HELD TO ACCOUNT

With accounting and auditing regulatory bodies already under close scrutiny, the South African Institute of Professional Accountants has become the latest such organisation to fall under the integrity spotlight

The South African Institute of Professional Accountants (Saipa) has become the third institution tasked with overseeing the integrity of the audit and accounting professions to hit a reputational pothole.

Until now, the organisation has largely escaped the opprobrium that for years has dogged its better-known associates, the South African Institute of Chartered Accountants (Saica) and the law-backed Independent Regulatory Board for Auditors (Irba).

But in early December Saipa chair Prem Govender informed “stakeholders” that the institute’s CEO, Shahied Daniels, and its COO, Gavin Isaacs, had been put on precautionary suspension. That shock was followed by news that Saipa had subsequently taken the same action against Nosheena Mansoor, its business innovation strategies executive, and Thomas Nyamvura, its digital and technology officer. They were suspended after they were found apparently attempting to disrupt the investigation into

Daniels and Isaacs.

When he took up the CEO position in early 2019, Daniels told journalists the profession’s image had been tarnished due to a few “rogue accountants”. The investigation will hopefully indicate just how few these are.

It could be that the suspensions reflect how seriously the Saipa board takes its responsibilities rather than any lapse in governance standards. In the statement, Govender stressed that the precautionary suspension does not suggest or presume wrongdoing or guilt.

By its own telling, Saipa’s objectives include “serving the public interest by adopting, or otherwise incorporating, and supporting implementation of international standards and maintaining adequate enforcement mechanisms to ensure the professional behaviour of individual members”.

Its 10,000 members are accountants who offer accountancy, tax and independent review services. And only its members can use the designation “professional accountant”, or PA (SA).

The naming rights are tougher for chartered accountants. They have to pass a series of exams as well as notch up work experience and then, only once accepted by Saica, can they use the designation CA (SA).

Saipa and Saica are two of the largest of the more than 10 organisations that represent about 56,000 professional accountants in South Africa, with Saica by far the largest.

Unlike Irba, which relies on the Auditing Profession Act to regulate the 4,500 registered auditors in South Africa, the professional accounting bodies are all self-regulating.

As almost everyone now knows, the biggest challenge with self-regulating professional organisations is working out how to protect the interests of the clients of their members. Certainly, the shareholders of Steinhoff, Tongaat Hulett and VBS Mutual Bank, and the taxpayers who inadvertently funded state capture, have not been overly impressed with Saica’s efforts to hold its members accountable. Even Irba has exhibited little ability or inclination to do so.

As Dieter Gloeck, a former professor of auditing at the University of Pretoria, tells the FM, self-regulating institutions face a huge potential conflict. “How can they ensure they protect the interests of the public and not just of their members?” he asks.

A basic requirement would be to shed the opacity with which these organisations traditionally deal with complaints and to operate in a more transparent manner.

This may be just what Saipa is doing. Its action was prompted by legal opinions and a report by governance experts which advised the board that there were “governance concerns and serious allegations” that required a forensic investigation. “The precautionary suspensions are meant to protect the integrity of a forensic investigation commissioned by the board,” said Govender.

There might be straight-forward explanations behind the issues being investigated. Though it’s difficult to work out why Daniels and Isaacs would, without board or member approval, want to set up an “international Saipa global entity” based in Switzerland. After all you don’t get far into Saipa’s website before finding out that it is a full member of the International Federation of Accountants and therefore “enjoys international reach and strong connections with the global accountancy community”.

This proposed Swiss-based entity appears to have been part of an unapproved strategic plan to globalise Saipa’s professional designations.

Not only were there costs relating to this unapproved strategy, but there was also “a variety of irregular expenditure” relating to overseas travel without board approval.

Saipa has given no indication of how much money was irregularly spent, nor how long it expects the investigation to take.

Tia van der Sandt, who previously served as chair of Saipa’s risk and compliance committee, has been appointed acting CEO.