Auditors body wants to oversee accountants too

The regulatory body for auditors has proposed to finance minister Tito Mboweni the extension of its powers to give it oversight over accountants.

If adopted, this is likely to result in much tighter monitoring and oversight of accountants, who presently fall under a number of professional bodies. Chartered accountants would continue to fall under the SA Institute of Chartered Accountants (Saica).

Independent Regulatory Board for Auditors (Irba) CEO Bernard Agulhas told members of the National Council of Provinces select committee on finance on Tuesday that this proposed system would ensure that accountants and not only auditors were subject to sanctions.

Having all role players regulated by one body would overcome the current fragmented system of regulation, which made “the effective monitoring of systemic risk difficult”, Agulhas said. He said the auditing scandals related to the Guptas, KPMG, Steinhoff and VBS Mutual Bank, had highlighted the need for comprehensive regulation that would make it easier to co-ordinate investigations.

Agulhas said the proposal for comprehensive regulation was based on a recommendation of the World Bank, which did not specifically say that Irba should be responsible for this expanded role. Agulhas said the board was well positioned to take on the role due to its long history and experience.

In terms of the model proposed to the minister, Irba would not regulate the 50,000 or so accountants in the country but would regulate 10 professional bodies. At the moment, Irba accredits and monitors Saica and has indirect oversight over its members. It is envisaged the same would apply under the proposed system with regard to the other professional bodies.

“We will have oversight over them and ensure that they have processes in place to manage their members. We don’t see ourselves doubling in size just because we have increased oversight over more people. We see ourselves doing this in a way in which we will have oversight over the accountants but indirectly through their professional bodies.”

If adopted, the new system would also not result in a large increase in the Irba budget, though a few more employees would be required to do the monitoring.

Agulhas said the budget for 2020-2021, which Irba had submitted to the Treasury, provided R44m for disciplinary inquiries and investigations. If this money was not forthcoming from the government, Irba would have to increase its fees on auditors, which it did not want to do as this could compromise its independence.

At the moment, Irba has 2,000 audit firms of various sizes on its books.

Agulhas said Irba was looking into how it could allow overseas auditors access to its register so when a local firm became associated with an international firm it could draw on the capacity of this firm. Only SA auditors can be registered now.

Select committee chair Yunus Carrim was “appalled” by the racial breakdown of the 3,890 registered auditors in the country as revealed by Agulhas: 7% are Africans, 79% are white, 7.4% are Indians, 1.2% coloured and 0.2% are Chinese, with the balance made up of auditors who did not declare their race. “This is not acceptable, 26 years beyond democracy,” he said.

Agulhas also briefed MPs on the proposed amendments to the Auditing Professions Act, which will empower the minister of finance to determine the maximum fine applicable to transgressions. He said the current fine of R200,000 was “ridiculous” and did not serve as a deterrent to undesirable behaviour. Irba has been criticised because its sanctions are too lenient.

The amendments will also empower Irba to demand information from auditors and give it the power to search, seize and subpoena.