced
Risk and Compliance Assessment (ORCA). A few of the most
outrageous failures, also confirmed by Vilakazi,24 include the
following:
Internal audit staff used different computer programmes to

prepare audit papers, while many were simply handwritten. The
internal audit file on the dry-snack tender was one of these;
Many handwritten notes and manual audit files excluded key

findings or did not even indicate who had worked on that file. The
working papers in the Mantelli’s file were inadequate, like most
files from 2012–2015;
There was no system for archiving audits

at SAA, meaning that documents could be
accessed and changed by anybody without
Vilakazi’s knowledge;
SAA had no policy regarding the timeframes

for changing working papers, and this could be
done at any time;
In the case of this tender, Vilakazi had thrown

away the working papers from 2014 and
reconstructed and replaced them in 2016.
However, he backdated the file to 2014,
justifying this by saying that the findings had
not changed, and no additional investigation
had been done. 25
Given this chaotic state of controls and oversight, it is not

surprising that SAA suffered financially for so many years.
Yet despite these admissions and the evidence contained in
the Treasury report on the tender, the disciplinary committee
chaired by chartered accountant and long-time IIA SA director
Robert Newsome found that there was insufficient evidence to
sanction Vilakazi in any way. 26
But it would not be long before Newsome himself was in hot
water about his conduct in the investigation. Shortly after the
hearings into the matter started, Newsome had been appointed
as a director of ORCA, the company that had undertaken the
quality-assurance review of Vilakazi’s work and later received
a glowing review from Vilakazi. ORCA sat on an SAA supplier

panel and its biggest client at the time was the SAA subsidiary
Mango.27 Despite recommendations from colleagues to do so,
Newsome never declared this conflict of interest while chairing
Vilakazi’s hearing.
SAICA asked a disciplinary committee to suspend Newsome
for five years and to pay R100 000 in legal costs. The committee
would eventually uphold the complaint and rule that Newsome
had been unprofessional and should have disclosed the conflict
of interest.28 However, they refused to publish any details of
the ruling or sanction.29 When the finding was later leaked, it
emerged that Newsome had in fact only been reprimanded and
given a R50 000 fine that was suspended on the condition that
he receive training on conflicts of interest and did not commit
a similar offence.30 At the time this ruling was handed down,
Newsome was earning R2.5 million a year – as the acting head of
risk and compliance at SAA.31
The IIA SA has since indicated that the Vilakazi case should
be heard afresh because of Newsome’s conflict.32 There has
been no apparent movement in this regard. Unfortunately, the
conflicts of interest that inevitably arise when professionals
swing between positions in industry and regulatory bodies is a
familiar and unresolved story.
PWC: THE EXTERNAL AUDITORS

As external auditors, it was incumbent on PwC to consider
the state of internal audit controls and governance at SAA.
The external auditor’s job is to ascertain whether the financial
statements put forward by the board contain misstatements due
to error or fraud. This requires them to identify risks in internal
accounting and control processes, to exercise professional
scepticism, and to plan their audit accordingly.
PwC must have known of the poor state of internal controls
at SAA. Deloitte was SAA’s external auditor prior to PwC, and
their 2011 report clearly stated that they had observed serious
‘control deficiencies’, particularly with regards to procurement
and contract management.33 Because of this, they could not
establish that the company was compliant with Section 51 of the
PFMA.
In 2012, PwC and its partner Nkonki Inc replaced Deloitte as
the external auditor, and suddenly these concerns disappeared.
The annual reports from 2012 onward claim that the entity
was fully compliant with the PFMA and the efficacy of internal
control processes had been addressed. PwC signed off these
reports without identifying any reportable irregularities in the
financial statements or raising any red flags about the internal
processes. This does not match up with facts that are now public
record.
ORCA’s review in 2014, which revealed systemic deficiencies
of control and internal management, was presented to SAA’s
audit and risk committee. The chief audit executive, Siyakhula
Vilakazi, says that he ‘took the hiding’34 from the committee for
all of the internal audit problems. He admitted that the audit
working papers were completely inadequate in 2011, 2012, 2013
and 2014, which caused him to go back and re-write scattered
handwritten papers. 35 As the external auditors, PwC would have
taken part in this meeting, and thus have been aware of these
problems.
In 2017, with the airline in crisis, the auditor-
general (AG) took over the external audit function at
SAA. Presenting a qualified opinion on the financial
statements, the AG found that PwC and Nkonki had 36
not identified eight major misstatements and that

the board had failed to identify and report irregular
and fruitless expenditure and failed to accurately
account for inventory and maintenance of aircraft.
The AG also confirmed that SAA was clearly in
37
breach of the PFMA.
Simon Mantell, still doggedly pursuing the matter, complained
about PwC’s conduct to the IRBA. PwC director Pule Mothibe
forcefully defended the firm in a letter to the IRBA, asking them
to completely disregard the complaint. Mothibe’s letter seems to
defer to SAA management, indicating that the board had told
PwC that Mantell’s initial complaint was ‘spurious’ and merely
a reaction to his unsuccessful bid to win the tender.40 Mothibe
also claimed that ‘no matters were brought to our attention that
highlighted a heightened risk of fraud or error in procurement
processes at SAA’. 41
Most startling, however, is the letter’s statement that, ‘[i]n
August 2014 the joint auditors received the Indyebo Consulting
report (dated 08 August 2014). The Indyebo Consulting report
generally supported the conclusions reached in the SAA internal
audit findings’.42 This is simply untrue. The Indyebo report found
that, contrary to the SAA internal audit, the provisions of the
PFMA had been infringed. 43
Rejecting PwC’s plea, the IRBA investigated Mantell’s
complaint and found that the auditors had indeed failed in
their professional and legal duties. The regulator concluded
that PwC ‘did not appropriately respond to the risk related to
procurement in terms of the requirements of international
standards on auditing. In addition, the respondent failed to
disclose noncompliance with legislation regarding procurement
in the joint audit.’ 44 PwC was given the maximum fine - a paltry
R200 000 - of which R50 000 was suspended. Nkonki received
the same fine.
While this finding seems encouraging, the fine is just a rap
across the knuckles compared to the R19 million that PwC and
Nkonki were paid for their work at SAA. Since then, PwC has
abandoned its earlier protests and announced that they have ‘used
the opportunity to effect the necessary remediation as important
lessons are learnt’.45 Yet again, the cost of PwC’s education is paid
by South African taxpayers who bear the brunt of SAA’s failures,
while the firm’s partners pocket their proceeds.
NKONKI INC.
In 2016, Nkonki’s management was bought out by Gupta associate Salim Essa. A
popular partner to the Big Four firms working with state-owned enterprises, Nkonki
has been implicated in a range of other state capture scandals.38 This includes its
partnership with Deloitte at Eskom, as described below. In 2018, Auditor-General
Kimi Makwetu cut ties with Nkonki, citing ‘uncertainty of independent leadership’.39

LACK OF TRANSPARENCY
The IRBA refused to publish the names of the firms implicated in audit failures at
SAA.46 The only reason the public even knows about this case, or that it concerned
PwC, is because of a determined investigation by the Financial Mail. This is an
unfortunate pattern in the disciplinary work of the IRBA. Auditors are rarely named
in the quarterly newsletter that details the regulator’s investigations and findings. It
seems as if the IRBA’s desire to protect its members overshadows its responsibility
‘to enhance performance, accountability and public confidence’,47 which should
include informing the public about dodgy auditors.
The public needs the IRBA to be more forceful, particularly now

that it has expanded its investigation into PwC’s work at SAA
over a much wider period. The expanded case was due to be
tabled with the IRBA in late 2019, and the first hearings were
expected in May 2020. Unfortunately, these were delayed due to
the failure of Tito Mboweni to appoint a new board of IRBA.
This has left it unable to form disciplinary committees and begin
proceedings. The Minister’s delay has thus slowed the process to
hold PwC to account. No reasons have been given as to why there
has been this delay which has resulted in a vacuum in leadership
at the IRBA.
ENS: THE FORENSIC

INVESTIGATORS
Forensic investigators dig through the muck of a scandal where
other auditors have failed. But they also play an important
preventative role: rigorous forensic reports help to guide external
auditors by identifying serious risk areas. Either way, it is essential
that the highly paid forensic investigators do a thorough job. In
the case of the SAA tender, one of the last parties to be called in
was ENS Forensics.
In November 2014, Simon Mantell wrote to the SAA board
with all of the evidence that the tender had been unlawful. This
fell into Nico Bezuidenhout’s second short stint as acting group
CEO for SAA, which ran from November 2014 to July 2015. He
was quick to offer Mantell a meeting in early 2015 to address
his concerns. In the months that followed, Bezuidenhout sent
him a series of emails that claimed the CIRO bid was valid
and that there was nothing untoward in the tender process. 48
In May 2015, however, the National Treasury report concluded
that Mantelli’s was in fact the only valid tender. At this point,
SAA appointed ENS Forensics to conduct an investigation into
whether CIRO’s bid was valid.
SAA and its executive management both have a long history
with ENS Forensics and its parent company, ENSafrica, the
mega law firm which proclaims itself as ‘Africa’s biggest law
firm’.49 At various points over the last decade, ENS Forensics has
been called in to investigate fraud and corruption at the airline.
In some instances, they have set out serious concerns, only to
have their recommendations ignored by SAA’s management.50 In
2015, ENS recommended that SAA lay criminal charges against
‘a complainant in a tender process who, in the end, did not have
a legitimate company or an aircraft to lease’. The board sat on the
report for months until it was leaked to the press. 51
Myeni was declared a ‘delinquent In 2017, while SAA was paying ‘for the services of two of
director’ by the High Court in
Pretoria in May 2020, and the
ENSafrica’s most experienced lawyers, Steven Powell (director
matter was referred to the NPA. of forensics) and George van Niekerk (director of dispute
Agreeing with the application resolution)’, SAA board chair Dudu Myeni had nonetheless hired
by the Organisation Undoing
Tax Abuse (OUTA) and the SAA Nick Linnell as an adviser to the board, at R167 000 a month, to
Pilots’ Association, the court deal with various legal issues.52 City Press revealed that Linnell
ruled that ‘Ms Myeni’s actions as
chairperson of the board caused billed for, amongst other things, liaising with ENSafrica. ENS
SAA immense harm. She was a also represented Dudu Myeni in court, including defending an
director gone rogue - she did not
have the slightest consideration
application to have her declared a delinquent director, before
for her fiduciary duty to SAA... dropping her as a client in June 2019. 53
Her actions did not constitute It is thus not surprising that Steven Powell was copied in to
mere negligence but were
reckless and wilful’. correspondence between Bezuidenhout and Mantell from early
2015, and that ENS was selected to investigate the tender and
prepare a report for Myeni as board chair. In June 2015, ENS
Forensics director Steven Powell invited Mantell to provide
input to assist the investigation, assuring him that ENS would
conduct a ‘warts-and-all investigation’ and get to the bottom of
the matter.54 A draft report was quickly put together – dated 29
July 2015 – and Mantell was again invited to ENS to discuss it
on 4 September. He said that the draft report fell far short of a
proper investigation and left numerous questions unanswered.
Steven Powell agreed and committed this view to email. On 9
September, he wrote to Mantell that the investigation had been
done with
‘clearly insufficient oversight and guidance from me’

and that the firm’s busy schedule did ‘not excuse
what has been a superficial investigation’. 55
Three months later, and only after intervention from the Chief
Executive of ENS Law Mzi Mgudlwa, Mantell received the firm’s
transcripts from that September meeting. Crucially, they indicate
that Powell and his investigators
the PFMA is conceded at that point that the tender
process was inherently flawed and
never followed that Mantelli’s should have received
the tender award.56 However, the
out at state ENS people were also of the opinion
entities that, despite the irregularities, there
was no fraud or corruption, and
that ‘the PFMA is never followed out at state entities’ and that
backdating tender registers happens often.57 This is a disturbingly
jaded view of lawyers conduct that amounts to serious violations
of the law.
ENS did promise to remedy the preliminary draft report
with a rigorous follow-up. Further emails from Powell to Mantell
included a guarantee that ENS would ‘cure’ the deficiencies.58
At this point, the relationship became frostier. Despite earlier
assurances, ENS refused to grant Mantell access to their updated
report. The first he saw of it was at the Zondo Commission of
Inquiry at the beginning of 2020, when it was handed to him
following his engagement with the Commission on these issues.
The ‘updated draft report’ was dated 13 October 2016, more
than a year after the sketchy preliminary draft. It is not clear
whether a final report was ever prepared. If so, it is not publicly
available. Despite more than a year between them, the updated
draft report is startlingly similar to the earlier one. It is not the
forensic report that one would expect from a firm that advertises
itself as ‘highly skilled in complex, large-scale investigations into
white-collar crime across Africa and beyond’. 59
The list on the next page shows the issues of concern with the
2016 ENSafrica Forensics report, its process and its findings: 60

