KPMG to review its audits of Dubai buyout firm Abraaj

KPMG is conducting an internal review into its audits of embattled Middle East buyout firm Abraaj Group following the alleged misuse of money, according to people with knowledge of the matter.

The accounting firm’s UK branch is looking into its examination of Abraaj and its related companies for any potential irregularities in the valuation of assets by KPMG’s Middle East division, the people said, asking not to be identified because the information is private.

KPMG is also studying its examination of Abraaj’s $1 billion healthcare fund, which was completed in February, they said. The reviews are ongoing and the outcome isn’t clear, the people said.

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While KPMG said it couldn’t comment on the specifics of the matter because of client confidentiality, a spokesman added that KPMG has taken steps to ensure that investors in the fund have had the opportunity to receive a copy of the KPMG UAE report from February to “see for themselves what it says”.

Representatives for Abraaj declined to comment.

Any potential findings of deficiencies in the Abraaj audits could intensify KPMG’s woes as it already faces heightened scrutiny following its links to South Africa’s controversial Gupta family, as well as potential missteps in its work for Miller Energy Resources Inc and Carillion Plc.

KPMG has issued a public apology for the work done for the Gupta family, and its South African unit has said it implemented “far-reaching changes” in a bid to win back the trust of its clients.

For Abraaj, the reviews come at a crucial juncture as the Middle East’s biggest buyout firm attempts to sell a stake in its funds business and placate investors.

The asset manager in February said that the review by KPMG - conducted after four high-profile investors including the Bill & Melinda Gates Foundation alleged that money from the health-care fund was being diverted elsewhere -- found that all payments and receipts were in order. That report failed to appease investors, prompting Abraaj to hire Deloitte to conduct another examination of its finances.

Preliminary findings by Deloitte, whose review is still underway, has uncovered potential discrepancies in Abraaj’s accounting and the firm is discussing its preliminary findings with the Dubai Financial Services Authority, people with knowledge of the matter said last week. A separate audit commissioned some months ago by investors also suggested that money from the health-care fund was being deployed elsewhere, the people said.

Close ties between top executives at Abraaj and KPMG in Dubai are also expected to come under scrutiny, the people said. In particular, Abraaj’s former-chief financial officer Ashish Dave’s relationship with the accounting firm may be reviewed. He had moved between both companies a number of times, the people said.

Mr Dave left Abraaj a few months ago, people familiar with the matter said. Before that, he was a partner and head of deal advisory for KPMG in Dubai between 2014 and January 2017, according to his LinkedIn profile. Mr Dave also previously worked at Abraaj in 2008 after joining the buyout firm from KPMG, according to an Abraaj press release at the time. Mr Dave referred requests for comment to Abraaj.

KPMG is already under the spotlight in other markets. The auditing firm’s South African unit this year flew in trouble shooters from around the globe and hurriedly met clients to stem any further loss of business after becoming embroiled in three evolving scandals in the country.

The local unit’s contract with the nation’s Auditor General was terminated in April after the firm signed off on the accounts of VBS Mutual Bank’s accounts before its March collapse. KPMG in September said the work it did for the Gupta family fell “considerably short” of the auditing firm’s own standards. It also withdrew the findings of its report about South Africa’s tax authority, saying parts of it “should no longer be relied upon.”