IRBA achieves a decade of clean audit opinions

Says Bernard Agulhas, CEO of IRBA: “We are pleased that we have continued to maintain a clean audit opinion on our financial statements, more so given the most recent audit outcomes reported by the Auditor- General, where it highlighted that irregular expenditure in government and state-owned entities (SOEs) has increased and that almost three in four departments and public entities simply did not comply with key legislation. These outcomes indicate a continuing need for improvement of governance, controls and financial discipline in the public sector.”

In his CEO message in the Annual Report, Agulhas makes reference to the turbulent period the profession has endured in the last few years.

Said Agulhas: “The current negative state of the profession brought on by unprofessional conduct of a few forced the collapse of trust in the auditing profession and cannot continue unabated. As a regulator we have to work even harder to restore confidence and get this profession to being one of the most trusted and respected again. During the previous financial year, the IRBA set out a strategy, which was adopted by the Board, to restore confidence in the public interest role of auditors and the regulator.

“Many of the activities and projects included in the Restoring Confidence Strategy are integral steps that must be taken to demonstrate that the profession and the regulator are committed to transforming and responding in order to better meet public expectations. We recognise that now is not the time to try to restore the status quo but to listen to the market not only about what is expected from auditors but also from the audit product, and then adapt to address challenges presented by the new landscape.

“We recognise that to respond to the market and close the expectation gap we will have to rely on understanding what needs to change, how it should change and what we can do to help enable that change. For those reasons, we continue to employ a stakeholder-centred approach in responding to the market.”

During 2017, the IRBA began tracking the number of JSE Ltd main board listed companies that had voluntarily rotated audit firms ahead of the effective date, and the IRBA expects that by 2021 most listed companies would have complied well ahead of the effective date. Mandatory Audit Firm Rotation is one of the initiatives mandated by the IRBA to strengthen auditor independence from their clients, which will go a long way in restoring trust in the auditing profession.

In the foreword to the Annual Report, the Minister of Finance, Tito Mboweni, who is the Executive Authority of the IRBA, notes that he is pleased that some companies have adopted the Mandatory Audit Firm Rotation rule and rotated their auditors before the implementation date of 2023, adding that he is encouraged that the rotations are also benefitting some of the medium and smaller firms.

Mr Mboweni also refers to the good progress with the amendments to the Auditing Profession Act 26 of 2005, which will give the regulator more powers.

On the question of confidence in auditors, he noted that auditors remain a key stakeholder in protecting the interests of the investing public and a link in attracting much needed investments to the country.

Despite the challenges in the auditing profession, the Independent Regulatory Board for Auditors (IRBA) has forged ahead with measures to restore confidence in the auditing profession and to build a strong culture of ethics. Part of building a strong culture of ethics is holding the guardians of governance accountable, which is why the Auditor-General recently amended the Public Audit Act to incorporate remedial action, as well as a certificate of debt process which will enable government to recover irregular expenditure which cannot be rectified.

The implementation of restoring confidence projects will continue for the next couple of years while the regulator and the profession find ways to work around the current challenges.

“Restoring confidence in the auditing profession will take great courage and commitment from all stakeholders”, concludes Agulhas.

Ends

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.

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.