IRBA Newsletter Issue 53

Issue 53 | January-March 2021 2 ACTING CEO’S PERSPECTIVE ENCOURAGING SIGNS OF RESILIENCE, DESPITE HAVING GONE THROUGH TURBULENT TIMES The beginning of 2021 has brought significant leadership changes at the IRBA, with the Minister of Finance appointing a Caretaker Board and an Acting CEO. These changes have largely been met with positive support from management and staff, who have shown tremendous resilience during a turbulent year in which they also had to navigate the unprecedented COVID-19 disruptions. I am truly humbled by the appointment as Acting CEO and fully committed to leading the IRBA in the coming months. With the full support of a cohesive management team, we have committed ourselves to look forward and continue with executing the IRBA’s mandate, together with our competent staff. Our specific focus is on the refocused five-year strategy, which was approved by the Caretaker Board and adopted by Parliament in March. We are also currently developing a roadmap to guide the ongoing implementation of our restoring confidence projects that started in 2018, including several new initiatives, in response to the refocused strategy. Further, we look forward to welcoming our new Board and CEO, and will support them in their endeavours to take the IRBA and the profession forward. The February appointment of the Caretaker Board, which comprises Mrs Nonkululeko Gobodo and Mr Roy Andersen, has resulted in decisive action on a number of issues. For instance, while many delays had accumulated at the statutory committee level, the Caretakers have resolved much of this backlog in a short space of time. In the first few weeks of their mandate, both Roy and Nonkululeko have availed themselves to every request. They have also taken decisions on seven new matters and have noted the impositions on 35 matters that were decided by the previous Disciplinary Advisory Committee. They have also started the process of appointing a new non-executive Board for the IRBA. The call for Board nominations was issued in February, with a closing date of 31 March 2021. The process will now include interviews, to strengthen the selection procedures. The Caretakers are committed to provide the Minister with a sufficient number of candidates who are of the right calibre and who have the experience and skills needed to lead the IRBA in fulfilling its mandate. In the meantime, until a new Board and CEO are appointed, I confirm that the execution of the IRBA’s core functions will continue unabated. This will be fully supported by a competent and experienced management team and staff members, who are committed to the cause of protecting the public interest and regaining public trust. The Caretakers met with the management team to review and refocus our five-year strategy, and the new reworked document was submitted to National Treasury in February. In the revised strategy, the IRBA has committed to enhance audit quality and address gaps in the auditing profession and the broader financial reporting and governance ecosystem, with a specific focus on areas that affect audit quality. Worldwide, there is broad consensus among regulators, investors and stakeholders that urgent interventions are necessary to enhance the financial reporting and governance ecosystem, including external audits. This is because the policy reforms implemented in the mid-2000s, following global corporate and audit failures, are no longer deemed to be sufficient or effective. The IRBA does not have jurisdiction over all the elements of the financial ecosystem. However, as an independent audit regulator and a member of the International Forum of Independent Audit Regulators (IFIAR), a forum of 54 independent audit regulators from around the world, we are well placed to conduct such a review. We acknowledge the need to focus, first and foremost, on identifying and addressing current challenges in the auditing profession. We also recognise that we can and should drive and influence broader systemic change and reforms with the relevant decision-makers in the financial reporting chain and governance environment. However, for such a review to be encompassing, we need to engage more broadly with relevant stakeholders and decision-makers and seek their participation in the review process. We will also need every stakeholder’s buy-in regarding the reforms and initiatives, before we can start to see sustainable improvements in audit quality. The refocused strategy takes into account COVID-19 and explains that our focus areas for the next five years will be: audit quality; sustainability and relevance of the regulator and the profession; and comprehensive stakeholder engagement, with the view to promote broader reforms. Until we have improved audit quality and have taken significant steps to transform and innovate the financial reporting and governance environment, both the audit profession and the audit regulator cannot rebuild trust in financial reporting and regain confidence in the financial markets. Consequently, where reform is within our mandate, we aim to apply further strategic measures to improve confidence in audits and the profession. We will commence this process by seeking some quick wins together with stakeholders, especially in relation to improved audit quality, transparency and communication. Where gaps that negatively impact audit quality are found in the broader reporting environment, we will offer recommendations for improvements or policy changes, with the support of our immediate stakeholders or the assistance of National Treasury and Parliament. The IRBA is fully committed to returning to its restoring confidence projects and taking stock of what we have achieved since early 2018, and what still needs to be achieved. Some significant projects that are well advanced are Mandatory Audit Firm Rotation (MAFR), Audit Quality Indicators (AQIs) and the imminent promulgation of the Auditing Profession Amendment Bill, which will give the IRBA strengthened powers of investigation, simplify disciplinary processes, increase sanctions and ensure that we have a Board that is independent of the profession.