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Issue 35 | July-September 2016
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FROM THE CEO’S DESK
I wish to welcome Robert Zwane to the management team of the
IRBA, in his new role of Director Education and Transformation.
Robert has been with the IRBA for the past few years and has
been instrumental in driving the Audit Development Programme,
which is the IRBA’s response to the dynamic environment in
which auditors operate. He is also a key role player in driving the
IRBA’s transformation in the profession through his engagement
with students, who represent our pipeline and the future of the
profession. He is already a known figure in the International
Federation of Accountants (IFAC) community in his position as
technical advisor to the South African member on the International
Accounting Education Standards Board (IAESB) of IFAC, and
we look forward to his further contribution to maintain auditor
competencies in support of high audit quality.
The key strategic activity from our Four Pillar Strategy that the
IRBA has been working on this year has been the project to
strengthen auditor independence.
The independence of auditors from their clients and the
independence of the regulator are strategic priorities. With so
many state entities and regulators under potential threat of state
or regulatory capture, we have been alert to such threats and
diligently continue to maintain our own independence, while
considering measures to strengthen auditor independence which,
in turn, must ensure reliable reporting.
You would be aware that the Board took a decision to implement
Mandatory Audit Firm Rotation at its July 2016 meeting, and this
was communicated to the Minister of Finance.
Commenting on the implementation, IRBA Chairman Rene Kenosi
says: “Investors and the public are demanding more information
and transparency and have become more aware of their rights,
which need to be protected. The work of the International
Integrated Reporting Council (IIRC) and others is advancing a
‘new normal’ among investors and the public that requires of
companies and auditors increased transparency, honesty and
reporting that is more accessible than ever before.
“Furthermore, the tolerance for corruption is decreasing, while the
demands for accountability and responsibility are on the rise.
“These developments,
inter alia,
have increased demands on
auditors to be more independent and have led to increasing
sanctions worldwide against those who do not report irregular
activities. They have also led international role players, including
the European Union, to implement more robust measures with
the aim of enhancing the independence of auditors; and for
respective audit regulators to increase efforts to avoid regulatory
capture.”
It therefore became crucial for the IRBA to implement measures
that would ensure the independence of auditors and it is in
the context of ensuring that the IRBA addresses the impact of
global developments, and contributes meaningfully to these
conversations, that this initiative commenced.
Without the required independence, investors cannot have the
assurance that the opinion expressed by the auditor is appropriate
in order for them to take economic decisions; and while the IRBA
must respond to stakeholder inputs, it ultimately has a statutory
obligation to protect the investing public.
On the international front, in a positive development for audit firms
and their global clients with shares listed on the Johannesburg
Stock Exchange, the IRBA has received confirmation that its
application for recognition as an equivalent competent authority
(ECA) under the European Union (EU) legislation – which came
into effect on 17 June 2016 – has been approved.
This recognition of adequacy means that the IRBA meets the
EU Commission’s standards for public oversight of statutory
auditors and audit firms and that its quality assurance reviews
and investigations are sufficiently comprehensive to meet the
standards of the Commission when it comes to the exchange of
information.
Importantly, this means that during a process of review and
inspection, where portions of the audit were conducted in this
country, firms would not be subject to additional inspections of
their working papers by member state statutory oversight bodies,
where the IRBA has successfully concluded an agreement with
that oversight authority. By reaching a reliance on each other’s
oversight systems, the transfers of audit working papers or
other documents held by statutory auditors of audit firms and of
inspection or investigation reports would not be necessary, but
become the exception rather than the rule.
The adequacy assessment deals withmatters such as cooperation
in practice, obstacles to cooperation and exchange of information,
which now also includes inspections findings, where applicable.
The other regulatory bodies recognised in the decision include
those of Brazil, Dubai, Guernsey, Indonesia, Isle of Man, Jersey,
Malaysia, South Korea, Taiwan and Thailand.
We also welcome the news that South Africa has been ranked
yet again as the world’s number one for auditing and reporting
standards, making it the seventh consecutive year that the
country holds this position. On this achievement, Ms Kenosi says:
“South Africa relies very much on external capital and one of the
important components of creating an environment where foreign
direct investment (FDI) can occur is a well-regulated and reliable
capital market. This results in a reputable audit profession, which
provides potential investors and capital providers with reliable and
credible financial information on which investment decisions can
be made.” Equally, public confidence in any profession depends
on the quality and robustness of the oversight.