The report indicates that a key objective was to interview SAA staff and
obtain sworn affidavits ‘where necessary’,61 but there are no affidavits
from key people who stand accused of making misrepresentations to
Mantell. For example, the report lists interviews with both Viwe Soga
and Siyakhula Vilakazi, but there is no detail of what was discussed in
these interviews and their names do not appear again.
Another stated objective was to ‘analyse relevant employee

mailboxes’, but this analysis was only done in August 2016 and for
only four employees. According to ENS, the reason for the delay was
a ‘dispute between SAA and the IT service provider’.62 Further, the
method of analysis was a keyword search that included the names
of the parties and the words ‘kickback, corrupt, corruption, fraud,
cracker and biscuit’.63 This cannot be considered an extensive search,
nor does it seem likely that wrongdoers would use this language in
emails. Added to the long delay, it is unclear how meaningful this
process could be.
The report alludes to a review of the Indyebo and National Treasury

reports. Yet it does not include their central findings, including the
alleged violation of the PFMA. The ENSafrica report concurs with
the Treasury that the tender should not have been granted to CIRO,
but expresses their legal opinion that Treasury’s recommendation to
grant a portion of the contract to Mantelli’s was not in fact lawful. 64
The closest the ENS report comes to the systemic problems

revealed by this tender is a recommendation that Air Chefs ‘retain
the services of a procurement specialist’ and that corrective
training should be provided.65 The overall approach skirts the
most fundamental issues: namely, the alleged contraventions of
the PFMA and the systemic deficiencies in internal control and
governance at SAA and its subsidiaries.
The failure of the forensic investigators to at least acknowledge
these concerns in their report is an important omission both for
the financial governance at SAA and for the future guidance of
other auditors and lawyers. It is not clear where this reluctance
comes from. Although ENS has a long relationship with SAA,
we certainly do not suggest any deliberate attempt to obscure
these matters. It may be that their mandate in this case – to test
the validity of the CIRO tender – was too narrow for them to
reasonably take up the greater context. However, this jars with
their early promise of a ‘warts and all’ investigation.
This raises another systemic issue. The scope of external
investigations is set by people who may themselves be implicated
in wrongdoing, or have a personal interest in hiding certain
elements. Moving this function to an independent body
could be an important remedy and will be discussed in the
recommendations below.
ENS RESPONDS
We asked ENSafrica Forensics a series of questions regarding this matter: whether
the October 2016 report was the final version of the report; whether they were
satisfied with the quality of their investigation in this matter; what concerns, if
any, it had raised for them about governance at SAA; how much fee income they
had received from SAA between 2010 and 2020; and whether they had any further
comment.
Steven Powell responded as follows:
Email from Steven Powell
to respond to the questions
ng out to us. We are not at liberty
Tha nk you for rea chi l and privileged as between
tion you seek is confidentia
raised by you, as the informa us to disclose to a private
be wholly inappropriate for
attorney and client. It would
rmation you seek.
body such as yours the info
ch more, in a comprehensive
res sed all of these issues, and mu
We hav e in fac t add te Capture. No doubt the
ission of Inquiry into Sta
submission to the Comm pose to cover as far
on will con sid er and add ress the very topics you pro
Commissi
as SAA is concerned.
igation was thorough and
I am satisfied that our invest
Suffice to say, nevertheless, s and concerns which had
tively with all the allegation
the final report deals exhaus dra ft report with Mr Mantell
is cor rec t tha t we had shared an initial to
been rais ed. It afford them an opportunity
his leg al rep res ent ativ e before it was finalised, to n of the fina l rep ort,
and paratio
taken into account in the pre
comment. Their input was ten der and sug gested appropriate remedi
al
nd irre gul arit ies with the
which fou directly for the report.
at liberty to approach SAA
actions. You are of course
FAILURE UPON FAILURE

It is remarkable that a simple tender for dry crackers could generate
so many investigations and such a long and protracted battle. It
is also deflating to recognise that, while these investigations have
generated healthy fees for the auditors, consultants and lawyers
involved, little was achieved to ensure accountability or to fix the
systemic issues in SAA’s long and costly decline. Would there
have been any accountability at all if Mantell himself had not
doggedly pursued the matter with the relevant regulators? Even
there, the sanction has been inadequate.
What emerges most forcefully from this story is

the lie that professionals in the financial-services
sector are let down by a “few bad apples”. One
professional failure was repeatedly compounded
by the failures of others. A stream of accountants,
lawyers and auditors – each paid millions per year
– had unique insight into a dysfunctional system at
SAA that permitted wrongdoing and was unfit for
its purpose of protecting public funds and ensuring
compliance with the law. All of these professionals
had the duty, both professionally and legally, to
report irregular and unlawful conduct when they saw
it. Their repeated failures have instead ensured that
a culture of impunity thrives.

Charging exorbitant
fees for the opaque
services they
provided, these
companies profited
from state capture
while diminishing
the service delivery
capacity of SOEs like
Eskom, and Transnet.
44
STATE CAPTURE
AUDITORS
The costs of contemporary state capture in South Africa have
been disastrous, if hard to quantify. Taking into account the
money lost directly to corruption, low or non-existent economic
growth, lost jobs, and an explosion of public debt and borrowing
costs, estimates range from the conservative R500 billion to R1.5
trillion.1 And the austerity measures enforced to appease credit-
ratings agencies have hit vulnerable South Africans the hardest.
These estimates cannot fully cover the consequences of
the destruction of institutional independence and capacity
throughout the state, including crucial institutions like the
National Prosecuting Authority (NPA) and the South African
Revenue Service (SARS). The loss of state capacity to investigate
and prosecute complex financial crime has in turn entrenched
impunity for the corrupt corporate and other elites.
Yet the story that contemporary state capture has been
perpetuated by the actions of a few corrupt political actors in
service of the Gupta family is an unfortunate myth. This obscures
the role of the global financial economy in laundering the
proceeds of these crimes so that the beneficiaries can continue
to benefit from them.2 It also ignores the role of auditors and
consultants in enabling capture. Global consulting firms were
key participants in the state capture enterprise. One need only
think of Bain’s complicity in the attack on SARS that resulted
in an estimated R100 billion decline in desperately needed tax
revenue.3 Or of McKinsey’s extraction of billions from Eskom. 4
45
The truth is that South Africa’s state-capture era
presents clear examples of the deleterious effects of
the Big Four and the broader professional-services
industry on a country’s economy and its people.
Charging exorbitant fees for the opaque services
they provided, these companies profited from
state capture while diminishing the service delivery
capacity of SOEs like Eskom and Transnet. The
effects are felt in the constant bailouts of SAA and
Eskom, the interrupted train services of PRASA, and
the persistence of load-shedding.
The following examples of this industry’s complicity in state
capture are not exhaustive. They only serve to illustrate the
pervasiveness of their corruption and the failure and reluctance
of regulators to rigorously and energetically hold powerful
industry players to account.
KPMG
KPMG is the firm that comes to many people’s minds as an
example of the private sector enabling and profiting from state
capture. When KPMG finally issued a public apology for its
role in facilitating some of the most egregious state capture
corruption – from SARS to VBS and the Estina Dairy Project –
the fallout posed an existential threat to the firm’s South African
office. It lost over 1 000 staff and saw an exodus of key clients. 5
A ROGUE INVESTIGATION AT SARS

KPMG’s role in state capture first garnered public attention in the
infamous KPMG “rogue unit” report it completed in 2015 at the
behest of then SARS Commissioner Tom Moyane. The evidence
now shows that KPMG’s report was filled with inaccuracies and
plagiarism. A subsequent investigation into Moyane’s conduct
by the Nugent Commission of Inquiry concluded that he had
made a concerted effort to take control of the revenue service by,
amongst other things, side-lining key executives. 6
Moyane used KPMG’s rogue unit report to ensure the
firing, early retirements of and criminal and other inquiries
into the conduct of Ivan Pillay, Pravin Gordhan and Johann
van Loggerenberg, amongst others.7 These moves were widely
perceived as attacks on an ‘anti-Zuma’ faction which opposed
the deepening corruption within state organs such as the NPA.8
KPMG would eventually retract the report and apologise to
those affected; in 2020, all criminal charges were withdrawn by
the NPA.
In 2007, a special investigative and enforcement unit was
created within SARS by a joint agreement between SARS and
what was then the National Intelligence Agency (now the State
Security Agency).9 SARS obtained three legal opinions at the time
on the legality of the unit – all gave the green light to proceed.10
Two months after his appointment as SARS commissioner by
Jacob Zuma in September 2014, Tom Moyane enlisted KPMG to
conduct a forensic investigation into allegations of a covert unit
at SARS that was allegedly spying on Zuma and Julius Malema,
the leader of the Economic Freedom Fighters party. 11
Rogue unit Given the importance of the issue in the public interest
In October 2014, the Sunday and in safeguarding the integrity of the revenue service, South
Times began two years of Africans expected that a leading forensic firm would undertake a
sustained reporting on what
it termed the ‘rogue unit’.12 thorough and careful investigation. This was not the case.
The newspaper has since The KPMG report found that the unit was breaking the
retracted all of its reporting on
the unit, admitted that it was
law and was thus ‘rogue in nature’.13 However, the report had
inaccurate, and apologised to striking similarities to earlier investigations by Advocate Muzi
those affected by this breach
of journalistic standards.
Sikhakhane and the law firm Mashiane Moodley and Monama
(MMM) which had been commissioned by former acting head
of SARS Ivan Pillay. A later examination revealed that KPMG
had plagiarised sections of the MMM report, including even
grammatical and spelling errors – it was literally a copy-and-
paste exercise. 14
Roy Waligora, head of KPMG forensics, led the internal
investigation into the report. Waligora found that the lead auditor
on the KPMG report, who insisted that his team’s investigation
had been ‘comprehensive’,15 had been ‘unprofessional and lazy’,
leading to an inaccurate report. 16
Advocate Dumisa Ntsebeza, who chaired the SAICA

inquiry into the saga, went further and concluded
that the KPMG auditor’s conduct had been ‘an act of
absolute dishonesty’. 17
KPMG later admitted that there had been 8no internal partner
review of the investigation, calling this ‘substandard’ quality
control.18 Ntsebeza’s report found that there was a prima facie
case that KPMG staff had violated SAICA’s professional code of
ethics.
KPMG’s report, alongside those of Sikhakhane and MMM,
was used to justify the dismissal of around fifty senior officials
at SARS, and investigations into Pillay, Gordhan and van
Loggerenberg.19 This, coupled with a coordinated restructuring
of SARS by Moyane and management consultant Bain and Co.,
had an undoubtedly negative effect on SARS’ capacity to generate
revenue. In the first quarter of 2017 alone, the agency failed to
meet its revenue target by R13 billion.20 The total cost of state
capture at SARS would rise much higher.
Although the lawyers, consultants and auditors involved in
the investigations into the “rogue unit” during the Moyane years
have denied that their findings were politically motivated, many
have been implicated in enabling other aspects of state capture.
KPMG also played a critical role in one of the most audacious
and iniquitous state-capture stories to date. 21
THE GUPTA CASH COW

Billed by then KPMG CEO Moses Kgosana as ‘an event of the
millennium’,22 the 2013 wedding of Vega Gupta and Aakash
Jahajgarhia cost South African taxpayers R30 million.23 The
lavish wedding and the arrival of some guests through the
Waterkloof Air Force Base catalysed a number of investigations
by Treasury and the Public Protector which revealed a vast
network of Gupta enterprises that were set up specifically to
extract rents from public procurement processes for the benefit
of the Gupta family. 24
State C aptu re A u ditors – 47

It emerged later that the wedding was connected to
another scandal: public money that was intended
to benefit local dairy farmers in the Free State had
instead been laundered into the
pockets of Gupta companies to meet
the costs of the Sun City wedding.
The Vrede Dairy Project was a public-private project between

the Free State government and BBBEEE company, Estina. It
was meant to establish a productive dairy farm near the town
of Vrede that would create local jobs and opportunity.25 Local
beneficiaries were to receive 51% of the shares in the project
through a special purpose vehicle. The Free State government
would provide R342 million to the project, while Estina would
inject R220 million of its own funding: R570 million that,
judiciously spent, would nurture a fledgeling dairy industry in
one of the neediest districts of the Free State. 26
From the beginning, the project was beset with irregularities
that violated procurement and public finance regulations.27 A
former head of the provincial department of agriculture later told
the National Treasury’s inquiry that ‘no procurement process
was followed in appointing Estina’ and that he ‘did not procure
the services of Estina through a competitive bidding process’.28
The #GuptaLeaks revealed that the project, from its
conception, was set up to loot the Free State agriculture
department. According to an investigation by Shadow World
Investigations, the bulk of the R280.2 million paid by the Free
State government to Estina was transferred into accounts held by
the Gupta enterprise. R229 went to Gateway Limited, a Gupta-
controlled company based in Dubai and 18% to the Guptas’ local
Laundromat
vehicle, Vargafield. SARS received 11% for VAT costs. 29 A “laundromat” is a complex
KPMG was centrally involved in assisting the Gupta money-moving system that
enterprise to launder stolen Estina funds onto the books of allows corrupt politicians,
organised crime figures,
Linkway Trading, another Gupta company. KPMG provided and wealthy businesspeople
both auditing and tax advisory services to Linkway, the South to secretly invest their
ill-gotten millions, launder
African firm that invoiced Dubai-based Accurate Investments money, evade taxes, and
R30 million for organising the extravagant wedding.30 Accurate fulfil other goals.
Investments was one of four offshore companies in the Gupta’s 31
UAE-based “laundromat”.
Linkway Trading was 53% owned by Islandsite Investments.
The shares in Islandsite were split equally between Atul Gupta,
Tony Gupta, Chetali Gupta and Arti Gupta. Ronica Ragavan, a
vital Gupta lieutenant, owned 25% of Linkway Trading. Linkway
drew up an invoice addressed to Accurate Investments on 31
July 2013 that provided a detailed breakdown of costs related
to the wedding.32 Linkway received $3 333 000 from Accurate
Investments in two payments, in August and September 2013.
Jacques Wessels, then an auditor partner at KPMG, managed
Linkway’s accounts. His management failed several standards for
the auditing profession.
Firstly, the Gupta wedding raised obvious red flags: for example,
Linkway was registered as a construction company, yet had taken
an odd foray into wedding planning.
Secondly, the R30 million invoice accounted for 55% of Linkway’s

