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Is the local auditing profession in crisis?

Once highly-rated globally, SA’s auditing sector has lost its status and requires urgent intervention, says Saiba’s CEO.

The spotlight returns to the auditing profession following recent developments at KPMG.

Read: KPMG admits partners took undisclosed loans from VBS

Moneyweb speaks to the CEO of the Southern Institute of Business Accountants (Saiba), Nicolaas van Wyk, about the state of the local auditing profession and where it’s going wrong. 

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This is the result of transformation for transformation’s sake.
As a newly qualified CA – a young white woman (like many of her peers) is planning to leave SA.
Why – because regardless of high praise for her knowledge, skill and great work ethic, she is being marginalized to make place for BEE appointments.
This is nothing new. This country’s fixation on race continues to do more damage than good.
Skilled, hardworking people are streaming out of SA as a result and token appointees are being caught out in their disingenuous dealings.
The poisoned tree is bearing bitter fruits.

I fully agree with you that BEE have had substantial negative side effects, amongst it the fact that 40% of CA(SA)’s work outside of SA. The fixation with race in SA also seems to be on the increase – even nearly 30 years after the end of Apartheid.

However, we need to be cautious to link the corrupt actions of individuals to the race of the individuals. As I mentioned in another post there are plenty of recent examples of corrupt/fraudualent activities from my white CA(SA)’s. Markus Jooste being the obvious example. At the time certain sections of the media and most of the Cape Town Southern Suburbs asset management industry tried to tie Jooste’s corruption with him being an ASfrikaner (Stellenbosch mafia/Afrikaner mafia).

People are corrupt for various reasons but racial make-up is not one of it.

If your argument is that BEE creates a environment conducive to corruption, I fully agree.

Would love a link to the source where you got the 40% stat from. That study must make for interesting reading. Thanks

Your statement:
If your argument is that BEE creates a environment conducive to corruption…,
is exactly why I feel that transformation plays a substantial role in the decline in the Accounting profession.

In any profession – where people are appointed for the wrong reasons, the impact is far wider than just putting a person on a chair in an office.
These damaging selections are also definitely NOT ONLY as a result of BEE practices – there are many more scenarios and many preceded the ANC government’s draconian, race-based employment laws.

Unfortunately, the pressure for companies to ‘get the numbers right’ seems to me to be the current, strongest driving force for questionable appointments. (Add to that the shrunken/compromised state of the economy, and you have a fine mess)

It would be interesting to see data on the state of the Accounting profession in countries where the above-mentioned practice is not present.

Jooste and all the people working closely with him – who were in the know and could have intervened and prevented/stopped the dubious dealings – should all be jailed. They are complicit in his actions. You can’t be somewhat pregnant.

That company directors/employees can cause so much damage and walk away scot-free is completely unacceptable. The practice of awarding golden-handshakes to individuals, who messed up as part of their role in companies, is simply repulsive.

Regrettably it seems to be the flavor of the day as there is nothing being done to address the ridiculous levels of non-accountability.

At the end of the day GREED is driving behaviour and if the necessary checks and balances aren’t in place, this atrophy will continue unabated.

Thanks for the references, and do not sweat it, 67% of commentators on blogging and social media sites make up 90% of the stats they quote. It goes up to 80% of commentators around the braaivleis vuur.

(see what I did there)

Transformation is only one of the problems and not the main one.

That is the unbridled greed/desperation/love of self of SAICA and IRBA to maintain itself as the one and only in the accounting & auditing world.

The current and past office bearers over the last 20 years, of this revolting organization should be named and shamed.

Amazing how SAICA lobbied IRBA(then again IRBA is basically SAICA members as well, conflict of interest??) to ensure that only CA(SA) could be Registered Auditors. Yet in the UK there is more than one Recognised Qualifying Bodies(i.e ACCA,ICAEW etc.)that can be Registered Auditor and audit Public Companies. Think the Auditing Profession Act 2005 needs to be reviewed.

I quite agree with the fact that only one profession in South Africa is allowed to become registered auditors resulting in a monopoly and no competition.

