A former University of Cape Town professor of accounting has urged members of his profession to embrace the unexpected initiative announced by finance minister Tito Mboweni in this year’s budget. Tucked away at the end of his budget speech, the minister announced the appointment of an independent panel of experts "to review practices in the auditing profession".
Prof Geoff Everingham tells the FM he suspects auditors will not be happy about the plan, but should embrace it nonetheless as an opportunity to relaunch the profession. This comes after its credibility has taken a beating through a series of public and corporate scandals.
"It is an indictment of a profession that is supposed to be self-regulating," Everingham says in reference to the minister’s proposals. "But it’s hardly surprising, given recent events."
He says it’s important to ensure the panel is made up of suitably experienced individuals, who are representative of the users of financial statements.
Lwazi Bam, CEO of Deloitte — which has been embroiled in a number of recent high-profile auditing scandals, including Steinhoff and Tongaat Hulett — has welcomed the plan.
"We have learnt from similar reviews that the solutions require us to consider a wide range of matters that contribute to the integrity of the business accountability ecosystem, including the quality and scope of the audit as well as the role of regulators, audit committees and those charged with governance," he says.
Late last year the UK government published the "Brydon Report", following an extensive review of the UK’s audit profession. The report contained 64 recommendations.
Without knowing the details of the scope of the SA government’s plan, Bam describes the minister’s announcement as a "very positive development" and says Deloitte looks forward to engaging in the deliberations.
The move highlights the significant reversal of fortunes of a profession that as recently as 2017 argued before a parliamentary portfolio committee that its self-regulating standards were sufficient to obviate any need for mandatory audit firm rotation.
Independent Regulatory Board for Auditors (Irba) CEO Bernard Agulhas, who faced an uphill battle to introduce mandatory rotation back then, tells the FM that Irba has already done a review of the profession and identified more than 40 projects aimed at restoring confidence in auditing; many are already beginning to yield improvement in quality.
"Irba will be pleased to have the backing of the government for a broader review of the audit landscape and profession, as well as those charged with governance in the financial reporting chain," he says.
Linda de Beer, director of a number of companies, including Tongaat, tells the FM it makes sense to review the profession, given what’s happened, not just in SA, but in many other countries. "If you consider the number of audit failures, it’s obvious the audit profession is in trouble," she says.
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