2013 revenue. 33
Thirdly, both firms had the same beneficial ownership and so

should have been classified as related parties. The ‘oversights’
for these transactions in financial statements indicate that the
company was using them for the purpose of tax evasion – which
KPMG allowed.34 To add insult to injury, Linkway’s 2014 annual
financial report stated a R7 million loss on the wedding as a ‘cost
of sales’, a misstatement aimed to evade taxes. 35
A competent auditor should have been able to pick these up, and
one did. A junior auditor at KPMG voiced concerns to Wessels
that the wedding expenses had nothing to do with Linkway’s real
business.36 However, these concerns were brushed aside.
One possible reason the junior auditor was shut down was
the close relationship between senior KPMG partners and the
Gupta family. Despite what would appear as an overt conflict of
interest, which the IRBA later criticised, senior KPMG partners
attended the wedding – including Jacques Wessels, who led the
Linkway account,37 and CEO Moses Kgosana, who attended
with his wife and subsequently wrote a gushing thank-you email
to Atul Gupta,. 38
As the details of KPMG’s role in this story emerged, the IRBA
initiated an investigation into Wessels’ conduct on the Linkway
account. On 28 March 2019, the regulator made a ruling striking
Wessels off the auditor’s register, ordering him to pay part of the
IRBA’s legal costs, and instructing that Wessel’s name, KPMG’s
name, and the findings were made fully publicly available. 39
The IRBA’s detailed findings noted that Wessels

displayed ‘egregious dishonesty’ and had been an
‘active participant in the subterfuge’. 40
While the finding against Wessels was a rare and welcome dose of
accountability, it is notable that the focus of such investigations is
the individual auditor responsible for the account. They rarely, if
ever, explore the systemic governance and accountability issues
that enable and permit such a failure to occur in the firm.
KPMG has since spent a lot of time apologising to South
Africans and the institutions they harmed. They also agreed to
pay back R23 million in fees from SARS and pledged to donate
the R40 million it earned in fees from Gupta-linked entities.41
It is unclear how these meagre offers are supposed to provide
restitution for the dairy farmers, or for the billions lost in tax
revenue and the near-collapse of several state institutions.
Moreover, KPMG has insisted that these dealings were the
result of a few rogue elements and that they have transformed.42
We should be cautious in accepting such promises. KPMG’s
failure to exercise independence and professional scrutiny is
typical of an industry whose ethical conduct has been in steady
decline. It is also indicative of an industry riven with structural
problems and deficiencies in governance that will continue to
produce major conflicts of interest.
DELOITTE’S WORK AT ESKOM
The spiralling debt and diminishing capacity of the nation’s public
electricity utility have been a constant cause of consternation for
South Africans. Eskom’s rolling blackouts, repeated bailouts, and
onerous debt-servicing costs collectively pose a fundamental
threat to South Africa’s economy. This will be heightened by the
expected economic downturn caused by the Covid-19 pandemic.
As with much analysis of the capture of state-owned
enterprises, there are many calls for Eskom to be privatised,
as if public-sector management were solely responsible for its
embattled position. Nevertheless, there is extensive evidence of
the role of private consultants and service providers in extracting
rents from Eskom.
One obvious example is the unlawful contract that led to
Eskom paying a hefty R1 billion to the US management consulting
firm, McKinsey and Company.43 McKinsey’s global head Kevin
Sneader admitted that they had overcharged Eskom and needed
to implement stricter controls, including ‘real recognition that
there has to be clarity on what performance means’.44 McKinsey’s
BBBEE partner on this contract, Trillian (a Gupta-linked firm)
was paid R700 million by Eskom, despite no contract being in
place and no work being done. 45
McKinsey did eventually become nervous about Trillian and
told Eskom that the partnership would not continue. Eskom
management approved payments to Trillian anyway. Eskom
insiders told investigative journalists from amaBhungane that,
‘when McKinsey dumped Trillian, Eskom officials started giving
McKinsey the cold shoulder’. 46
Enter Deloitte.
In June and September 2016, Eskom procured the services of

Deloitte’s ‘CFO [Chief Financial Officer] Transition Laboratory’
in the SM002 and SM004 tenders, which called for strategic,
business and management consulting.47 Deloitte describes its
CFO Transition LabTM as ‘an experience’ that helps ‘newly
appointed CFOs, including those with prior CFO experiences,
make an efficient and effective transition’ into their expanded
‘leadership’ roles as strategic partners to boards and CEOs.48
Deloitte was appointed by Eskom CFO Anoj Singh and
senior executive Prish Govender.49 According to Eskom’s then
chairperson Jabu Mabuza, in a court application to recover the
funds from Deloitte, the tenders for the value of R207 million
were ‘pure corruption’.50
The manner in which Deloitte secured these Eskom contracts
is suspicious for several reasons:
■ Deloitte submitted proposals before the tender process was

opened (such unsolicited bids to SOEs were common in the
state capture period). The CFO tender – much like other
suspicious tenders in which Anoj Singh participated when
he was at Transnet – was a closed bidding process, which is
used when there is an urgent need for the services. It remains
unclear why the CFO Laboratory was so urgently necessary.51
■ New evidence unearthed by an amaBhungane investigation
indicates that Deloitte was already conducting extensive work
for Eskom on unsolicited bids “at risk”, meaning the company
would not be paid unless a formal contract was concluded.
This implied that over 42 Deloitte staffers, including senior
partners and at least one director, were working full time
for five months without a contract to guarantee payment.52
Eskom had not even issued a request for quotation (RFQ).
Industry insiders suggested that it was absurd that a company
would do work worth R50 million on an at-risk basis.53
■ Deloitte used ‘off-the-record briefings’ with Eskom to submit
proposals. Eskom management now alleges this made the
process uncompetitive, untransparent and inequitable.54
■ Eskom’s agreements with Deloitte were simple 100-word
documents which stated that Eskom would except the ‘scope’
and ‘budget’ of whatever Deloitte proposed.55
■ When a tender process was finally opened, Deloitte was
granted these contracts despite their proposals being up
to five times more expensive than their competitors. This
constituted a clear violation of the Preferential Procurement
Policy Framework Act (PPPFA).56
A final irony, and possibly one of the more audacious elements

of Deloitte’s conduct, is that Deloitte’s proposals apparently bore
‘striking similarities’ (particularly in wording) to proposals that
McKinsey had submitted. It is alleged that the email servers of
Singh and Govender revealed that many of McKinsey’s proposals
were shared and discussed with Deloitte’s director, Shamal
Sivasanker.57 Given McKinsey’s own role in extracting up to R1
billion from Eskom, one journalist quipped that ‘it was a case
of there being no honour among thieves – the scammers being
scammed’. 58
In a media statement after the amaBhungane pieces
were published, Deloitte denied any wrongdoing, stating ‘we
specifically deny any association or involvement in “state
capture” or corruption’.59 They also indicated that they would
contest Eskom’s allegations in court.
Responding to questions by journalists from

amaBhungane, Deloitte Consulting’s managing
director for Africa, Thiru Pillay, said:
‘I do feel we were led down a path by Eskom,

and we tried to cooperate and do the best that
we could… The world is in a very different place
today. When you look at what was happening in
2016; our environment is very, very different. In
hindsight, when you look at it, you wish you had
done things differently, but the question is, “Did
we add value?” and I think we did. And what was
our intent? Was our intent to go and defraud and
exploit Eskom? Definitely not.’
60
This account is perplexing. Deloitte was no doubt aware of the

legal requirements around public procurement in 2016 as the
Public Finance Management Act (PFMA) had been in existence
since 1999.

On 20 March 2020, in an about-turn, Eskom and
Deloitte announced that they had reached an out-
of-court settlement. Deloitte agreed to pay back
R150 million, which allowed them to keep over R57
million earned between April 2016 and September
2017. In the statement announcing the settlement,
61
Deloitte and Eskom agreed that:
1: Investigations completed by Eskom and

Deloitte showed no evidence of state capture
or corruption;
2: Eskom benefited from the services that

Deloitte Consulting rendered during the period
of engagement, and Eskom continues to
benefit from these services;
3: There were technical irregularities within the

procurement process, and Deloitte Consulting
accepts that it participated in this irregular
procurement process; and
4: Deloitte Consulting is entitled to compensation

for the value it delivered to Eskom. 62
Disturbingly, detailed findings of these ‘investigations’ have not

been made public, nor is it clear if external investigators were
consulted. This makes it difficult to understand the basis on which
Eskom has abandoned its allegation of ‘pure corruption’.63 It also
leaves unresolved many of the serious allegations of irregularities
made by Eskom and outlined in amaBhungane’s reporting. These
were not merely technical in nature, but involved allegations of
collusion with Eskom staff, possible plagiarism of McKinsey’s
work, the choice to partner with a Gupta-linked firm, and
violations of procurement law. 64
It was not announced at the time of the joint statement,
but Deloitte has since confirmed to amaBhungane that both
Thiru Pillay and Shamal Sivasanker resigned in the wake of the
Eskom scandal. The firm has said that the two senior directors
‘have acknowledged that the events related to the Eskom
matter occurred on their watch. They have taken leadership
accountability and have withdrawn from the Firm’.65 Again, they
carefully sidestep any mention of actual wrongdoing.
It is also clear that the oversight and accountability functions
of both state regulators and professional bodies have been
inadequate in most instances. Instead of hefty fines and auditors
being struck from the register, regulation by light touch ensures
that meaningless apologies and promises to change are the order
of the day.
This is again indicative of a
pattern where large consultancies
and audit firms are implicated
in wrongdoing at state-owned
enterprises. Directors and
partners quietly exit their firms
and some or all of the illegitimate
fees are paid back, but there
is no hard accountability for
those responsible. Inadequately
regulated, these professionals
systematically diminish the
capacity of the state to provide
services while cashing in on
the feeding frenzy around
providing financial and consulting
services to the state. They do
so ultimately to the detriment of
an already deeply unequal and
divided society. In the words
of a consultant interviewed by
amaBhungane: ‘This is what
immiserates our country and
bankrupts it.’
66

54
THE ABSENCE OF
ACCOUNTABILITY
The continued role of the Big Four in enabling grand corruption
and other economic crime is unsurprising, given that they
largely enjoy impunity even when caught red-handed. Rarely
do they face sufficient sanction to truly discourage misconduct.
Commenting on PwC’s treatment by the IRBA after their work
at SAA, veteran journalist Ann Crotty summed up a key flaw in
the IRBA’s oversight of the industry:
‘Remarkably, if an audit firm is found guilty at the

end of what should be a daunting process, there
is nothing more than an inoffensive reference
to the issue in the IRBA’s quarterly newsletter
and a modest fine. No mention is even made
of the audit firm or the client that suffered the
inappropriate audit service. It is nothing that might
discourage noncompliance.’ 1
55
The South African situation reflects a global reality: the Big Four
continue to generate enormous profit regardless of the number
of scandals they are implicated in. In this relentless pursuit of
profit and bonuses, the social utility of the audit function is
obscured.2 South African civil society must continue to advocate
for accountability from this sector. As the Auditing with
Accountability report argues, the problem is an underlying gap
in accountability: ‘the shortfall between what the wider public
might legitimately expect auditors to do and what the audit
process currently delivers’.2
TOO FEW TO FAIL, TOO

