High-profile cases of accounting irregularities are sowing distrust
THE SA INSTITUTE of Chartered Accountant’s (Saica) suspension of the membership of former Transnet and Eskom chief financial officer and now former chartered accountant Anoj Singh seems a rare instance where the profession has dealt with corruption within its ranks.
Saica’s allegations against Singh included that he failed to disclose to the Eskom board the true reason for Tegeta’s request of R600 million from Eskom, as part of state capture by the Gupta brothers, dealing in false statements and failing to take action and for failing to act professionally.
Public and private sector accountants and auditors are required to vet the quality and fairness of accounts, but high-profile corruption cases at state-owned enterprises (SOEs), or corporates such as Steinhoff and Tongaat Hulett, attest to these professionals having failed in their work over several years, with little consequences to date.
These organisations are aware of the growing public distrust in them.
Independent Regulatory Board for Auditors (Irba) chairperson Abel Dlamini said in the 2019-20 annual report, for example: “The audit failures in the recent past resulted in the auditing profession in South Africa moving from being one of the most respected globally, to becoming one of the most vilified, in the shortest space of time. Our global ranking dropped along with the confidence that South Africans had in our profession.
“The recent audit and business failures that we have witnessed are not only due to poor audit quality. They have a lot to do with auditors behaving unethically, not exercising professional scepticism and not acting independently.
“What we thought were isolated cases of unethical behaviour soon became clearer as systemic problems in the profession as more wrongdoings came to light.”
Three organisations provide regulatory controls over unethical auditors and accountants, normal criminal or court proceedings against these individuals are as rare as convictions are against government and corporate fraudsters.
Irba is a statutory body that controls the profession involved with public accountancy. Then there is Saica and the SA Institute of Professional Accountants (Saipa).
Are these organisations are doing enough about corruption?
Irba chief executive Jenitha John said in response to Business Report questions that it took disciplinary action against 66 of registered auditor members from April 2017 to March 18, 69 auditors in 2018-19, and 60 from 2019-20.
Irba only investigates auditor ethics and compliance to auditing standards and the audit of financial statements. It does not investigate company fraud, nor allegations relating to SOEs that fall under the Auditor-General of SA (Agsa), except where the audit is allocated by the Agsa to a private sector firm.
In the year to March 31, 2020, Irba received 76 complaints about auditors out of about 3 900 auditors in total.
John said Irba’s sanctions includes a caution, reprimand, fine of up to R20 000 per charge, suspension of the right to practice, cancellation of registration, potential cost order and terms of publication of the sanction.
In the past five years, Irba finalised 403 matters, of which 8 percent were referred to disciplinary hearing, with most settled by fines. There were currently 227 matters awaiting investigation, said John.
The number of complaints has increased over the past few years and the matters were becoming more complex, putting pressure on Irba’s capacity, she said.
For example, the African Bank disciplinary hearing started in March 2018, and the disciplinary committee findings were still awaited. Other high-profile matters still under investigation were Steinhoff, EOH, VBS Bank and Tongaat Hulett.
The responsibility for disciplinary action against CAs rests with the Saica.
Saica institutes disciplinary proceedings either upon receipt of a complaint or where it becomes aware of alleged member misconduct through other avenues, such as from court proceedings or media articles.
In 2018, Saica concluded 128 disciplinary cases and 184 cases last year.
The organisation expects its members to adhere to the Saica Code of Professional Conduct, and it revised its by-laws to its Disciplinary Code to improve its disciplinary processes effectively from June 1.
The sanctions that can be imposed by Saica’s professional conduct committee and disciplinary committee include a caution, reprimand, fines of up to R250 000 a charge, suspended from membership for up to 12 months or referred to the disciplinary committee.
This committee could caution, reprimand, or fine up to R500 000 a charge, suspend from membership for up to five years, exclude from membership, disqualify from applying for membership permanently or for such period as the committee recommends.
In cases where members are alleged to be involved in illegal activities, Saica liaises with the authorities mandated to carry out public prosecutorial processes such as Irba or the Special Investigating Unit, etc.
Last year, Saica received 247 complaints of alleged misconduct against members or trainee accountants, and 248 complaints of alleged misconduct against members or trainee accountants in 2018.
Last year, Saica’s professional conduct committee held 20 meetings and finalised 173 complaints, while 12 additional complaints were referred by the professional conduct committee to the disciplinary committee for formal hearings. The disciplinary committee held 22 meetings last year and finalised 11 cases.
In response to BR questions, Saipa said it had responded to all complaints about its members, receiving 25 complaints last year, of which three were dealt with by a disciplinary committee, while this year, eight were referred to the committee.
Sanctions included a fine, reprimand, suspension, restrictions on area of practice or cancellation of registration; no legal action had been taken against members in five years.