The auditors in Steinhoff and Tongaat Hulett are being investigated by the Independent Regulatory Board for Auditors (IRBA) to establish if there was any improper conduct, this is according to IRBA CEO Imre Nagy.
In an interview with Business Report, Nagy said there were cases of management fraud and corruption in the JSE-listed entities, notably Steinhoff and Tongaat Hulett.
Nagy said the Steinhoff case was a complicated investigation and is still ongoing.
“We anticipate that we will know by the first quarter of 2023, whether there are any charges of improper conduct,” he said.
Embattled Steinhoff was involved in a financial scandal where some of its management had manipulated the balance sheet, while Tongatt Hulett’s executives were charged with backdating sale agreements between March, 2015 and September, 2018.
Last week, the IRBA unveiled its new brand journey that, it said, incorporates internal change management.
“The new brand will help us align to the new vision and mission of the IRBA and will impact all our operations, specifically in relation to how we engage with our stakeholders,” Nagy said.
He said the IRBA was committed to open and transparent engagement.
“We understand that to build trust, we must lead with integrity, focus on public interest and provide auditors with an environment in which they can pursue consistent and reliable high audit quality, without fear or limitation,” he said.
Nagy said the brand change was not a reputational bandage for the JSE scandals that have occurred in the past.
“The brand change is a process of continuous improvement and is linked to many improvement projects not just internally at the IRBA, but in line with our refocused five-year strategy. We also have initiatives that will study what reforms are appropriate in the broader financial reporting and governance eco-system (FRAGE),” he said.
According to Nagy, the IRBA aimed to be a balanced regulator that can engage with all stakeholders to restore confidence in our financial reporting and governance ecosystem, but at the same time hold errant auditors accountable.
Historically, Nagy said, the IRBA experienced limitations in its investigation and disciplinary process.
“This meant that we were bound to follow a process that negatively impacted the quantum of sanctions that could be imposed for improper conduct,” he said.
In April, 2021, President Cyril Ramaphosa signed the Auditing Profession Amendment Act into law.
“This gives the IRBA significantly more powers of investigation and streamlines our disciplinary process, as well as makes provision for search and seizure powers, the president said.
Nagy said auditors were not the primary decision-makers at companies and not the only line of defence.
“We are therefore looking at all role players in the financial ecosystem that must play a role to ensure integrity and trust in the system,” he said.
Nagy said the IRBA can only regulate and investigate registered auditors, and its mandate was limited to about 3 650 registered auditors.
“We don’t have the mandate to regulate accountants like CA(SA) who are in many instances running big companies. Where those individuals outside of our regulation are accused of improper conduct, we welcome and will support the relevant authorities where we can, as we see the benefit to reducing the risk of further corporate failures,” he said.
Nagy said there were significant upcoming changes in the regulation of auditors.
“Notably, the International Standards on Quality Management (ISQM) are effective in December, 2022. These make additional provisions for audit firms and audit engagement partners to take additional quality management steps to improve firm and engagement quality,” he said.
He said the IRBA was one of the first regulators worldwide to adopt these standards in February this year and promoted early adoption.
“Many audit firms have made significant inroads to revising their quality management systems well ahead of the effective date by which they must all comply,” Nagy said.
BUSINESS REPORT