Accounting firm KPMG has taken some serious reputational hits over the past several months.
The first was around KPMG South Africa’s work with the politically connected Gupta family and its web of corrupt entities in South Africa, which led to the dismantling of the South African operations team and replacement by others in the firm. It also led to many South African and African customers ceasing doing business with KPMG.
Next came the corruption scandal in the United States, where several KPMG U.S. practice leaders allegedly secured information on upcoming audits by the Public Company Accounting Oversight Board (PCAOB) of the work done by KPMG for its clients. Several partners and others at the firm were terminated. Many were later indicted.
Both of these scandals put serious dents in the company’s global reputation.
Now KPMG faces a whole new round of reputational risk, as the Bank of England has begun probing the firm’s continued viability. The Bank of England’s Prudential Regulation Authority is considering whether the scandals in South Africa, America, and even audit work done for U.K. construction and facilities management firm Carillion, which collapsed this year, could put the rest of KPMG’s international work at risk, as well as the financial health of the organization.
KPMG claims there are no such worries. However, when a national regulatory that has no direct regulatory responsibility over an entity questions it continued viability, things have reached a very critical state. If the Bank of England is asking questions about the continued international work of KPMG, how many other regulators, entities, and groups are also asking the same question?
This story demonstrates how far-ranging reputational risk can reach in today’s world.