POWERFUL TO JAIL
In the current world order, many financial-sector firms are
deemed too big to fail. The 2008 global financial crisis highlighted
the primacy of banking in the global economy. The rescue of
banks through US government bailouts, while ordinary citizens
suffered through debt and job losses, highlighted an innate
plutocracy.
Ironically, as the Big Four grow ever larger and further
embedded in a financialised global economy, governments are
now fearful that the collapse of any of them would lead to the
tighter monopoly of a “Big Three”. As one report notes:
‘When so few actors occupy such a large part of

the market, the chances of collusion dramatically
increase, and it becomes very difficult for
governments to regulate them. If one of them
collapsed, it would lead to a crisis in the audit
market because there are no real alternatives.’ 3
Thus, we see mounting criticism of the Big Four but few calls for
the complete overhaul of the industry. Suggested changes refer to
the need for reform. Mandatory rotation of audit firms by public
companies has become a favourite reform. This is intended to
maintain more independent relationships between clients and
their auditors, rather than hundred-year mutually beneficial
partnerships.4 South Africa’s Independent Regulatory Board for
Auditors introduced mandatory rotation in 2016, though it will
only come into effect in 2023.
While laudable, it is unlikely that mandatory rotation will
have much impact, given the small number of players in the
market. 5 This is particularly so if conflicts of interest preclude
the appointment of one or more firms for a given company,
further limiting the possibilities for rotation: 6
CAPTURED REGULATORS
The public largely relies on professional associations and bodies
to regulate these professions and provide accountability. In
South Africa, the IRBA regulates auditors and SAICA has
professional authority over chartered accountants, associate
general accountants, trainee accountants and accounting
students. IRBA regulations stipulate extensive norms and
standards that ought to guide auditors to ensure professional
independence and scepticism.7 There is significant overlap in the
fields of accountancy and auditing, and so the bodies regularly
work together.
Since the first Royal Charter for Accountants in 1880, many
professional standards have been formulated for integrity, ethics,
and professionalism. The stereotype of accountants as “bean-
counters” pictures a zealous pursuit of accuracy down to the
last bean. This is arguably not true of today’s accountants,
who are the high rollers of the global financial economy,
earning seven-figure packages and enjoying significant
political access. Asked how he would improve the accounting
profession, a former Big Four professional answered, ‘[M]ake
it boring again.’ 8
This is made increasingly difficult, however, by the role
that accountants play in setting the standards that they violate
repeatedly. The Big Four’s ability to escape regulation and
punishment is partly due to their ability to “capture” regulators.
This applies to legislators and professional bodies. The Big Four
are notoriously powerful in policymaking circles, where they
can promote and protect their and their clients’ interests. This
creates a sort of elite financial capitalism that feeds their long-
term interests.9 A former auditor also revealed that political
connections can keep scandals from being pursued legally. 10
These firms regularly lobby governments, sponsor political-
party campaigns and are drawn into consultation for the drafting
of legislation. In 2013, the UK’s Public Accounting Committee
highlighted the incestuous relationship between the Big Four
and legislators. According to the PAC’s findings, the Big Four
seconded staff to the UK Treasury to advise on the drafting of
tax legislation and routinely flooded the email inboxes of the
UK’s tax authority, HM Revenue & Customs, with advice on
taxation.11 With their insider knowledge of legislation, these
firms then go on to advise their private clients and companies
on tax avoidance schemes. Effectively, they use their expertise to
legally rob the HMRC of its revenue. 12
In 2018, it was reported that PwC, Deloitte and EY earned
€10.5 million as consultants to the European Commission’s
Directorate-General for Taxation and Customs Union. They
had earned a similar fee in 2016 for consulting on European tax
policy, raising serious concerns about conflicts of interest. 13
Karthik Ramanna, a professor on governance at

Oxford University, noted that this was first and
foremost a failure of the regulators to recognise
the conflict:
‘Of course this makes the Big Four look bad. But
it’s hardly news these days to call out the Big
Four on ethics violations. The folks who look really
silly are the European Commission. They should
know better than to invite the foxes to consult on
henhouse security measures.’
14
Th e A bs en ce of A ccou n tability – 57
The revolving door between the Big Four and government
regulators applies for industry regulators, too. Four of the seven
members of IRBA’s former board were working for or previously
had worked for the Big Four auditing firms.15 Nearly half of
the board members of the EU’s European Financial Reporting
Advisory Group are current or former Big Four employees. The
US’ Public Company Accounting Oversight Board has five board
members, two of whom as former employees of the Big Four. 16
PENALTIES: DETERRENT OR
ANOTHER BUSINESS COST?
Where the Big Four do get into a bother with regulators, the
most common sanctions are fines. There is little evidence that
these are an effective deterrent of poor conduct.
Firstly, the size of the fines may appear significant to ordinary
members of the public, but they are usually insignificant
compared to the profits these firms continuously amass, or even
to the amount made from the contract in question. 17
Secondly, there is often insufficient follow-up by the regulator
after a firm has paid its fine. It is not currently industry practice
to place offenders under a higher level of scrutiny for a certain
period after the fine has been levied.18 In South Africa, there is
little evidence that the IRBA monitors sanctioned auditors to
ensure improved conduct in the future.
A final concern is the lack of transparency and public access
to information about accountability in the sector. Except in a few
exceptional circumstances, the IRBA does not publicly list the
names of auditors and auditing firms found guilty of misconduct.
Companies and government departments thus do not have
access to information that would help them decide whether or
not to work with a particular firm or auditor that may have been
censured for noncompliant behaviour. 19
In essence, the Big Four
routinely make the rules,
fail to play by them, and
exonerate themselves.
More effective and intrusive

state regulation is essential,
along with refocusing and
rebuilding the capacity
of state agencies tasked
with investigating and
prosecuting financial and
economic crimes.
It also demands radical

intervention to change the
structure and nature of the
Big Four firms themselves.
Th e A bs en ce of A ccou n tability – 59
If we are going to
reform auditing, then
there’s one lesson
to learn from the
financial crisis:
Don’t trust the
auditors to do it.
60
RECOMMENDATIONS
The status quo must be disrupted. As the Big Four become larger
and more powerful, it becomes ever more difficult to reform
and regulate them effectively. Yet without radical changes, the
continued role of these mega-firms in corporate fraud, grand
corruption and other crimes will continue apace.
By examining the patterns of complicity and the failures of
accountability, the areas for urgent reform become clear. While
there is no single change that can reform the industry and restore
public trust in these firms, these recommendations together offer
some ideas for challenging the impunity of the Big Four and
changing their role in the global economy.
61
SEPARATE AUDITING FROM
CONSULTING
This report argues that the “independence conundrum” facing
the Big Four is a crucial problem and that it arises from conflicts
of interest created by providing services that are ‘fundamentally
incompatible’1.
These firms offer auditing services that are meant

to assure financial probity and compliance with the
rules while simultaneously offering highly lucrative
consulting services that are ‘often specifically aimed
at gaming the very systems and rules for which they
are also supposed to assure compliance’.
2
With the recurring scandals related to such conflicts of interest,

there are calls in many countries to separate the auditing and
consulting functions of the Big Four. The United Kingdom’s
parliamentary business committee recently completed a
comprehensive review of the industry after several corporate
implosions in which auditors were either negligent or at fault.
The cross-party committee recommended that the auditing and
consulting arms of these firms be legally split in order to ‘improve
standards and transparency in book-keeping after audit failures’.3
As the crisis of confidence in these firms grows, and the
costs of their failures mount, South African authorities should
also require this split.4 Moreover, given the public importance of
audit functions and the public cost of audit failure, activists have
called on government to consider ‘nationalising’ certain audit
functions.5 In the South African context, this would require
significant resourcing and support to the auditor-general’s
office. At the least, government should consider establishing an
independent body that would select auditors for companies.
POWER TO THE REGULATORS

AND TRANSPARENCY FOR THE
BIG FOUR
The Big Four are not publicly listed companies. As a result,
they are not required to reveal their inner workings and are not
subject to the same public scrutiny. This makes the role of state
regulators and professional bodies even more important.
The IRBA has recommended that firms voluntarily submit
transparency reports from 2020.6 These will require firms to
disclose their approach to, amongst other things, ‘audit quality’;
‘leadership, culture and ethics’; ‘risk management practices’;
‘independence’; and ‘external and internal inspection and
monitoring results to assist audit committees’.7
Unfortunately, there is little evidence anywhere that voluntary
standards deliver the kind of accountability that is urgently
required in this industry. It is concerning that the IRBA continues
to take a soft approach with firms that have consistently flouted
professional standards. This new initiative does not mention
the IRBA gaining the ability to probe the reports that the firms
submit.
To their credit, the IRBA has admitted that they need far
greater powers of investigation and sanction to deliver effective
accountability for auditors. In addition to demanding mandatory
rotation of audit firms in 2016, the IRBA and National Treasury
made recommendations in early 2019 to amend legislation to
grant it greater subpoena and search-and-seizure powers, and to
allow the minister to increase the limit of sanctions imposed on
auditors. 8
In his budget speech in February 2020, Minister

of Finance Tito Mboweni indicated that a draft
amendment bill that would increase the powers of
the IRBA would soon be introduced to parliament.
The Bill notably grants the IRBA the power to issue
a warrant, to ‘enter and search premises and to
subpoena persons with information required for
an investigation or disciplinary process’, as well as
9
creating a duty to disclose information.
It also allows for higher sanctions which may serve
as greater deterrents.
10
These are welcome additions, but the public will need to monitor
whether the IRBA uses these powers to ensure accountability
and acts independently of the industry it regulates. The IRBA
also must commit to improving its own transparency and
information-sharing, including the names of individual auditors
and their firms found to have engaged in misconduct. Vague
newsletters and the refusal to name names – a recurring theme
in the case studies in this report – undermines the sanction and
prevents other actors from making informed decisions when
selecting service providers.
A GREATER ROLE FOR THE

AUDITOR-GENERAL
The SAA case study raises serious concerns about the role of
private auditors at public entities. When the auditor-general’s
office took over the audit function at SAA in 2017, they
immediately noted a series of fundamental problems in the
airline’s finances and governance that had either been missed or
ignored by previous auditors PwC and Nkonki. The SAA case
also demonstrates the obvious drawbacks of board members
hiring and setting the scope for investigations in which they
themselves may be implicated. In both instances, the private
audit and forensic firms face conflicts of interest if they hope to
provide more services – including lucrative consulting contracts
– for that public entity.
As an independent Chapter 9 institution with the requisite
skills, the AG is well placed to take greater responsibility for the
audit function at public entities. Further, where an independent
forensic investigation is required, the AG should set the mandate
Recom m en dation s – 63
and scope of that investigation. Resources to enable this should
be made available. This would ensure that well-paid firms are
answerable to the AG for the quality of their work, and they
would also depend on the AG’s office for repeat work rather than
looking to executives of the entities they investigate.
PREPARE FOR THE PUSH-BACK

Finally, as public discussions on these and other possible reforms
take shape, it is important to anticipate and prepare for the push-
back by the Big Four themselves.
Around the world, the Big Four have slammed proposed
reforms, especially recommendations to split the audit and
consulting arms of their business. In the UK, the firms ‘vented
their fury’, arguing that reforms would harm them, the economy,
and the status of the city of London as a financial centre. 11 In
South Africa, the Big Four have been similarly outraged by
proposals for legislative reform and recommendations to bolster
the power of the IRBA. The parliamentary committee on finance
received “comment” from Deloitte and PwC that demanded the
right to appeal against attempts to amend the legislation and
pushed back hard on the proposed new powers, particularly
those related to search and seizure. 12
This is unsurprising. The status quo works perfectly

for these firms. With their dominant position in the
global financial-services market, the Big Four are
exceedingly profitable, powerful, and well resourced.
They are also increasingly influential in policy-
making spaces. If they are not kept in check, this
combination allows them to game the system for the
benefit of their clients, some of whom will be engaged
in financial crimes, aided and abetted by delinquent
auditors who can bend and break the law with little
fear of penalty.
Auditing should be understood as a social utility, given that it is

a vital check on accounting abuses to protect the public at large.
We should therefore reject the argument that public anger at
audit failures is misplaced because the public expects more than
auditors can deliver. The “expectations gap” is better understood
as the auditors’ failure to deliver on legitimate expectations that
it is their job to assure corporate financial probity – there is an
accountability gap. 13
DON’T TRUST HENHOUSE
SECURITY TO FOXES
The Big Four will also try to capture the reform process. Given
the complexities of the financial-services industry, governments
will be tempted to look to the firms themselves to help in the
process. The US did just this after the Enron scandal and it led
to a piece of legislation ‘sometimes pejoratively referred to as the
“Accountants’ Full-Employment Act”, for its proclivity to create
busy work (and more fees) for the industry’.14
Research in the UK has noted the same pattern of audit
firms using their links to policymakers and access to political
spaces to push back against reforms that would make them more
accountable. In addition, auditors have technical knowledge
and expertise in a field that is largely opaque to outsiders, which
allows them to dominate discussions.15 These factors come
together to make regulatory capture more likely.
This problem is arguably prevalent throughout the financial
sector. Recent painful experience of the 2008 financial crisis
should remind us not to rely on the financial sector to address
its own problems:
‘Recall how eagerly we accepted the help of bankers

in 2008. No surprise, they bailed themselves out,
first and foremost. If we are going to reform auditing,
then there’s one lesson to learn from the financial
crisis: Don’t trust the auditors to do it.’
16
This challenge requires a vigorous engagement by civil society

and activists in the processes of reforming the audit industry.
We hope that this edition of the CECR series makes a small
contribution. It has highlighted the social utility of the audit
function and the vast public cost of audit failure, as well as
the key role of the Big Four in grand corruption, the massive
social injustices incurred as a result, and the failure of state and
professional regulators up to now to
hold these highly paid
professionals to
account.
Recom m en dation s – 65
The failures and
crimes of the auditing
industry have huge
consequences
for all of us. This
requires a vigorous
engagement by civil
society and activists
in the processes of
reforming the audit
industry. We hope
that this edition of
the CECR series
makes a small
contribution.
66
SOURCES
Introduction
1: Richard Brooks (2018), Bean Counters: The Triumph of the Accountants

