Crackdown on auditors

IMPROPER CONDUCT: NEW BILL AIMS TO GIVE AUDITING REGULATOR TEETH

Move to tighten disciplinary steps in wake of scandals facing financial profession.

Moneyweb

After several delays, the Auditing Profession Amendment Bill is making its way through parliament and judging by its reception in the standing committee on finance this week, it seems to be supported by all parties.

The Bill follows much controversy surrounding the auditing profession in the wake of events such as those at Steinhoff and many calls for the tightening of disciplinary procedures regarding auditors.

The new Bill represents amendments to the Auditing Profession Act of 2005, which established the Independent Regulatory Board of Auditors (Irba), which regulates the registration of auditors and candidate auditors, as well as their education, training and professional development; investigates alleged improper conduct; runs disciplinary hearings; and imposes sanctions for improper conduct.

The new Bill’s aims are to strengthen Irba’s governance and investigating and disciplinary processes; provide for the power to enter and search premises and to subpoena persons with information required for an investigative process; provide the minister of finance with the power to periodically change the amounts pertaining to fines; define the offences regarding disciplinary processes; and to provide for the protection and sharing of relevant information.

The legislation further aims to strengthen Irba’s independence and efficacy, including through the inclusion of two members of the legal profession, and to prevent Irba’s board from containing members who share directly or indirectly in the profits of registered auditing firms, and receiving any payments (excluding pensions) from registered auditors.

The investigating committee is to only consist of members who are independent from the auditing profession and to always contain two members who are former auditors and one advocate or attorney.

Because the disciplinary committee is currently overburdened by the number of disciplinary cases, Irba is empowered by the new Bill to appoint as many additional members of the disciplinary committee as it deems fit.

In order to ensure effective disciplinary procedures, the investigative processes are enhanced to include the power to subpoena documents and people (clause 15) and to conduct search and seizure operations (clause 16), on condition that entry and search operations can only be consensual or be dependent on a search warrant granted by a judge or a magistrate.

Such powers are only to be exercised within the prescripts of the South African constitution.

Once an auditor has been found guilty, two processes are created in clause 17, namely an admission of guilt process and a disciplinary hearing process.

Cancellation of registration to the relevant professional body and disqualification from registration with the professional body may also be imposed.

Anyone who fails to comply with the findings of a disciplinary hearing will face imprisonment for up to five years, or a fine, or both imprisonment and a fine.

To safeguard information obtained during reporting of alleged misdeeds and disciplinary processes, the Bill prohibits the disclosure of information – except where it is required by other legislation.

The Bill was passed by the National Assembly last year.

Once the standing committee on finance has added its stamp of approval, it will be submitted to a full and public session of the National Council of Provinces (NCOP) in parliament for a vote.

If the NCOP introduces any amendments, the Bill is referred back to the National Assembly for concurrence. If the NCOP passes the Bill without amendments, the Bill is sent to the president to sign into law in due course.

The bill prohibits disclosure of information