(Adds independent investigation)
JOHANNESBURG, Sept 22 (Reuters) - South African law enforcement agencies should investigate KPMG after the global auditor sacked its local leadership over work done for business friends of President Jacob Zuma, Finance Minister Malusi Gigaba said on Friday.
KPMG is the latest international firm to become embroiled in factional battles within South Africa's political establishment.
The dismissal of its top management in the country last week followed an internal investigation which found work it did for firms owned by the Gupta family, a trio of businessmen accused by a watchdog of improperly influencing the award of government contracts, "fell considerably short" of KPMG's standards.
KPMG is already being investigated by the country's Independent Regulatory Board of Auditors for its work for the Gupta firms and several South African companies are reconsidering their use of the firm.
Gigaba called on companies and other stakeholders to join hands and "(root) out bad elements" that undermine the South African economy.
"It is therefore, warranted and critical that the relevant law enforcements and bodies such as the Independent Regulatory Board for Auditors look into this matter to identify and sanction those responsible for any wrong-doing," Gigaba said in a statement.
Gigaba also called on all government departments to consider reviewing their work with KPMG to ensure "their audit processes have not been compromised."
The Democratic Alliance, the main opposition, on Friday said it will review KPMG's contracts in the more than 30 municipalities it runs, while lobby group Business Leadership South Africa (BLSA) suspended KPMG's membership on Friday, citing the "gravity" of its conduct over the auditor's work for Gupta firms.
"BLSA recognises the considerable steps announced by KPMG to change its leadership and commence a process of cultural change," it said in a statement. "It cannot, however, look past the gravity of their conduct which is completely inconsistent with the values of BLSA."
BLSA's move is another blow for the local arm of KPMG, which has already lost at least three clients due to the scandal, while large companies that include Barclays Africa and Investec are reviewing their ties with the firm.
KPMG International said on Friday it would approach a senior legal figure to conduct an independent investigation into the work its South African firm did for the Guptas.
"The investigation will determine if there is any evidence to suggest KPMG South Africa partners or staff were complicit in illegal activities by the Gupta family and their businesses," KPMG International Chairman John Veihmeyer said in a statement.
The investigation will also look into whether there were any failings or collusion in the work performed in compiling a report for the South African Revenue Service (SARS).
The document, alleging the creation of an illegal "rogue unit" at SARS, has been used as ammunition to dismiss or discredit senior employees at the tax service.
Meanwhile South Africa's second largest bullion miner Gold Fields said on Friday KPMG would for now continue to serve as its external auditor.
KPMG is the third global firm to face questions about its work for the Indian-born Gupta brothers.
Consulting giant McKinsey is being investigated by South Africa's parliamentary committee on public enterprises, and the British-based public relations agency Bell Pottinger collapsed this month following a scandal over a racially-charged political campaign it ran for the Guptas in South Africa.
The Guptas and Zuma 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.
Europe's largest software company SAP in July also launched an investigation into allegations that it was involved in a government bribery scheme.
SAP on Friday announced it will provide an update on the investigation during the last week of October this year.
"We are acutely aware that we owe South Africa answers," Adaire Fox Martin, a member of SAP's executive board, said in a statement. (Reporting by TJ Strydom and Tiisetso Motsoeneng; Editing by Joe Brock and Toby Chopra)