KPMG was banned from auditing public institutions in South Africa, compounding a crisis for the auditor in the country over its role in a high-profile bank failure and ties to the controversial Gupta family.

The South African auditor-general’s office said on Tuesday that it had terminated contracting KPMG over government work with immediate effect.

KPMG apologised and several partners left its South African office last year over its work for companies linked to the Guptas – who have been accused of using influence under the former president, Jacob Zuma, to divert state contracts in order to benefit their businesses.

Mr Zuma resigned in February under pressure from the ruling African National Congress, including over the corruption scandal. His successor, Cyril Ramaphosa, has pledged to root out graft from government.

KPMG South Africa has come under fire again in recent weeks after VBS, a bank given a clean audit by the firm last year, collapsed last month with holes in its reported deposits and evidence of fraudulent transactions.

The bank’s central bank-appointed curator withdrew the audited results this week. At the weekend KPMG said that two partners who worked on VBS’s audit had left the firm before facing disciplinary action for failing to disclose financial interests in the bank.

The auditor said it would be reviewing past audit files in a bid to reassure clients.