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KPMG has nothing to fear in the face of a toothless Irba

Why KPMG SA doesn’t need to be nervous of being found guilty of poor Gupta audit.

JOHANNESBURG – KPMG SA has virtually nothing to fear from its regulator if it is found guilty of a bad audit of Gupta-linked company Linkway Trading.

Last month the Independent Regulatory Board for Auditors (Irba) said that it will investigate the 2014 audit of Linkway, the company alleged to be involved in the Gupta wedding scandal.

But the announcement is unlikely to have left Linkway’s auditor, KPMG SA, in any state of concern. The reason? Irba is a toothless chihuahua of a regulator. One merely has to look at how it has punished errant auditors in the past. Or, rather, how it hasn’t really punished them.

Auditors who are found guilty of misconduct are typically ordered to pay a relatively tiny fine, which seldom exceeds R200 000. Fines against auditors are limited by the Auditing Profession Act.

Most importantly, the auditor’s misdeeds are almost never exposed to public scrutiny. This, despite the fact that Irba’s Disciplinary Advisory Committee has the power to name and shame errant auditors in matters of high public interest.

Some media attention has been given to the fact that Irba has the power to suspend an auditor’s registration or remove his or her name from the register. But this seems extremely unlikely to happen.

Moneyweb recently asked Irba what the longest suspension it has ever imposed.

Irba did not answer the question directly.

It responded: “The most severe sanction would be the cancellation of the registration of the registered auditor concerned and removal of his or her name from the register. The sanction of suspending the right to practice as a registered auditor for a specific period is generally not used.”

From this answer it seems reasonable to infer that Irba has never suspended a registered auditor for any period of time.

Furthermore, even if Irba imposes the most severe sanction and removes an auditor from the register, it would only be the “individuals under investigation”, and not the audit firm, as a media report claimed recently.

Irba’s latest newsletter provides insight into the relatively light punishment auditors receive for bad behaviour.

The newsletter states that Irba’s Disciplinary Advisory Committee concluded 20 matters by consent order. A consent order is effectively an admission of guilt.

Not one of the errant auditors is identified. Irba merely describes their transgressions in broad terms, without even stating the year in which the offences were committed.

Even though some serious transgressions are recorded, the highest fine levied is R150 000, of which R50 000 was suspended for three years on condition that the respondent is not found guilty of unprofessional conduct committed during the period of suspension. No costs order was granted either.

Those hoping for a speedy resolution to the KPMG matter may also be disappointed. Moneyweb is aware of a complaint laid against an auditor in 2010. The complainant was only notified in 2015 by Irba that it intended to discipline the auditor concerned. To this day the complainant is unsure if the auditor has actually been disciplined.

Irba explains that the investigations and disciplinary process are complex and lengthy. “It is also important that Irba follows its due process. Reaching conclusion on matters can therefore take time.”

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All IRBA and SAICA does is protect the CA(SA) brand! They ensured have that only a CA(SA) can audit public companies. Yet UK has 3 audit bodies that can audit public companies i.e ACCA allow more open access to the profession.

Like how is it possible that SizweNtsalubaGobodo is auditors of ESKOM and Oakbay????? How can we even trust investing in listed companies in SA. Same thing with ABIL how come the auditors got away with it? SA has far too many laws keeping a lot of academics in jobs and absolutely now way of implementing succesfully or enforcing. What was KING reports all about?

Pretty much the same story with the FSB and insurance ombudsman.

FSB definitely not perfect but its Enforcement Committee levies fines for serious offences that are multiples of IRBA’s fines. Further, offenders are named and shamed, which hurts their reputation and acts as a deterrent to would-be offenders.

It’s the protection of errant auditors’ identities that makes IRBA so toothless.

At long last a commentator that states it like it is in terms of the”profession”.

Long long overdue and mega kudos to you Julius.

The medical profession has the same ‘protect those in the tent’ mentality. Talk about indpendence!

Rubbish. Doctors are struck off the roll. When last did you read a government gazette?

Thank you for giving exposure to this shameful scam where the auditing profession tries to convince the public that they have an organisation that will act in their best interests.

How many crooked CA’s are still in business having been investigated by their mates?

So the crooks get paid a lot and are still protected. Sounds the same as politicians

Am still wondering about the constitunality of irba and the auditing professional act.

Those that study for ACCA and CA(SA) designations learn the same things and pass the same type of exams and should have the same type of experience to be designated but irba or the audit act only recognises those that did CA(SA) essentially, this fallacy, time will come and it will always not be so.

Spot on.

ACCA were attempting to get clearance to do audits…………….and then just stopped.

When asked why they stopped what came from them was a refusal to respond.

This was a long time ago, cannot remember, maybe in the days of tricky trev or pg?

It’s time that people who are involved in corrupt practices are named and shamed so that employers are protected from these crooked opportunists.

Draw up a list of all the news headlines over the last 20 years that read : “Massive fraud discovered by big 4 auditor” I cant find any. I can however name numerous like Enron, Madof, Worldcom, SAA, ect where one of the big auditors were the auditors.

Audit is not there to discover or prevent fraud.

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