Irba’s Nonkululeko Gobodo on holding auditors to account
Irba caretaker says exit of CEO first move in overcoming scandals
● Nonkululeko Gobodo, caretaker of the troubled Independent Regulatory Board for Auditors (Irba), says the resignation of its controversial CEO, Jenitha John, this week was necessary to restore confidence in a profession that has been rocked by a spate of corporate scandals.
“There is an urgent need to restore confidence in the accounting profession, and for this to happen the integrity of Irba has to be restored,” she says.
Irba’s credibility as regulator of the audit industry was shredded when its board appointed John as its CEO in June 2020 although she’d been compromised by an accounting scandal at Tongaat Hulett which happened while she was chair of its audit committee.
Finance minister Tito Mboweni fired the board at the end of January and appointed industry veterans Roy Andersen and Gobodo to run a caretaker board and restore the regulator’s credibility.
On Monday, within two weeks of their appointment, John, who had refused to step down, announced she had resigned.
“The issue of the CEO was a cloud over Irba that could not be allowed to continue,” says Gobodo, who after becoming SA’s first black female chartered accountant in 1987 started her own audit and advisory firm and then led a merger to create SizweNtsalubaGobodo, the largest homegrown audit and advisory firm in Southern Africa.
“That was the first thing we had to deal with, so we can get on with restoring confidence in the regulator and in the profession. There’s been a huge problem of corporate scandals which in the last three years have dropped our audit profession from being ranked number one in the world to about 49.”
She says there needs to be “a lot of introspection to say, how did we land up here, so that we can take action and normalise the situation”.
“We’ve been talking about it for years. “We need to go back to the drawing board to look at our processes and systems so that investors can have confidence in the annual financial statements that are signed by our auditors.”
She says corruption scandals in the public and private sectors are the result of an absence of leadership.
“If things deteriorate the way they have, it is because of a leadership gap. It’s all about leadership.”
Board chairs should provide leadership to their boards, and boards have a responsibility to make sure they appoint capable CEOs who can provide leadership within the organisation, she says.
“Why is it that in all these years we have not been able to achieve that? Why in all these years that we’ve been crying about our SOEs we have not been able to stabilise them? I really don’t understand.
“Of course the political situation is not helpful, because maybe it hinders the proper functioning of the boards.”
By contrast she and Andersen have been able to move decisively at Irba because there’s been no interference from the minister of finance.
“He’s given us full power to make sure we put things right at Irba.”
She says that’s why they were able to deal with the issue of the CEO so quickly.
“Within two weeks of being appointed as a caretaker board we were able to do the big thing that was a big problem for months.”
She is reluctant to blame interference from the shareholder, meaning the government, for the collapse of SOEs.
“All I know is that the political situation in the country is not helpful in assisting us to bring order and stability to these SOEs.
“The political environment in which we are operating is not helpful in dealing with the corruption that is going on that we all know about.”
She and Andersen were able to resolve the long-standing problem of the Irba CEO because the minister gave them the space to do what had to be done without interfering.
That is critical to an understanding of why SOEs have largely failed, she says.
“That is very important. When you appoint a chairman and a board you’ve got to give them room to lead. If they’re not allowed to lead, then who can blame them if the board doesn’t function?
“And then the board must appoint a qualified CEO and give the CEO room to lead the organisation. That’s why we need to clean up our governance processes so that those things happen.”
Equally, the regulatory environment governing the accounting and auditing professions has to be strengthened. She believes the new powers given to Irba in legislation before parliament could be a game changer.
“We’re hoping the new [Auditing Profession] Act will be approved speedily because that will be the first step in strengthening the regulator so that it is able to do its job properly. Which is to ensure that auditors are independent.”
She applauds KPMG’s announcement that it will no longer provide consulting services for clients.
“Those are the kinds of steps we have to take to restore confidence in the accounting profession.”
Another step is the rotation of audit firms.
“You can’t have a situation where one firm is an auditor for 30 years for the same company. As much as we try to say we are independent, that casts a shadow over such claims. You can change partners but that doesn’t make you independent.”
Issuing new audit or accounting standards each time there’s a problem has not helped, she says.
“Things continue to deteriorate.”
This is because “companies that are under pressure to improve their profitability are always coming up with all sorts of schemes” to do so, she says.
“Criminals are always ahead of you.”
This is not just about the accounting profession, she says.
“When you have an environment where the ethics of the country have deteriorated to such an extent then unethical behaviour becomes a culture and lines are blurred.”
It’s not just about fixing the ethics of an industry. “We have to fix the ethical culture of the country. And to do this we need political leadership as well as strong regulatory institutions that can play their oversight roles effectively.”
In an environment where the ethics of the country have deteriorated to such an extent then unethical behaviour becomes a culture