The South African Reserve Bank (SARB) said on Tuesday recent developments involving embattled audit firm KPMG SA may compel it to consider policy changes to further strengthen governance and transparency within the auditing and accounting professions.

KPMG in South Africa failed to flag monies allegedly laundered through businesses owned by the controversial Gupta family.

A week ago, KPMG International admitted the work it did for the Gupta family “fell considerably short of KPMG’s standards”. The audit firm also announced that it intended to withdraw its report on the so-called “rogue spy unit” within the South African Revenue Service (Sars).

Amid the mayhem, Trevor Hoole resigned as the chief executive KPMG SA. Chief operating officer and country risk management partner Steven Louw also stepped down. Five other senior partners followed suit and quit in a huff.

SARB deputy governor, Francois Groepe, said that SARB has taken the extraordinary step to comment publicly on the developments surrounding KPMG as they are the auditors to three of the big four banks, as well as to other banks and insurance companies.

Ordinarily, SARB as a regulator does not comment on individual firms.

“Our interest stems solely from a public policy perspective that arises from our financial stability mandate. We had noted with concern the regrettable auditing practices and serious errors of judgement that had occurred at KPMG and which had led to significant damage being inflicted on certain individuals, organisations, and the country as a whole,” Groepe said.

“As a regulator, we do not pick winners or losers, but we are concerned stemming from our extensive experience of regulating banks this unfolding situation may take the form of a bank run with contagion risk that extends beyond an individual firm

“This situation calls for thoughtful leadership and restraint as we believe that our economy will be better served if we can avoid further market concentration within the auditing and auxiliary professional services sector.”

Groepe made his remarks at the workshop on the impact of International Financial Reporting Standard 9 on banks and regulators in Africa, jointly hosted by the Working Group on Cross-border Banking Supervision and the SARB in Pretoria on Tuesday.

He said future policy considerations within the auditing and accounting professions may include the requirement that audit firms may be “too big to fail” and whether this may require regulatory intervention, including limiting the extent to which audit firms provide non-audit services, especially to audit clients.

Other considerations could include a requirement for a greater degree of disclosure and transparency by the auditing and accounting profession, the appointment of independent boards of directors and the strengthening of the risk management function within audit firms, and the publication of an integrated report by the large and medium size audit firms.

“While this list is not exhaustive, it would be useful if there were a public discourse around these policy questions,” Groepe said.

“We firmly believe that the implementation of some of these proposals may go some way to strengthening the governance within the audit and accounting professions and could assist to further support and possibly strengthen the trust that society places in them.”