and How They Broke Capitalism (Atlantic Books, London).
2: Dennis Webster (19 November 2019), ‘Why South Africa is the world’s
most unequal society’, Mail and Guardian, URL: https://mg.co.za/
article/2019-11-19-why-sa-is-the-worlds-most-unequal-society
[Accessed 30 April 2020].
3: Stats SA (November 2019), Inequality Trends in South Africa – a
Multidimensional Diagnostic of Inequality, pg. 65.
4: Aroop Chatterjee, Léo Czajka and Amory Gethin (April 2020),
‘Estimating the distribution of household wealth in South Africa’,
Southern Centre for Inequality Studies and World Inequality Lab, WID.
world Working Paper 2020/06.
5: Stats SA (November 2019), pg. 6.
6: Oxfam International (January 2019), ‘Public good or private
wealth?’, URL: https://oxfamilibrary.openrepository.com/bitstream/
handle/10546/620599/bp-public-good-or-private-wealth-210119-
en.pdf [Accessed 18 May 2020].
7: Jason Hickel (7 August 2019), ‘Progress and its discontents’, New
Internationalist, URL: https://newint.org/features/2019/07/01/long-
read-progress-and-its-discontents [Accessed 30 April].
8: Thomas Piketty, quoted in ICIJ (8 February 2015), ‘Banking giant
HSBC sheltered murky cash linked to dictators and arms dealers’,
International Consortium of International Journalists (ICIJ), URL:
https://www.icij.org/investigations/swiss-leaks/banking-giant-
hsbc-sheltered-murky-cash-linked-dictators-and-arms-dealers/
9: International Consortium of Investigative Journalists (19 January
2020), ‘Western advisors helped an autocrat’s daughter amass and
shield a fortune’, URL: https://www.icij.org/investigations/luanda-
leaks/western-advisers-helped-an-autocrats-daughter-amass-and-
shield-a-fortune/ [Accessed 30 April 2020].
10: Jonathan Ford and Madison Marriage (1 August 2018), ‘The big
flaw: auditing in crisis’, Financial Times, URL: https://www.ft.com/
content/29ccd60a-85c8-11e8-a29d-73e3d454535d [Accessed 30
April 2020].
11: Consulting.com, ‘The Complete Guide to Big Four Consulting: History,
Services, Salaries and More’, URL: https://www.consulting.com/big-
4-consulting [Accessed: 5 December 2019].
12: Corporate Europe Observatory (July 2018), Accounting for Influence:
how the Big Four are embedded in EU policy-making on tax avoidance.
13: Michael Marchant, Mamello Mosiana, Paul Holden and Hennie van
Vuuren (2020), ‘The Enablers: The Bankers, Accountants and Lawyers
who Cashed in on State Capture’, Open Secrets and Shadow World
Investigations.
67
The Big Four: A Cartel at the Helm of the Global Economy
1: ‘The Complete Guide to Big Four Consulting: History, Services, Salaries

and More’, Consulting.com, URL: https://www.consulting.com/big-4-
consulting [Accessed: 5 December 2019].
2: Tabby Kinder (28 October 2019), ‘Big Four lift UK market share as
audit reform concerns grow’, Financial Times, URL: https://www.
ft.com/content/96d4b090-f973-11e9-a354-36acbbb0d9b6
3: Richard Brooks (29 May 2018), ‘The Financial Scandal No One is
Talking About’, The Guardian, URL: https://www.theguardian.com/
news/2018/may/29/the-financial-scandal-no-one-is-talking-about-
big-four-accountancy-firms
4: Ann Crotty (27 October 2016), ‘Companies’ long audit links
documented’, Business Day, URL: https://www.businesslive.co.za/bd/
companies/financial-services/2016-10-27-companies-long-audit-
links-documented/ [Accessed 20 January 2020].
5: Ibid.
6: Brooks (29 May 2018).
7: Rachael Willis (23 July 2019), ‘Consulting Scandals: Holding the
Accountants Accountable’, Fair Observer, URL: https://www.
fairobserver.com/business/consultancy-accountancy-big-four-
scandals-deloitte-ey-business-news-00917/
8: Brooks (2018), Bean Counters, pp. 1-4.
9: Christina Ionela Neokleous (21 July 2016), ‘Accounting for power: the
history of an industry that shaped the world’, The Conversation, URL:
http://theconversation.com/accounting-for-power-the-history-of-an-
industry-that-shaped-the-world-61593
10: Ibid.
11: James Bunney (31 December 2019), ‘History of the top 10 audit
firms: what’s changed since 2003?’, Accountancy Daily, URL:
https://www.accountancydaily.co/history-top-10-audit-firms-whats-
changed-2003
12: KPMG, Who were K, P, M & G? The Men Behind the Initials, URL:
https://assets.kpmg/content/dam/kpmg/pdf/2015/09/History-Who-
were-K-P-M-G.pdf [Accessed: 3 December 2019].
13: Royal Charter of 11 May 1880, The Institute of Chartered Accountants
in England and Wales (ICAEW), URL: https://www.icaew.com/-/media/
corporate/files/about-icaew/who-we-are/charters-bye-laws/royal-
charter-of-the-11th-may-1880.ashx?la=en [Accessed: 8 December
2019].
14: SAICA.
15: Neokleous (21 July 2016).
16: Nicholas Shaxson (2018), The Finance Curse: How Global Finance is
Making Us All Poorer, (Penguin Random House, UK), pp. 55-57.
17: Ibid.
18: Gerald A. Epstein (2005), Financialisation and the World Economy,
(Edward Elgar Publishing), p. 3.
19: Independent Regulatory Board for Auditors (IRBA) (2014/2015),
Manual of Information, p. 112.
20: Ibid.
21: Ibid.
22: Ibid.
23: Khaya Sithole (13 May 2019), Telephonic Interview with Open Secrets.
24: IRBA (2014/2015), Manual of Information.
25: Sithole (13 May 2019)
26: Ibid.
27: The Spider’s Web: Britain’s Second Empire (2017), Directed by
Michael Oswald, Produced by: Michael Oswald, John Christensen and
the Tax Justice Network, URL: https://www.filmsforaction.org/watch/
the-spiders-web-britains-second-empire/
28: Shaxson (2018), pp. 52-59.
29: Marchant et.al (2020).
30: Austin Mitchell and Prem Sikka (2011), The Pin-Stripe Mafia: How
Accountancy Firms Destroy Societies, (Association for Accountancy &
Business Affairs, Essex), p. 7.
31: The Tax Free Tour (March 2013), Directed by Marije Meerman,
Produced by Marie Schutgens, VPRO, URL: https://www.
youtube.com/watch?v=d4o13isDdfY&list=PLRiighMPrJ_
uubh2NLo38FqvPTmn7mhRt&index=41&t=924s
32: FATF and Egmont Group (2018), Concealment of Beneficial Ownership,
FATF, Paris, France, www.fatf-gafi.org/publications/methodandtrends/
documents/concealment-beneficial-ownership.html.
33: Ibid.
34: The Tax Free Tour (March 2013).
35: Prem Sikka and Hugh Willmott (2013), ‘The Tax Avoidance Industry:
Accountancy Firms on the Make’, Critical Perspectives on International
Business 9, no. 4.
36: Mitchell and Sikka (2011), p. 21.
37: Ibid, p. 22.
38: Simon Bowers (3 March 2013), ‘Ernst & Young to pay US regulators
$123m over tax avoidance schemes’, The Guardian, URL: https://
www.theguardian.com/business/2013/mar/03/ernst-young-pays-us-
regulators
39: Jérôme Duval (27 September 2017), ‘Doing without advice from
Deloitte?’, Committee for the Abolition of Illegitimate Debt (CADTM),
URL: https://www.cadtm.org/Doing-without-advice-from-Deloitte
40: Tax Justice Network Norway (2017) cited in Fjeldstad, O., Jacobsen,
S., Ringstad, P., Ngowi, H. (Eds.), ‘Lifting the Veil of Secrecy:
Perspectives on International Taxation and Capital Flight from Africa’,
Chr. Michelsen Institute, p. 70.
41: Simon Bowers (2016), ‘Former PwC employees face trial over role
in LuxLeaks scandal’, The Guardian, URL: https://www.theguardian.
com/world/2016/apr/24/luxleaks-antoine-deltour-luxembourg-tax-
avoidance-pricewaterhousecoopers-trial
42: Adam Leaver, Leonard Seabrooke, Saila Stausholm, Duncan Wigan
(2020), Auditing with Accountability: Shrinking the Opportunity Spaces
for Audit Failure, (University of Sheffield & Copenhagen Business
School), p. 22-26.
43: Sikka and Willmott (2013), p.4-5.
44: The Tax Free Tour (March 2013).
45: Jenkins, JG., Stanley, JD. (2018), ‘A Current Evaluation of Independence
as a Foundational Element of the Auditing Profession in the United
States’, American Accounting Association Journals, pp. 1-2.
46: Ibid.
47: Fjeldstad, O., Jacobsen, S., Ringstad, P., Ngowi, H. (2017), ‘Lifting the
Veil of Secrecy: Perspectives on International Taxation and Capital
Flight from Africa’, Chr. Michelsen Institute, pp. 70-71.
48: Ben Chapman (10 July 2019), ‘PwC, KPMG, Deloitte and EY all fail
to meet audit quality targets after string of high-profile failures’,
Independent, URL: https://www.independent.co.uk/news/business/
news/pwc-kpmg-deloitte-and-ey-audit-quality-failure-frc-
report-a8998321.html
49: Ibid.
50: Enron: The Smartest Guys in the Room (2005), Directed by Alex
Gibney, Produced by Alex Gibney, Jason Kliot, Alison Ellwood and
Susan Motamed (Magnolia Pictures: United States).
51: Richard A. Oppel and Kurt Eichenwald, (16 January 2002), ‘Enron’s
collapse: The overview; Arthur Andersen fires an executive over
Enron orders’, The New York Times, URL: https://www.nytimes.
com/2002/01/16/business/enron-s-collapse-overview-arthur-
andersen-fires-executive-for-enron-orders.html [Accessed 22
January 2020].
52: Pat Sweet (8 April 2015), ‘PwC completes 14-year Enron Administration’,
Accountancy Daily, URL: https://www.accountancydaily.co/pwc-
completes-14-year-enron-administration
Sou rces – 69
53: David Teather (1 June 2005), ‘Andersen cleared by Supreme Court
over Enron’, The Guardian, URL: https://www.theguardian.com/
business/2005/jun/01/corporatefraud.enron [Accessed 29 April
2020].
54: Rosalind Z. Wiggins, Rosalind L. Bennett and Andrew Metrick, (2019),
‘The Lehman Brothers Bankruptcy D: The Role of Ernst & Young,’
Journal of Financial Crises 1, Issue no.1, p. 100.
55: Wiggins et.al (2019), p. 108-113.
56: Ibid., p. 101.
57: Gina Chon (15 April 2015), ‘Ernst & Young to pay $10m over Lehman
accounting’, Financial Times, URL: https://www.ft.com/content/
ad5b5082-e3a0-11e4-9a82-00144feab7de
58: Barclay Ballard (2018), ‘Top 5 biggest financial scandals of all time’,
World Finance, URL: https://www.worldfinance.com/markets/top-5-
biggest-financial-scandals-of-all-time
59: Chon (15 April 2015).
60: Ibid.
61: Al Jazeera Investigative Unit (18 April 2020), ‘Exclusive: Audio Reveals
Pressure on Dubai Gold Whistle-Blower’, Al Jazeera English, URL:
https://www.aljazeera.com/news/2020/04/exclusive-audio-reveals-
pressure-dubai-gold-whistle-blower-200418134421024.html
62: Ibid.
63: David S. Hinzelrath (10 May 2018), ‘PwC Whistle-blower Alleges
Fraud in Audits of Silicon Valley Companies’, Project on Government
Oversight (POGO), URL: https://www.pogo.org/investigation/2018/05/
pwc-whistleblower-alleges-fraud-in-audits-of-silicon-valley-
companies/
64: Jeff Bukhari (28 February 2017), ‘5 PwC Scandals Far Worse than Oscar
Envelopegate Mix Up’, Fortune, URL: https://fortune.com/2017/02/28/
pricewaterhousecoopers-pwc-scandals-oscars/
65: Kristin Broughton (26 February 2019), Swedbank Drops EY as External
Auditor Amid Reports of Danske Bank Ties, Wall Street Journal, URL:
https://www.wsj.com/articles/swedbank-drops-ey-as-external-
auditor-amid-reports-of-danske-bank-ties-11551218963 [Accessed:
1 April 2019].
66: ‘How did auditors miss signs of money laundering at Danske
Bank?’ (2018), The Irish Times, URL: https://www.irishtimes.com/
business/financial-services/how-did-auditors-miss-signs-of-money-
laundering-at-danske-bank-1.3643323 [Accessed: 3 December
2019].
67: Ibid.
68: Ibid.
The Audit Rap sheet
1: ‘How did auditors miss signs of money laundering at Danske

Bank?’ (2018), The Irish Times, URL: https://www.irishtimes.com/
business/financial-services/how-did-auditors-miss-signs-of-money-
laundering-at-danske-bank-1.3643323 [Accessed: 3 December
2019].
2: Photo credit for PWC building: https://goo.gl/maps/
QRRBwkdmavRFLoqB7
3: Photo credit for Deloitte building: http://www.businesstech.co.za/
news/business/170269/a-look-at-deloittes-stunning-new-r1-billion-
headquarters-in-midrand/
4: Photo credit for EY building: https://goo.gl/maps/
JUPHKxVoRxxGVmNZ7
5: Photo credit for KPMG building: www.consultancy.co.za/news/1599/
kpmg-opens-new-office-on-the-foreshore-of-cape-towns-central-
business-district
Auditing South Africa’s Corporate Giants: Steinhoff and
Tongaat Hulett
1: Rob Rose (2018), Steinheist, (Tafelberg: Cape Town) p. 23.