There are at least three other institutes which are strongly regulated by their statutes and ongoing CPD requirements to ensure the highest standards are met.

Also – where all are crying for BEE this is prevented by law as, again only one professional body’s members are allowed to become registered auditors.

Question on this issue also: Isn’t it time the Competition Board investigate this issue?

Other than sponsoring the broadcast, no word from SAICA itself? The Ntsebeza Inquiry has yielded nothing thusfar apart from some spin produced by an unknown law firm. Members pay >R200m per year in membership fees. Where does it go? 90% (R180m) is used to fund bursaries, 3.5% (R7m) goes to the CEO’s pay packet and that leaves only 6.5% to deal with the real issues. Don’t believe me, see for yourself. Source: 2016 SAICA annual report (latest currently available)

@Zinger.

Your comments are 100% correct. SAICA s/be disbanded as it has failed SA.

It’s “alumini” prove this failure daily.

It, the “profession” lost it’s status 15 – 20 years ago.

Fortunately (for South Africa) SAICA self aggrandisement eventually failed and the true state of this “profession” and it’s greedy members came to light.

Sad that KPMG has fallen so far but hopefully this can be a re-awakening and the “profession” can attain it’s true position in business and society. This will be providing true value at a reasonable price.

There tends to be an over simplification of far more greater problems in the country and business community.

Corporate scandals the likes of VBS, African Bank and Steinhoff indicate a complete break-down in various checks and balances. External audit is one componant but what has happened with the board of directors, audit committees, finance committees, internal audit?

A doctor goes to school knowing when they graduate they will become a doctor, same applies to an engineer,teacher, actuary etc but when it comes to Registered Auditors it is different, they must first become these so called “SAICA CAs” and there right there is the problem. SAICA seemingly does not care what their members do and they represent something that is not acceptable these days, something very dark.

Change the model of becoming external auditors and increase the accountability of auditors right from the first year clerk to the partner. People must go to school to become nothing but external auditors. Becoming a CA first does not enhance the credibility or the standing of one as an RA in any way. SAICA/CA does not even enhance this field in any way, completely useless to the field and profession.

People must go to school to become nothing but R.A , nothing else and that does not take away Accounting,Tax, Finance or Auditing from them. If nurses,doctors and engineers can be created to become accountable and responsible as they are,the same can be done with auditors.

I understand what you are trying to say. But if reports from medical aids are to believe, a lot of medical aid fraud is perpetrated by this “direct to doctor” educated people.

Also, those “direct to nurses” educated people running around in state hospitals are the shining example of selflesness when tea break arrives and a patient enters the room.

Not to mention the “direct to teacher” educated sadtu member collectively holding the youth of this country to randsom by protecting the incompetent amongst them.

And the we have the direct to lawyer, direct to estate agent etc crowd.

Your educational path has nothing to do with your moral compass.

Oh and by the way, if you follow the TIPP route, your training as an RA is as direct as anything. Your SAICA and RA affiliation is simultaneous, if you so register.

I have done Tipp articles and still practice.One learns a lot but some/many people who are in the field don’t know what they are doing, they hate it and there’s a lot of subjectivity when assessing talent, a lot of favouritism and butt kissing. Also have learned that SAICA makes no contribution at all to the field in addition to passing SAICA exams which mean nothing at all really and the exams do not reflect real talent and real world practical understanding.

SAICA should just be limited to accounting, financial management and taxation like other accounting bodies, auditing is not it’s thing and it is destroying the field directly and indirectly.

Yes education path has no influence on morals but the wheel needs to be reinvented here.

I would like IRBA to be totally independent and stand on it own feet. The APA needs to be revisited. Drop SAICA.

As a TIPP CA myself, your last comment better illustrates what I thought you were trying to say. And I agree with those statements to some extent.

But the path to a profession (education and training) is not going to solve that alone.

Professional bodies have to re-look what there role is and should be. Not only is IRBA slipping up here, but SAICA themselves to with the likes of Sighn (Eskom) and Jooste (Steinhoff).

