Auditors bill ‘ will help repair reputation ’

Finance minister Tito Mboweni says the bill aimed at strengthening the powers and governance of the regulatory body for auditors will help restore the profession’s reputation, which has been damaged by accounting scandals.

Finance minister Tito Mboweni says the bill aimed at strengthening the powers and governance of the regulatory body for auditors will help restore the profession ’ s reputation, which has been damaged by numerous accounting scandals recently.

He was speaking at the conclusion of the debate on the Auditing Profession Amendment Bill when MPs made repeated reference to scandals such as those at Steinhoff, Tongaat Hulett and VBS Mutual Bank to support the need for its provisions.

The bill was adopted unanimously by all parties, and will now be sent to the National Council of Provinces for concurrence.

“At the core of the bill, at the centre, is the need for us to restore the ethical, moral and integrity levels of the accounting and auditing profession,” Mboweni said.

“We have gone through in the recent past a number of problems within the profession. These problems have called into account whether as SA we are still keeping the high standards of the profession for which we are known.”

He said that the scandals had put some of the country’s top accounting and auditing firms in a bad light.

“Once doubt is cast on the accounting and auditing profession, then we know we are in serious trouble,” Mboweni said.

“We have to bring SA back to the level it was before the recent malfeasance in the profession.”

But the minister said auditors could not do their jobs properly if top executives in companies actively concealed information from the internal and external auditors, as was allegedly the case with former Steinhoff CEO Markus Jooste.

“So in the first place we need credible, reliable, ethical executive management, particularly the CFO, in order for the company ’ s books to give us sufficient assurance that things are done properly.”

A provision in the bill will give the Independent Regulatory Board for Auditors (Irba) the power to search and seize documents without awarrant if there is consent, and with a warrant if there is no consent. This will help address a key weakness in Irba’s regulatory role, namely the length of time it takes to complete its investigations, which are often held up by the refusal of audit firms to hand over audit files.

It took the regulator six years, for example, to finalise its investigation into African Bank, which collapsed in 2014 under the weight of bad debt due to its reckless lending practices.

These long delays have tarnished the regulator’s reputation to the point that it is seen as weak and ineffective.

A strong regulator with powers to investigate and impose substantial penalties is regarded as necessary to keep the profession in line and weed out incompetent or dishonest auditors.

The search-and-seizure proposal was criticised by auditing firms during parliamentary public hearings on the bill as being too onerous and possibly unconstitutional, but this was dismissed by the Treasury.

Parliament ’ s finance committee did not accept a proposal to include registered auditors on the Irba board as it felt this could undermine its independence and also lead to Irba’s membership of an international regulatory body being withdrawn.

Some submissions argued that registered auditors would bring up-to-date experience of the profession to the board.

The committee did, however, agree to increase the number of formerly registered auditors and legally qualified people on the board from one to two each.

It also supported submissions that membership of the Irba board and its committees should be prohibited to those having a direct or indirect share in the profits or interests of a registered auditor, including receiving payments, except for pension benefits.

During hearings on the bill, Treasury chief director for legislation Empie van Schoor said some of the proposals made during the public hearings, such as accountants being included in the mandatory rotation of auditors, had merit and would be considered in a future review.

These proposals require further consultation and it is urgent that the current bill be passed into law, she said.