3. Gupta scandal

Ethical scandal

The gupta scandal involved government corruption. The gupta family was a family involved in political corruption in south Africa. KPMG was their auditors and was obviously conflicted because the partners on the account were very closely tied with the gupta family. KPMG had received warnings regarding the integrity and ethics of the Guptas that were not acted upon, and which should have led to it cutting ties with the family sooner. The Firm faced many negative side effects as a result of their association with the scandal. They were investigated by the south African charted accountant organization. KPMG came after an internal investigation found the accounting firm had missed red flags in its auditing of companies owned by the Gupta family. The auditor said on Friday that KPMGs South Africa division the firms largest business in Africa. South Africa chartered accountants probe. Guptas role in South African politics intensified in June when leaked emails fuelled fears the family was exploiting its friendship with Mr Zuma to win state contracts and manipulate political appointments. The family and Mr Zuma deny the allegations. Kpmg set to audit own staff in april of 2018. As a result of the Gupta scandal, KPMG lost a lot of clients in South Africa. Barclays Africa was one of these clients. They dropped KPMG as their auditor in May 2018.

A) Discuss the ethical threat in the above scenario and also outline how KPMG would have safe guarded themselves (20 marks)