KPMG UK undertaking internal review into its audit of Abraaj: Report

The proximity of ties between top executives at KPMG and Abraaj in Dubai will also come under the scanner

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LAHORE: In another blow to the embattled Abraaj Group, KPMG is said to be undertaking an internal review into its audits of the world’s largest emerging private equity house.

KPMG forms part of the “big four” accountancy and audit firms globally and its UK branch is investigating its Middle East division for any potential irregularities in the valuation of assets of Abraaj and its linked entities, reported Bloomberg.

The sources refused to be identified due to the sensitive nature of the information and KPMG is also reevaluating its examination of Abraaj’s $1 billion healthcare fund which was given a clean chit in February.

The evaluations are said to be underway and the result isn’t clear, sources revealed.

Although KPMG refused to comment on the developments due to a client confidentiality clause, its spokesman said to Bloomberg the firm had undertaken moves to provide investors in the fund a copy of its UAE division audit report from February to “see for themselves what it says.”

However, an initial investigation by Deloitte which was hired by Abraaj after investors expressed their displeasure at KPMG’s audit and clean chit they gave to the private equity house discovered potential discrepancies in its accounting, said Bloomberg.

Also, Deloitte is said to be sharing its initial findings with the Dubai Financial Services Authority (DFSA), sources privy to the developments told.

And the proximity of ties between top executives at KPMG and Abraaj in Dubai will also come under the scanner.

Especially the ex-Chief Financial Officer Ashish Dave’s link with KPMG could get reviewed and as per Bloomberg had shifted between both company’s multiple times.

However, a report in Wall Street Journal on Wednesday said one of the world’s largest emerging market private equity house had utilized over $200 million of investor money from a $1.6 billion buyout fund for funding its own business.

WSJ added the money wasn’t utilized for investment in companies, people with knowledge of the matter revealed.

Founder of Abraaj Group Arif Naqvi and its executives on Wednesday met with investors in a London hotel to hold deliberations about the buyout fund.

According to WSJ, people with knowledge of the matter said Abraaj had utilized some of the funds for its own purposes as early as this year. The meeting continued for over seven hours and saw attendance from US-based entity Hamilton Lane.

Also, WSJ reported U.S private equity firm TPG was in negotiations with investors in Abraaj’s healthcare fund to overtake management of the assets of the $1 billion fund.

And these negotiations are independent of the ongoing sale process for Abraaj Investment Management Limited (AIML), in which Colony Northstar has expressed an interest to acquire.

Reuters had reported last week “Abraaj, the Middle East’s largest private equity house, is in violation of conditions relating to a portion of its debt, said six banking sources, adding to the pressure on a group locked in a dispute with investors.

Banks are still keen to support Abraaj but are worried about the outcome of an investigation into the firm’s alleged misuse of investor money and any related regulatory action, including possible fines, some of the sources said.

Abraaj has denied any wrongdoing.

The sources said Abraaj was in technical breach of certain financial covenants relating to a bilateral debt owed to some United Arab Emirates-based banks.

Three of the sources said Mashreq was one of the banks involved.”