KPMG SA has nothing to fear
AUDITING REGULATOR IS NOT KNOWN TO BE TOUGH OR QUICK TO ACT Irba has agreed to probe Gupta company Linkway’s 2014 audit but a tap on the wrist is likely to follow.
The Independent Regulatory Board for Auditors (Irba) has never suspended a registered auditor for any period. Therefore, KPMG SA has little to fear from its regulator if it’s found guilty of a bad audit of Gupta-linked company Linkway Trading.
In June, Irba said it would investigate the 2014 audit of Linkway, the company alleged to be involved in the Gupta wedding scandal. But the announcement is unlikely to have left Linkway’s auditor, KPMG SA, feeling concerned. Irba is a toothless chihuahua of a regulator: look at how it’s punished errant auditors in the past (or rather, how it hasn’t). Auditors found guilty of misconduct are typically ordered to pay a small fine, seldom exceeding R200 000.
Fines against auditors are limited by the Auditing Profession Act.
Most importantly, the auditor’s misdeeds are almost never exposed to public scrutiny. This, despite Irba’s disciplinary advisory committee having the power to name and shame errant auditors in matters of high public interest.
The Sunday Times recently drew attention to the fact that Irba has the power to suspend an auditor’s registration or remove his/her name from the register. But this seems extremely unlikely to happen.
Moneyweb asked Irba what the longest suspension was that it’s ever imposed. It said: “The most severe sanction would be the cancellation of the registration of the registered auditor concerned and removal of his or her name from the register. The sanction of suspending the right to practice as a registered auditor for a specific period is generally not used.”
Even if Irba imposes the most severe sanction and removes an auditor from the register, it would only be the “individuals under investigation”, and not the firm.
Irba’s latest newsletter provides an insight into the relatively light punishment auditors receive for bad behaviour. It says the disciplinary committee concluded 20 matters by consent order (effectively an admission of guilt). None of the errant auditors are identified. Irba merely describes their transgressions in broad terms.
Even though some serious transgressions are recorded, the highest fine levied is R150 000, of which R50 000 was suspended for three years on condition the respondent isn’t found guilty of unprofessional conduct committed during the suspension period. No costs order was granted either.
Those hoping for a speedy resolution to the KPMG matter may be disappointed. Moneyweb is aware of a complaint laid against an auditor in 2010: Irba only notified the complainant in 2015 that it intended to discipline the auditor concerned. To this day the complainant is unsure if the auditor was actually disciplined.
Irba says investigations and disciplinary process are complex and lengthy. “It is also important that Irba follows its due process. Reaching a conclusion on matters can therefore take time.”