Accounting irregularities do not necessarily indicate an audit failure

Johannesburg, Thursday, December 7, 2017 - The Independent Regulatory Board for Auditors (IRBA) has acknowledged market concerns for the many South African investors affected by the collapse of the Steinhoff share price during the week. The matter is complex, details of the collapse as yet are unclear and, as it is a multi-jurisdictional matter, the IRBA still needs to consider its role.

Says Bernard Agulhas, Chief Executive Officer of the IRBA: “Accounting irregularities do not necessarily indicate an audit failure, as accountants and auditors have different responsibilities in respect of financial information. Also, different structures have oversight over accountants and auditors. This is further complicated where there are multi-jurisdictional listings and oversight.

“We expect that the German investigation would first need to obtain a complete understanding of the nature of any alleged irregularities, before it can determine the scope of the investigation. It is possible that it may take some time for the full extent of the allegations arising out of that investigation to come to light and it is only then that regulators, here and abroad, would be able to ascertain each of their roles of oversight and jurisdiction.”

The Steinhoff primary listing is in Frankfurt. However, the IRBA will continue to monitor the developing investigation.

The IRBA is mandated by the Auditing Profession Act (26 of 2005) to have oversight of auditors registered in South Africa and ensure that registered auditors comply with the international audit standards when conducting an audit and subsequently providing an assurance opinion on the company’s annual financial statements.

Companies and company management are governed by the Companies Act (No. 71 of 2008) and, in the case of listed entities, by the listing requirements of the Johannesburg Stock Exchange; therefore, the IRBA does not investigate the actions of companies or company management.

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More about the IRBA:

The IRBA is a public protection statutory body established to protect the financial interests of the public by ensuring registered auditors and their firms deliver services of the highest quality. It upholds audit firm independence to ensure that audit quality is such that it enhances the accuracy and credibility of financial performance reporting. In this way, the IRBA has an important role to play in building the reputation of South Africa as an investment market for both local and global investors and driving economic growth for the country.

It is an internationally recognised regulator of the auditing profession and other assurance services relevant to the South African environment. The IRBA also registers suitably qualified accountants as auditors, who must adhere to the highest ethics standards, and promotes the auditing profession through the effective regulation of assurance conducted in accordance with internationally recognised standards and processes.