But based on my wife’s views of her body, the HPCSA (doctors) can be faulted in the same way.

If these bodies continue on the “we do not wash our dirty laundry in the public domain” stance, public faith, and the profession’s reputation, will falter with time.

IF you want the public’s trust and admiration, you should also be willing to illustrate your swift and decisive action against these rogue members. Otherwise you are nothing more than an “old boys club” collecting fees and spending it on trophy symbolic social projects.

PS, subjectivity, favouritism and but kissing will exist everywhere humans interact with one another, even within an “independent” IRBA

@daniemare – you couldn’t have said it any better: “Otherwise you are nothing more than an “old boys club” collecting fees and spending it on trophy symbolic social projects.”

SAICA is preying on the fact that you and I and most other members will receive an invoice for R7k+ membership fees and simply forward that invoice to your company’s creditors department to pay. We don’t feel the drain on our pockets, because, hey, they wanted to employ a CA, they must pay.

You have to therefore feel for the members who don’t have the luxury of a creditors department and have to pay this ridiculous amount out of their pocket, just to see 80% of it handed out in bursaries and see no real value to themselves as members other than being branded a CA(SA). Given the continued silence and inaction from SAICA regarding of Singh, Jooste etc. this dare-I-say “increasingly tarnished” CA(SA) label is becoming more of a burden than an asset.

SAICA is doing a lot of hard yards in terms of transformation, and that is commendable. It needs, hoewever to get its priorities right. Its primary focus should be maintaining the integrity and standards of the profession, else there will eventually be nothing left to transform.

In twenty years of professional life, I have yet to meet anyone that has been satisfied with the work performed by auditors. And from personal experience, any CA that has lived up to the standards of their own profession has been a bitter disappointment.
This crisis is nothing new and it has been brewing for a long time. IRBA is a toothless entity.
I think allowing the chartered accounting profession to avoid liability when auditing is the problem. The law should never have changed. The partners are too far from their clients, working almost exclusively through clerks, who in turn rely on software. It is set to get worse with firms starting to promote AI, which will lead to less client interaction by the partners (if that were possible)…

I listened to the interview with Nicolaas and I support what he says. However, we need to accept the fact that the problems in the profession are much wider than merely limited to the Big 4 firms. We need to create more mobility towards becoming registered auditors for those that do aspire to become statutory auditors. I believe that the IRBA is purely another division of SAICA who in turn managed to build quite a nice relationship with the current and past government. They even managed to capture the English dictionary by taking sole ownership of some very general words and excluding other accountants from not uttering these words, such as “registered” and “certified” to name two. Their reason: “to ensure the public doesn’t get confused”. Well, the public is now properly confused. Over the past 100 years the accounting profession focused on the training of technicians and not professionals. This resulted in the profession also being controlled in much the same way as one would control technicians. Therefore two primary issues to get attention: Destroy the monopoly and revisit the training of these individuals. Oh and my personal favourite: Get them to back their clients like professionals even if SARS comes knocking on their doors. I’m seeing too many of these so called professionals running for their lives at the slightest display of aggression by SARS. Man up, cup cakes. I love this profession. We only need to jump start it with a new battery …

There’s a number of issues here, some being:
– Way too many kids study accounting for the money only. That’s not a good starting point.
– Many of these kids are not hugely reflective, and accounting studies does not develop that ability.
– Audits, I think, are much more flimsy than the profession makes them out to be. Much of what auditors do during the audit process (e.g. materiality determinations, sample sizes) would be difficult to defend in a court of law. And when I was still in the game I was made to audit things I did not understand, more than once.
– The profession suffers from arrogance, with SAICA being way too self-important. IRBA’s better in that regard.
– The same panic about auditing ethics pops up every few years. It’s time that we really reflect on this issue, and what can be done about that. The semester of undergrad ethics that accounting students is made to do is not doing the trick.
– Don’t think the answer necessarily is to open auditor registration to members of other professional accounting bodies. Some (not all) of those other professional bodies are pretty dysfunctional.
I will stop here.

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