2: Jan Cronje (18 March 2019), ‘Top 5 things to know about the PwC
report into Steinhoff and questions that still remain’, Fin24, URL:
https://www.fin24.com/Companies/Retail/the-top-5-things-to-know-
about-the-pwc-report-into-steinhoff-and-the-questions-that-still-
remain-20190318 [Accessed 1 June 2020].
3: Ibid.
4: Craig McKune AmaBhungane and Warren Thompson (1 November
2018), ‘Steinhoff’s secret history and the dirty world of Markus
Jooste’, Financial Mail, URL: https://www.businesslive.co.za/fm/
features/cover-story/2018-11-01-steinhoffs-secret-history-and-the-
dirty-world-of-markus-jooste/ [Accessed 30 April 2020].
5: Ibid.
6: Ibid.
7: Ibid.
8: Rose (2018) p. 3.
9: PwC forensic investigation into Steinhoff, cited in Tim Cohen, ‘PwC’s
Steinhoff report suggests profit was boosted R106bn in seven years’,
Daily Maverick, 17 March 2019.
10: Tim Cohen (17 March 2019), ‘PwC’s Steinhoff report suggests profit
was boosted R106bn in seven years’, Daily Maverick, URL: https://
www.dailymaverick.co.za/article/2019-03-17-pwcs-steinhoff-
report-suggests-profit-was-boosted-by-r106bn-in-seven-years/
11: Steinhoff 1999 Annual Report.
12: Rose (2018) p. 11.
13: Tehillah Nieselow (19 January 2018), ‘We did the right thing with
Steinhoff – Deloitte, Fin24, URL: https://www.fin24.com/Companies/
Financial-Services/exclusive-we-did-the-right-thing-with-steinhoff-
deloitte-20180119 [Accessed 30 April 2020].
14: Rose (2018), p. 13.
15: Nieselow (19 January 2018).
16: Cohen (17 March 2019).
17: ISA 200, Overall Objectives of the Independent Auditor and the
Conduct of an Audit in Accordance with International Standards on
Auditing.
18: Ann Crotty (15 July 2019), ‘Steinhoff pays another R1,3bn in
advisory fees’, Business Day, URL: https://www.businesslive.co.za/
bd/companies/retail-and-consumer/2019-07-15-steinhoff-pays-
another-r13bn-in-advisory-fees/ [Accessed 30 April 2020].
19: Ibid.
20: McKune and Thompson (1 November 2018).
21: Rob Rose (13 September 2018), ‘Markus Jooste’s fables’,
Financial Mail, URL: https://www.businesslive.co.za/fm/
features/2018-09-13-markus-joostes-fables/ [Accessed 30 April
2020].
22: IRBA (19 March 2019), ‘IRBA investigation into Steinhoff auditors
will recommence once restated financials are released’, IRBA: Press
Statement.
23: Londiwe Buthelezi (3 December 2018), ‘Deloitte should not
have missed African Bank red flags, says auditing board’, Business
Day, URL: https://www.businesslive.co.za/bd/companies/financial-
services/2018-12-03-deloitte-should-not-have-missed-african-
bank-red-flags-says-auditing-board/ [Accessed 30 April 2020].
24: Joseph Cotterill (13 June 2018), ‘Steinhoff shareholders sue
Deloitte for damages’, Financial Times.
25: Rob Rose (11 July 2019), ‘Deloitte, we have a problem’,
Financial Mail, URL: https://www.businesslive.co.za/fm/features/
cover-story/2019-07-11-deloitte-we-have-a-problem/ [Accessed 30
April 2020].
Sou rces – 71
26: Tongaat Hulett company website, URL: http://www.huletts.co.za/
[Accessed 19 May 2020].
27: Siseko Njobeni (2 December 2019), ‘Tongaat considers civil
action against Peter Straude and other executives’, Business Day, URL:
https://www.businesslive.co.za/bd/companies/industrials/2019-12-
02-tongaat-goes-after-former-executives/ [Accessed 30 April 2020].
28: Tongaat Hulett Limited (29 November 2019), Summary: Key Findings
of the PwC Investigation.
29: Ibid.
30: Rob Rose (12 December 2019), ‘Deloitte’s R11,8 billion
pickle’, Financial Mail, URL: https://www.businesslive.co.za/fm/
opinion/editors-note/2019-12-12-rob-rose-deloittes-r118bn-pickle/
31: 18. Ibid.
32: James de Villiers (4 June 2019), ‘Tongaat Hulett scandal: Deloitte
replaces senior auditors and launches an internal investigation’,
Business Insider, URL: https://www.businessinsider.co.za/tongaat-
hulett-deloitte-replaces-auditing-leadership-team-launches-
investigation-2019-6 [Accessed 30 April 2020].
33: Business Day (8 October 2019), “Tongaat takes page out of Steinhoff
rule book”, URL: https://www.businesslive.co.za/bd/companies/2019-
10-08-tongaat-takes-page-out-of-steinhoff-rule-book/ [Accessed 30
April 2020].
34: Rob Rose (28 May 2020), ‘Inside audit watchdog’s Tongaat Blunder’,
Financial Mail, URL: https://www.businesslive.co.za/fm/opinion/
editors-note/2020-05-28-rob-rose-inside-audit-watchdogs-tongaat-
blunder/ [Accessed 2 June 2020].
35: Letter from the Organisation Undoing Tax Abuse (OUTA) to Minister
Tito Mboweni, 21 May 2020.
VBS: Audit Failures Enable a Bank Heist
1: Rolivhuwa Sadiki (5 April 2019), ‘“I don’t sleep, I feel like I could just
die” – VBS bank heist victim on losing her money’, Drum, URL: https://
www.news24.com/SouthAfrica/News/i-dontsleep-i-feel-like-i-could-
just-die-vbs-bank-heist-victim-on-losingher-money-20190405
[Accessed 30 April 2020]; Aubrey Mothombeni (31 March 2019), ‘Top
VBS man’s mansion goes under the hammer’, Sunday World, URL:
https://www.sowetanlive.co.za/sundayworld/news/2019-03-31-top-
vbs-mans-mansion-going-under-hammer/[Accessed 30 April 2020].
2: Sikonathi Mantshantsha (21 December 2019), ‘Scandal of the year:
VBS – a most unsophisticated bank heist’, Financial Mail, URL:
https://www.businesslive.co.za/fm/features/cover-story/2018-12-
21-scandal-of-the-year-vbs--a-most-unsophisticated-bank-heist/
3: Terry Motau SC (30 September 2018), The Great Bank Heist:
Investigator’s Report to the Prudential Authority. The report
recommends criminal prosecutions. Unfortunately, more than a year
on, there have been none.
4: Pauli van Wyk (7 November 2019), ‘Five VBS robbers-in-chief
– R2,7 billion gone (R800 million more than previously thought) –
still zero criminal prosecutions’, Daily Maverick, URL: https://www.
dailymaverick.co.za/article/2019-11-07-five-vbs-robbers-in-chief-
r2-7-bn-gone-r800-million-more-than-previously-thought-still-zero-
criminal-prosecutions/ [Accessed 30 April 2020].
5: Sipho Masondo and Dewald Van Rensburg (24 June 2018),
‘How VBS Mutual Bank was plundered’, Fin24, URL: https://
www.fin24.com/Companies/Financial-Services/how-vbs-was-
plundered-20180624-2 [Accessed 30 April 2020].
6: Pauli van Wyk (20 August 2019), ‘The Great Bank Heist: How
VBS bought the silence of two key PIC officials’, Daily Maverick, URL:
https://www.dailymaverick.co.za/article/2019-08-20-the-great-
bank-heist-how-vbs-bought-the-silence-of-two-key-pic-officials/
7: M antshantsha (21 December 2019).
8: Ibid.
9: Pauli van Wyk (13 May 2020), ‘Philip Truter, the sentinel who
failed to raise the alarm at VBS’, Daily Maverick, URL: https://www.
dailymaverick.co.za/article/2020-05-13-philip-truter-the-sentinel-
who-failed-to-raise-the-alarm-at-vbs/ [Accessed 19 May 2020].
10: Motau SC (30 September 2018) p. 16.
11: Pauli van Wyk (11 July 2019), ‘What happens when governance
fails? A VBS whistle-blower’s account describes the price of truth’,
Daily Maverick, URL: https://www.dailymaverick.co.za/article/2019-
07-11-what-happens-when-governance-fails-a-vbs-whistle-
blowers-account-describes-the-price-of-truth/ [Accessed 30 April
2020].
12: Aubrey Mothombeni (31 March 2019), ‘Top VBS man’s mansion goes
under the hammer’, Sunday World, URL: https://www.sowetanlive.
co.za/sundayworld/news/2019-03-31-top-vbs-mans-mansion-
going-under-hammer/ [Accessed 30 April 2020].
13: Motau SC (30 September 2018), p. 135.
14: Rolivhuwa Sadiki (5 April 2019), ‘“I don’t sleep, I feel like I could
just die” – VBS bank heist victim on losing her money’, Drum,
URL: https://www.news24.com/SouthAfrica/News/i-dont-sleep-
i-feel-like-i-could-just-die-vbs-bank-heist-victim-on-losing-her-
money-20190405 [Accessed 30 April 2020]; Aubrey Mothombeni
(31 March 2019), ‘Top VBS man’s mansion goes under the hammer’,
Sunday World, URL: https://www.sowetanlive.co.za/sundayworld/
news/2019-03-31-top-vbs-mans-mansion-going-under-hammer/
[Accessed 30 April 2020]
15: van Wyk (7 November 2019).
16: Liesl Pretorius (31 July 2019), ‘Analysis: Did ‘no poor person’
lose money in VBS’s bank collapse?’, Africa Check, URL: https://
africacheck.org/2019/07/31/analysis-did-no-poor-person-lose-
money-in-vbs-banks-collapse/ [Accessed 30 April 2020].
17: Ibid.
19: Marchant et. al (2020).
20: Hannah Ziady (13 April 2018), ‘Regulator reveals KPMG waved
no red flags over Guptas and VBS’, Business Day, URL: https://www.
businesslive.co.za/bd/companies/2018-04-13-regulator-reveals-
kpmg-waved-no-red-flags-over-guptas-and-vbs/ [Accessed 30 April
2020].
22: Kabelo Khumalo (11 October 2018), ‘KPMG auditor paid R34
million to cover up #VBSBankHeist’, Business Report, 11 October
2018. Detailed accounts of these ‘loan facilities’ can be found in
Terry Motau SC, The Great Bank Heist: Investigator’s Report to the
Prudential Authority, 30 September 2018.
23: Ibid.
24: Motau SC (30 September 2018), p. 113-114.
25: Kyle Cowan (11 October 2018), ‘Ex-KPMG partner slams
SARBs ‘fatally tainted’ VBS report, heads to court’, News24, URL:
https://www.news24.com/SouthAfrica/News/ex-kpmg-partner-
slams-sarbs-fatally-tainted-vbs-report-heads-to-court-20181011
26: Nqobile Dludla (24 November 2018), ‘KPMG reports ex-partner
to police over VBS scandal’, Moneyweb, 24 November URL: https://
www.moneyweb.co.za/news/south-africa/kpmg-reports-ex-partner-
to-police-over-vbs-scandal/ [Accessed 30 April 2020].
27: Khumalo (11 October 2018).
28: Thanduxolo Jika (31 May 2019), ‘VBS Mutual liquidators target
KPMG’, Mail & Guardian, URL: https://mg.co.za/article/2019-05-31-
00-vbs-mutual-liquidators-target-kpmg/ [Accessed 30 April 2020].
29: Terry Motau SC, The Great Bank Heist: Investigator’s Report to
the Prudential Authority, 30 September 2018, pg. 76.
30: Ibid.
Sou rces – 73
31: Motau SC (30 September 2018), 84-85.
32: Ibid, p. 83.
33: Ibid. p. 83.
34: IRBA (7 November 2018), IRBA responds regarding actions
against auditors of VBS
35: Helena Wasserman (13 April 2018), ‘Curator asked PwC to stop
its work as internal auditor at VBS. Millions may have disappeared
at its time at the bank’, Business Insider, URL: https://www.
businessinsider.co.za/pwc-out-as-vbs-auditor-2018-4 [Accessed 30
April 2020].
36: IRBA (7 November 2018).
SAA: How the Accountability Cookie Crumbles
1: D raft Affidavit of Simon Mantell (January 2020).

