Rebuilding trust in South Africa’s auditors is essential as the country battles corruption, fraud and malfeasance, according to the South African Institute of Chartered Accountants (Saica).
The institute said yesterday that the scandals involving fraud, corruption and unethical behaviour that had come to light over the past few years had caused society to a profession that used to be characterised by integrity.
Saica undertook to continue to engage with and bring the various role-players in the financial reporting ecosystem together to identify the problems and possible solutions that would promote efficacy in South Africa’s capital markets.
Tsakani Maluleke, the Auditor-General of South Africa, said the incidences of irregularities impacted all chartered accountants in the country in different ways.
“Why don’t we learn from past mistakes? We tend to go for the easy answer. The easy answer includes setting up structures, fine-tuning the reporting framework, trying to fix internal audit. It seems to me the problem is not technical skills or a lack of structure. It is about our moral competence, about character and integrity. We have got to interrogate matters differently,” said Maluleke.
She said auditors needed to think broadly about the information and not tick the box and not be happy with the “bells and whistles”, but think about the substance of the things that went wrong.
“Why is internal auditing not functioning the way it should? Why is the remuneration committee not raising the alarm about the nature of those ‘super bonuses’? Why is the audit committee not functioning the way that it should?”
According to Maluleke, the solution to the problem was multifaceted.
“First, we have to be quick to apply consequences. People must start seeing that crime does not pay. So, we have got to deal with the rigour, speed and effectiveness of our processes right up until conviction.”
For her, this started with leadership. “Whether in the private or public sector, you’ve got to have courageous leadership that sets the right tone, that builds the right culture with the type of values that are consistent with having understood that we owe a debt to society. It is about ensuring the core of professionals that are there to serve society are imbued with these values and around this very duty.”
Stanley Subramoney, the chairperson of Nedbank’s group audit committee, said corruption all came down greed.
“The culture of greed is of concern and the root cause of the challenges we face in corporate South Africa,” said Subramoney.
He said that having been in the profession long enough to be able to test its moral compass, he felt that the trust deficit in the profession was at an all-time low. He said South African citizens were angry and directing their anger, sometimes unjustly so, at the auditors.
KPMG South Africa chief executive Ignatius Sehoole said they felt that no one was learning from the scandals.
“We don’t learn the fundamentals. We learn the rules and the mechanical tinkering. The real thing is people get co-opted easily through greed. One of the important things we are focusing on at KPMG is integrity and serving the public interest. For me, corporate South Africa, and it does not matter where in the financial value chain you are, need to be focused on integrity, on serving the public first and less on greed,” said Sehoole.
Julius Mojapelo, the chief executive of the Institute of Internal Auditors South Africa, said from an internal audit perspective, there needed to be a recognition of the internal audit as an item in the toolkit of the oversight structure.
“It’s only as effective as it is used and structured by the oversight structures. An internal audit is not meant to catch the oversight out. It’s meant to create an environment where the promises made by the organisation are supported by the right systems to mitigate all the risks that are in the organisation,” Mojapelo said.