The KPMG audit failure at VBS Mutual Bank represents one of the most consequential professional failures in South African corporate history — an external auditor who actively concealed a R2.3 billion looting scheme.
**The Role of the External Auditor**
External auditors serve as a critical check on corporate governance. Their independent verification of financial statements is supposed to protect depositors, creditors, and investors. For a mutual bank, where depositors are the ultimate owners, the auditor's role is especially important.
KPMG South Africa was VBS Mutual Bank's external auditor. Audit partner Sipho Malaba was responsible for signing off on the bank's financial statements.
**The False Certification**
Despite VBS's financial statements being fabricated — with fictitious credits masking the looting — Malaba signed off on them as accurate. The Motau report found that Malaba was not merely negligent but complicit: he allegedly received R34 million in payments from VBS.
The false audit opinions enabled the looting to continue undetected from 2015 to 2018. Had the auditor flagged the irregularities, the SARB Prudential Authority could have intervened years earlier, potentially saving hundreds of millions and protecting depositors.
**The Motau Report Findings**
The Motau report explicitly identified KPMG's complicity and recommended: 1. Criminal complaints against Malaba 2. An auditor's liability claim against KPMG 3. Action by the Independent Regulatory Board for Auditors (IRBA)
**KPMG Settlement**
The VBS liquidator initially sued KPMG for R864 million (February 2021). KPMG settled for R500 million — a confidential settlement reported by Daily Maverick in February 2024. The settlement is one of the largest audit-related payouts in South African history.
**Criminal Prosecution**
Malaba was suspended by KPMG in 2018 and arrested in June 2020. He remains among the 13 accused in the main VBS trial, postponed to 9 February 2026.
**KPMG's Broader Troubles**
The VBS failure was not KPMG South Africa's only scandal. The firm also faced reputational damage from its work for the Gupta family (separate matter), leading to a near-complete leadership overhaul. The VBS settlement, combined with Gupta-related fallout, represented an existential crisis for KPMG SA.