2: CIRO’s bid was also significantly more expensive than Mantelli’s as
confirmed by the Indyebo Report.
3: Antony Sguazzin (14 April 2020), ‘South Africa cuts off funding
line to state-owned airline’, Bloomberg, URL: https://www.bloomberg.
com/news/articles/2020-04-14/south-african-airways-denied-
further-funding-by-government-owner [Accessed 15 April 2020].
4: James de Villiers (January 2020), ‘South African taxpayers have
paid R16.5bn to bail out SAA over the past decade — almost R1,000
per household’, Business Insider, URL: https://www.businessinsider.
co.za/this-is-how-much-the-south-african-government-spent-
bailing-out-saa-2020-1 [Accessed 16 April 2020].
5: Tito Mboweni (26 February 2020), 2020 Budget Speech, Treasury, URL:
http://www.treasury.gov.za/documents/national%20budget/2020/
speech/speech.pdf [Accessed 17 February].
6: Draft Affidavit of Simon Mantell (January 2020).
7: Ibid, p. 16, paragraph 6.11.
8: Ibid, p. 5, paragraph 4.16.
9: The Public Finance Management Act is the legislation governing
financial management at the national and provincial levels of
government.
10: Indyebo has since been incorporated into Nexia SAB&T, a majority
black-owned accounting, audit and consulting services firm.
11: Interview with Simon Mantell, March 2020, Cape Town.
12: Indyebo Consulting (8 August 2014), ‘Investigation report: Alleged
irregular awarding of a tender’, Submitted to Siyakhula Vilakazi of
SAA.
13: Section 51(1)(a)(iii) of the Public Finance Management Act 1 of 1999.
14: Section 86(2) of the Public Finance Management Act 1 of 1999.
15: Draft Affidavit of Simon Mantell (January 2020), p. 5, paragraph
4.21.1.
16: National Treasury (21 May 2015), ‘Report on the verification of
compliance with Treasury norms and standards using the bidding
process of Bid No: RFP-GSM 25/2013 Air Chefs PTY Ltd’.
17: Gauteng Disciplinary Hearings (September 2019), Gauteng
Legal Practice Council, Report in terms of Section 38(3) of the Legal
Practice Act.
18: National Treasury (21 May 2015), ‘Report on the verification of
compliance with Treasury norms and standards using the bidding
process of Bid No: RFP-GSM 25/2013 Air Chefs PTY Ltd’.
19: Ibid.
20: Institute for Internal Auditors South Africa, ‘Definition of Internal
Audit’, IIASA, URL: https://www.iiasa.org.za/page/Technical_IADef
21: Cornelies Crous CA(SA), ‘The 1-2-3 of audit committees: the
responsibilities of the audit committee’ , SAICA, URL: https://www.
saica.co.za/portals/0/documents/Attachment%20B.pdf [Accessed 17
April 2020].
22: IAASA Website, URL: https://www.iiasa.org.za/ [Accessed 30 April
2020].
23: Siyakhula Vilakazi (16 March 2017), ‘SAA Chief Audit Executive
affidavit to Institute of Internal Auditors South Africa’.
24: Ibid.
25: Antoinette Slabbert (28 May 2018), ‘The biscuit maker, the big
shot auditor, and the SAA cover-up’, The Citizen, URL: https://citizen.
co.za/news/south-africa/1939019/the-biscuit-maker-the-big-shot-
auditor-and-the-saa-cover-up/ [Accessed 17 April 2018].
26: Antoinette Slabbert (31 July 2018), ‘What Saica was hiding
about top SAA man’, The Citizen, URL: https://citizen.co.za/
business/1988980/what-saica-was-hiding-about-top-saa-man/
27: Slabbert (28 May 2018).
28: Slabbert (31 July 2018).
29: Ann Crotty (18 June 2018), ‘SAA executive seeks legal advice
after adverse Saica ruling’, Business Day, URL: https://www.
businesslive.co.za/bd/companies/transport-and-tourism/2018-06-
18-saa-executive-seeks-legal-advice-after-adverse-saica-ruling/
30: Slabbert (31 July 2018).
31: Sabelo Skiti (8 June 2018), ‘Broke SAA goes on spending spree’,
Mail&Guardian, URL: https://mg.co.za/article/2018-06-08-00-broke-
saa-goes-on-spending-spree/ [Accessed 17 April 2020].
32: Draft Affidavit of Simon Mantell (January 2020), p.30, paragraph 8.19.
33: Deloitte’s Independent Auditor’s Report (2012), As contained in the
South African Airways Annual Financial Statements for year ended 31
March 2011.
34: Vilakazi (16 March 2017).
35: Vilakazi (16 March 2017).
36: Khaya Sithole (24 May 2018), ‘Lack of Accountability Crash-Lands
SAA’, Business Day, URL: https://www.businesslive.co.za/bd/opinion/
columnists/2018-05-24-khaya-sithole-lack-of-accountability-crash-
lands-saa/ [Accessed 17 April 2020] [Accessed 30 April 2020].
37: Auditor-General of South Africa (8 December 2017), ‘Report of the
Auditor-General’, as contained the South African Airways Annual
Financial Statements for year ended 31 March 2017.
38: Stefaans Brummer and Susan Comrie, ‘The Nkonki Pact Part 1:
How the Guptas bought themselves an auditor’, amaBhungane for
News24, URL: https://www.fin24.com/Economy/the-nkonki-pact-
part-1-how-the-guptas-bought-themselves-an-auditor-20180328
39: Khulekani Magubane (7 May 2018), ‘MPs hear why AG’s office
ditched KPMG and Nkonki’, Mail & Guardian, URL: https://mg.co.za/
article/2018-05-07-mps-hear-why-ags-office-ditched-kpmg-nkonki/
40: Letter from Pule Mothibe to the Independent Regulatory Board for
Auditors, 22 February 2016.
41: Ibid.
42: Ibid.
43: Indyebo Consulting (8 August 2014).
44: Ann Crotty (25 October 2017), ‘EXCLUSIVE: Another major
auditing firm drawn into SAA Scandal’, Business Day, URL: https://
www.businesslive.co.za/fm/fm-fox/2017-10-25-exclusive-another-
major-auditing-firm-drawn-into-saa-scandal/ [Accessed 17 April
2020].
45: Ibid.
46: Ibid.
47: IRBA (2020), ‘What we do’, URL: https://www.irba.co.za/about-us/
what-we-do [Accessed 19 May 2020].
48: Draft Affidavit of Simon Mantell (January 2020), p. 7, paragraphs
4.37-4.40.
49: ENSafrica Forensics, ‘Company e-Brochure’, URL: https://www.
ensafrica.com/Uploads/e-brochures/brochure_forensics.html
Sou rces – 75
50: Carol Paton and Nicky Smith (27 November 2015), ‘SAA
board duped into probing tender’, Business Day, URL: https://www.
businesslive.co.za/archive/2015-11-27-saa-board-duped-into-
probing-tender/ [Accessed 21 April 2020].
51: Ibid.
52: Susan Comrie (9 August 2015), ‘SAA’s 167k a month adviser’,
City Press, URL: https://city-press.news24.com/News/SAAs-R167K-
a-month-adviser-20150809 [Accessed 21 April 2020].
53: Genevieve Quintal (30 September 2019), ‘Dudu Myeni’s lawyer
withdraws just before her delinquent directors case’, Business Day,
URL: https://www.businesslive.co.za/bd/national/2019-09-30-dudu-
myenis-lawyer-withdraws-just-before-her-delinquent-director-case/
54: OUTA and SAAPA v Myeni and Others, High Court of South Africa
(Gauteng Division, Pretoria), Case Number: 15996/2017.
55: Draft Affidavit of Simon Mantell (January 2020), p.9, paragraph 4.61.
56: ENSafrica Forensics, Transcripts of meeting between ENSafrica
Forensics, Simon Mantell, and Mantell’s attorney, 4 September 2015,
Johannesburg.
57: Ibid.
58: Email from Steven Powell to Simon Mantell, Monday 14 September
2015.
59: ENSafrica Forensics, ‘Company e-Brochure’, URL: https://www.
ensafrica.com/Uploads/e-brochures/brochure_forensics.html
60: ENSafrica Forensics (13 October 2016), ‘Forensic investigation
into allegations relating to the award of the Dry Snack tender
GSM025.2013’, Prepared for SAA: Dudu Myeni; and Draft Affidavit of
Simon Mantell (January 2020)
61: Ibid., p.5, paragraph 3.
62: Ibid., p.29, paragraph 5.54.
63: Ibid., p.29, paragraph 5.54.3.
State Capture Auditors
1: Marianne Merten (1 March 2019), ‘State Capture wipes out a third

SA’s R4,9 trillion GDP – never mind lost trust, confidence, opportunity’,
Daily Maverick, URL:
3: Natasha Marian (2 July 2019), ‘SARS and treasury to pursue
criminal charges against Bain & Co’, Mail & Guardian, URL: https://
mg.co.za/article/2019-07-02-sars-and-treasury-to-pursue-criminal-
charges-against-bain-co [Accessed: 2 July 2019].
4: These case studies are explored in Open Secrets (February
2020), The Enablers: The bankers, accountants and lawyers that
cashed in on state capture. Report Submitted to the Zondo Commission
of Inquiry into State Capture.
5: Loni Prinsloo and John Bowker (26 September 2018), ‘KPMG
loses more SA staff, clients from Gupta fallout’, Sunday Times, URL:
https://www.timeslive.co.za/sunday-times/business/2018-09-26-
kpmg-loses-more-south-african-staff-clients-from-gupta-fallout/
[Accessed 23 January 2020].
6: Judge R Nugent (11 December 2018.), Final Report: Commission
of Inquiry into Tax Administration and Governance by SARS. While Tom
Moyane indicated that he might challenge the final report, no such
challenge has materialized.
7: Jeanette Chabalala (27 June 2018), Ntsebeza inquiry: Claims
that KPMG ‘rogue unit’ report was cut-and-paste job’, News 24, URL:
https://www.fin24.com/Economy/sars-inquiry-claims-that-kpmg-
rogue-unit-report-was-cut-and-paste-job-20180627
8: Huffington Post (15 September 2017), ‘How KPMG’s ‘Rogue Unit’
Report Was Ludicrous From The Beginning: Extract from Rogue: The
Inside Story of SARS’s Elite Crime-busting Unit’, URL: https://www.
huffingtonpost.co.uk/entry/how-kpmgs-rogue-unit-report-was-
ludicrous-from-the-
9: Kyle Cowan (5 July 2019), ‘SARS and the ‘rogue’ unit: the
ultimate guide’, fin24, URL: https://www.fin24.com/Economy/sars-
and-the-rogue-unit-the-ultimate-guide-20190705
10: Ibid.
11: Pieter du Toit (2 October 2019), ‘Secret intelligence report into SARS
unit a ‘travesty’ and ‘false’, says former taxman’, News24, URL: https://
www.news24.com/SouthAfrica/News/secret-intelligence-report-
into-sars-unit-a-travesty-and-false-says-former-taxman-20191002
12: Cowan (5 July 2019).
13: Jeanette Chabalala (27 June 2018), Ntsebeza inquiry: Claims
that KPMG ‘rogue unit’ report was cut-and-paste job’, News 24, URL:
https://www.fin24.com/Economy/sars-inquiry-claims-that-kpmg-
rogue-unit-report-was-cut-and-paste-job-20180627
14: Ibid.
15: Marianne Thamm (3 October 2017), ‘SARS Wars: KPMG report-
the Firm, the Lawyers, the Auditor and the Blame Game’, Daily
Maverick, URL: https://www.dailymaverick.co.za/article/2017-10-
03-sars-wars-kpmg-report-the-firm-the-lawyers-the-auditor-and-
the-blame-game/#.WdSkuxOCxn4
16: Chabalala (27 June 2018).
17: Ibid.
18: Pauli van Wyk (15 September 2019), ‘KPMG: “Weak” apology
suggests company saw no evil, heard no evil- therefore did no evil’,
Daily Maverick, URL: https://www.dailymaverick.co.za/article/2017-
09-15-kpmg-weak-apology-suggests-company-saw-no-evil-heard-
no-evil-therefore-did-no-evil/
19: Ibid.
20: Ibid.
21: Hajra Omarjee (16 July 2019), ‘”I Would Do This for Anyone”:
Zuma’s Lawyer Muzi Sikhakhane’, Power987, URL: https://www.
power987.co.za/news/zuma-lawyer-muzi-sikhakhane-state-
capture-intimidation/
22: Sibongile Khumalo (6 August 2018), ‘Gupta Wedding Under
Scrutiny as IRBA Wraps Up Disciplinary of ex-KPMG Auditor’, Fin24,
URL: https://www.fin24.com/Companies/Financial-Services/gupta-
wedding-under-scrutiny-as-irba-wraps-up-disciplinary-of-ex-kpmg-
auditor-20180806/ [Accessed 23 August 2019].
23: Ibid.
24: Pieter-Louis Myburgh (12 July 2018), ‘Gupta associated
‘advised’ Magashule on Vrede dairy project’, News24, URL: https://
www.news24.com/SouthAfrica/News/exclusive-gupta-associate-
advised-magashule-on-vrede-dairy-project-court-papers-20180712
[Accessed 19 August 2019].
25: Tabelo Timse and Stefaans Brümmer (2013), ‘Guptas’ Farm
Cash Cows in Free State, Mail & Guardian, URL: https://mg.co.za/
article/2013-05-31-00-guptas-farm-cash-cows-in-free-state/
26: Myburgh (12 July 2018).
27: Review of the Vrede Dairy Integrated Project, Commissioned by ENS
Forensics, Dawie Maree, December 2013 reveal extensive violations
of the Public Finance Management Act (PFMA).
28: National Treasury/ENS Forensics (February 2014), Report on the
Investigation into the Vrede Integrated Dairy Farm Project.
29: Shadow World Investigations (November 2019), Submission to
the Commission of Inquiry into Allegations of State Capture [Zondo
Commission] regarding the Estina/Vrede Integrated Dairy Project.
30: Myburgh (12 July 2018).
31: ‘The Troika Laundromat’, OCCRP, URL: https://www.occrp.org/en/
troikalaundromat/ [Accessed: 6 March 2019].
Sou rces – 77
32: Shadow World Investigations (November 2019).
33: Khumalo (6 August 2018).
34: AmaBhungane and Scorpio (30 June 2017), ‘The Dubai
Laundromat – How KPMG saw no evil at the Sun City Wedding’,
News24, URL: https://www.news24.com/SouthAfrica/News/
guptaleaks-the-dubai-laundromat-how-kpmg-saw-no-evil-at-the-
sun-city-wedding-20170629 [Accessed 23 August 2019].
35: Ibid.
36: Ibid.
37: Ibid.
38: Ibid.
39: Independent Regulatory Board for Auditors (IRBA) (23 March
2019), Linkway Trading Auditor deregistered – ordered to contribute to
costs. URL: https://www.irba.co.za/news-headlines/press-releases/
linkway-trading-auditor-deregistered-ordered-to-contribute-to-costs
40: Ibid.
41: ‘KPMG to donate R40m it earned in fees from Gupta-related
entities to NGOs’ (15 September 2015), Mail & Guardian, URL: https://
mg.co.za/article/2017-09-15-kpmg-to-donate-r40m-it-earned-in-
fees-from-gupta-related-entities-to-ngos/
42: Ibid.
43: Sally Evans (2017), ‘How McKinsey and Trillian Ripped R1.6bn
from Eskom – and Planned to Take R7.8bn More’, #Guptaleaks. 2017,
URL: . https://www.gupta-leaks.com/salim-essa/how-mckinsey-and-
trillian-ripped-r1-6bn-from-eskom-and-planned-to-take-r7-8bn-
more/
44: Stefan Hofstatter (2018), ‘McKinsey Stands Firm on SOE Pricing
Model’, Business Day, 2018, URL: https://www.businesslive.co.za/bd/
companies/financial-services/2018-07-10-mckinsey-stands-firm-
on-soe-pricing-model/
46: Susan Comrie (16 January 2019), ‘The Dirt on Deloitte’s
Consulting Dealings at Eskom Part 2’, amaBhungane for News24, URL:
https://amabhungane.org/stories/the-dirt-on-deloittes-consulting-
deals-at-eskom-part-2/.
47: Tebogo Tshwane, ‘Eskom accuses Deloitte of corruption and
(maybe) plagiarism’, Moneyweb, URL: https://www.moneyweb.
co.za/news/south-africa/eskom-accuses-deloitte-of-corruption-and-
maybe-plagiarism/
48: ‘CFO Transition LabTM: Plan Ahead’, Deloitte, URL: https://www2.
deloitte.com/za/en/pages/finance/articles/cfo-transition-lab.html
[Accessed: 8 January 2019]
49: Carol Paton (21 October 2019), ‘Eskom goes after Deloitte for
Corruption’, Business Day, URL: https://www.businesslive.co.za/bd/
national/2019-10-21-eskom-goes-after-deloitte-for-corruption/
50: Comrie (16 January 2019).
51: Tebogo Tshwane (23 October 2019), ‘Eskom accuses Deloitte
of corruption and (maybe) plagiarism’, Moneyweb, URL: https://www.
moneyweb.co.za/news/south-africa/eskom-accuses-deloitte-of-
corruption-and-maybe-plagiarism/
53: Ibid.
54: Paton (21 October 2019).
55: Ibid.
56: Sikonathi Mantshantsha (23 October 2019), ‘Eskom: We
paid Deloitte R60-million for three weeks of work in two corrupt
contracts’, Business Maverick, URL: https://www.dailymaverick.
co.za/article/2019-10-23-eskom-we-paid-deloitte-r60-million-for-
three-weeks-of-work-in-two-corrupt-contracts/
57: Tshwane (23 October 2019),
58: Mantshantsha (23 October 2019).
59: Deloitte (January 2020), Media statement on amaBhungane articles,
URL: https://amabhungane.org/wp-content/uploads/2020/01/Media-
statement-16-01-2020final.pdf
60: Susan Comrie (15 January 2019), ‘The Dirt on Deloitte’s
Consulting Dealings at Eskom Part 1’, amaBhungane for News24,
URL: https://www.fin24.com/Economy/Eskom/the-dirt-on-deloittes-
consulting-deals-at-eskom-20200115-2
61: Joint Statement between Eskom and Deloitte Consulting (20
March 2020), Deloitte & Eskom.
62: Ibid.
64: Ibid.
65: Susan Comrie (9 April 2020), ‘In the wake of Eskom scandal, two
Deloitte directors resign’, amaBhungane, URL: https://amabhungane.
org/stories/update-in-the-wake-of-eskom-scandal-two-deloitte-
directors-resign/ [Accessed 30 April 2020].
The Absence of Accountability
1: Ann Crotty (25 October 2017), ‘EXCLUSIVE: Another major auditing

