JOHANNESBURG • Global auditor KPMG has cleared out its South African leadership en masse after damning findings from an internal investigation into work done for businessmen friends of President Jacob Zuma.

KPMG's investigation into its work for the Guptas, accused by a public watchdog of improperly influencing government contracts, identified no evidence of crimes or corruption, but found that work done for Gupta family firms "fell considerably short of KPMG's standards", the auditor said in a statement on Friday.

In particular, it acknowledged "flaws" in a report it compiled for South Africa's tax service, which implied that former finance minister Pravin Gordhan had helped set up a"rogue spy unit" when he was head of the service.

Mr Gordhan, later sacked as finance minister by Mr Zuma, said the report had damaged South Africa's young democracy, and he was considering legal steps.

KPMG is the third global company to be damaged by work carried out for the Indian-born brothers, after the business consultancy McKinsey and the public relations agency Bell Pottinger, whose British business collapsed last week.

Both Mr Zuma and the Guptas deny wrongdoing and say they are victims of a politically motivated witch-hunt. The Guptas and their companies have not been charged with any crime, but the scandal is one of many that have dogged the Zuma presidency. "I want to apologise to the public, our people and clients for the failings that have been identified by the investigation," said KPMG's new South African CEO, Mr Nhlamu Dlomu.

KPMG said it would donate 40 million rand (S$4.1 million) earned in fees from Gupta-controlled firms to education and anti-corruption groups, and refund 23 million rand it had received for the tax service report.

The chief executive of KPMG South Africa, Mr Trevor Hoole, its chairman Ahmed Jaffer, chief operating officer Steven Louw, and five senior partners all resigned.

KPMG also plans to dismiss Mr Jacques Wessels, the lead partner on audits of Gupta-linked firms, it said. Mr Andrew Cranston, former CEO of KPMG Russia, has been appointed as interim chief operating officer.

The announcement stunned hundreds of KPMG staff crammed into an auditorium in its Johannesburg head offices and others listening in via video link from Cape Town and Pretoria. "Everybody is just dumbfounded," said one employee, who asked not to be named. "They're obviously trying to show that responsibility stretches to the top. But right now I don't think anybody knows what to think."

The firm is under investigation by IRBA, a South African regulatory body, and could be removed from the auditors' register, an outcome that would have a devastating impact on its African business.

REUTERS