firm drawn into SAA Scandal’, Business Day, URL: https://www.
businesslive.co.za/fm/fm-fox/2017-10-25-exclusive/.
2: Adam Leaver, Leonard Seabrooke, Saila Stausholm, Duncan Wigan
(2020), Auditing with Accountability: Shrinking the Opportunity Spaces
for Audit Failure, (University of Sheffield & Copenhagen Business
School), p. 30.
3: Ibid, p. 3.
4: Fjeldstad, O., Jacobsen, S., Ringstad, P., Ngowi, H. (Eds.),
‘Lifting the Veil of Secrecy: Perspectives on International Taxation
and Capital Flight from Africa’, Chr. Michelsen Institute, 2017: p. 71.
Available: https://www.cmi.no/publications/file/6382-lifting-the-veil-
of-secrecy.pdf
5: Ann Crotty, ‘Local auditing profession’s fall from grace’, Financial
Mail, 7 March 2019, Available: https://www.businesslive.co.za/fm/
opinion/boardroom-tails/2019-03-07-ann-crotty-local-auditing-
professions-fall-from-grace/
6: van der Does de Willebois, E., Halter, E., Harrison, R., Park J.W.,
Sharman, J.C. (2011), ‘The Puppet Masters: How the Corrupt Use
Legal Structures to Hide Stolen Assets and What to Do About It’, Stolen
Asset Recovery Initiative, p. 6.
7: Khaya Sithole (13 May 2019), Telephonic Interview with Open Secrets.
8: Code of Professional Conduct for Registered Auditors (Revised)
(2018), The Independent Regulatory Board for Auditors, p. 37.
9: Richard Brooks (29 May 2018), ‘The Financial Scandal No One is
Talking About’, The Guardian, URL: https://www.theguardian.com/
news/2018/may/29/the-financial-scandal-no-one-is-talking-about-
big-four-accountancy-firms
10: Leaver et. al (2020), p. 28.
11: Ibid., p. 29.
12: Cris Shore & Susan Wright (2018), ‘How the Big 4 got big: Audit
culture and the metamorphosis of international accountancy firms’,
Critique of Anthropology Vol. 0, no. 0, pp. 11-12.
13: Ibid, p. 12.
14: Madison Marriage (10 July 2019), ‘Big Four Paid Millions to
Advise Brussels Tax Policy’, Financial Times, URL: https://www.
ft.com/content/56f862ee-8392-11e8-96dd-fa565ec55929.
15: Ibid.
16: Madison Marriage & Jonathan Ford, (20 August 2018), ‘Too close
for comfort: the incestuous ties that bind auditors and watchdogs’,
Financial Times, URL: https://www.ft.com/content/e129b888-a088-
11e8-85da-eeb7a9ce36e4
17: Ibid.
Sou rces – 79
18: Zucman, G., Fueling Inequality, Süddeutsche Zeitung, 2017.
Available: https://projekte.sueddeutsche.de/paradisepapers/
wirtschaft/tax-havens-fuel-inequality-e168550/
19: Sithole (13 May 2019).
Recommendations
1: Alex Cobham, Director of the Tax Justice Network quoted in Lynley

Donnelly (20 April 2018), ‘Calls mount to split auditing firms’, Mail &
Guardian, URL: https://mg.co.za/article/2018-04-20-00-calls-mount-
to-split-auditing-firms/
2: Ibid.
3: Huw Jones (2 April 2019), ‘UK lawmakers want Big Four
accounting firms broken up’, Reuters, URL: https://www.reuters.
com/article/us-britain-accounts/uk-lawmakers-want-big-four-
accounting-firms-broken-up-idUSKCN1RD3FC.
4: Iraj Abedian (19 March 2018), ‘Audit profession needs a new
dawn’, Daily Maverick, URL: https://www.dailymaverick.co.za/
opinionista/2018-03-19-audit-profession-needs-a-new-dawn/.
5: Lynley Donnelly (20 April 2018), ‘Calls mount to split auditing
firms’, Mail & Guardian, URL: https://mg.co.za/article/2018-04-20-
00-calls-mount-to-split-auditing-firms/.
6: IRBA, ‘Only Through Combined Efforts: Will we be able to restore
the reputation of the profession’, IRBA News, Issue 45.
7: Ibid.
8: Ann Crotty, ‘Local auditing profession’s fall from grace’, Financial
Mail, 7 March 2019, Available: https://www.businesslive.co.za/fm/
opinion/boardroom-tails/2019-03-07-ann-crotty-local-auditing-
professions-fall-from-grace/ [Accessed 16 July 2019].
9: Jan Cronje (11 February 2020), ‘Powers of subpoena, search
and seizure will boost auditing regulator’s reach – CEO’, fin24.
10: Ibid.
11: Lucy Burton (18 April 2019), ‘Big Four vent fury at watchdog’s
plan to split audit and consulting divisions’, Telegraph, URL: https://
www.telegraph.co.uk/business/2019/04/18/big-four-vent-fury-
watchdogs-plan-split-audit-consulting-divisions/.
12: Madison Marriage (10 July 2019), ‘Big Four Paid Millions to
Advise Brussels Tax Policy’, Financial Times, URL: https://www.
ft.com/content/56f862ee-8392-11e8-96dd-fa565ec55929.
13: Adam Leaver, Leonard Seabrooke, Saila Stausholme and
Duncan Wigan (March 2020), ‘Auditing with accountability: shrinking
the opportunity spaces for audit failure’, University of Sheffield and
Copenhagen Business School, p.3.
14: Karthik Ramanna (16 March 2018), ‘The trouble with
accounting’s Big Four’, CapX, URL: https://capx.co/the-trouble-with-
accountings-big-four/.
15: Leaver et. al (March 2020), p.30.
16: Ramanna (16 March 2018).
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CORPORATIONS AND

ECONOMIC CRIME REPORT

Research by: Michael Marchant and Mamello Mosiana

Copy editor: Helen Douglas

Copyright of Text: Open Secrets

The publication of this report has been made possible by

2nd Floor Community House,

AUDITING SOUTH AFRICA’S CORPORATE GIANTS: 21

VBS: AUDIT FAILURES ENABLE A BANK HEIST 27

SAA: HOW THE ACCOUNTABILITY COOKIE 33

STATE CAPTURE AUDITORS 45

THE ABSENCE OF ACCOUNTABILITY 55

3500 of the wealthiest South Africans

There are perhaps no more important cogs in this system than

KPMG, EY, PwC and Deloitte also do an increasing amount

EVOLUTION OF THE BIG FOUR’S

■ internal audit services. Internal auditors work in-house.

In this way, external auditors are responsible for publicly

‘I wilfully aided and abetted the evasion of taxes…

Despite this damning admission, KPMG received a deferred

THE HUMAN COST

of these firms in the recommendations at the end of this report.

EY IMPLICATED IN ANOTHER SCANDAL

• In 2007, PwC was fined $225 million for failing to flag 2

• PwC failed to identify major misstatements while the

• In 2013, a Deloitte document was leaked. It encouraged investors to use

PENSIONERS BEAR THE BRUNT

WHERE WERE THE AUDITORS?

Another defence – one that the Big Four trot

public with confidence or explains why their work

Auditing South Africa’s Corporate Giants: Steinhoff and Tongaat Hulett – 23

TONGAAT HULETT: DÉJÀ VU

PwC described all of this conduct under the nebulous and

In December 2019, Tongaat confirmed that these

The IRBA is also investigating Deloitte’s conduct at Tongaat. This

BRAVE CFO DOES RIGHT

“As a chartered accountant, you get one

STOLEN FUTURES, SLEEPLESS

“ I don’t sleep – I’m constantly thinking about

KPMG AND PWC: WHERE WERE

V BS : Au dit Failu res En able

This was done predominantly through loan facilities

for which Malaba did not qualify. The loans turned

JUNIOR AUDITOR SHUT DOWN

‘The limits to sanctions are up to R200 000 per

As we discuss later in this report, providing the IRBA greater and

WHAT ABOUT THE INTERNAL AUDITORS?

V BS : Au dit Failu res En able

SAA: HOW THE

In the Roman legend, the sword hanging above

SAA seemed dead set against revealing the content

Mantell laid a formal complaint related to this conduct and

SAA’S INTERNAL AUDITORS

THE ROLE OF INTERNAL AUDITORS

At the time of the dry-snack tender, Siyakhula Vilakazi was the

Internal audit staff used different computer programmes to

Many handwritten notes and manual audit files excluded key

There was no system for archiving audits

SAA had no policy regarding the timeframes

In the case of this tender, Vilakazi had thrown

Given this chaotic state of controls and oversight, it is not

SAA: How th e Accou n tability C ookie C ru m bles – 37

PWC: THE EXTERNAL AUDITORS