South Africa’s auditing regulator is “concerned” about the country’s application of international accounting standards. A government entity that was supposed to oversee that SA adheres correctly to these reporting standards seems to have ceased to exist, leaving the door wide open for “self-regulation” by the country’s private sector.
The Independent Regulatory Board for Auditors (IRBA) told the Standing Committee on Finance on Tuesday that SA’s local accounting standards setting body, the Financial Reporting Standards Council, has not been operational for over two years.
Formed in 2011, Financial Reporting Standards Council, which sits under the Department of Trade, Industry and Competition (DTIC), was supposed to set the standards for financial reporting for South Africa. It should also monitor how accountants and auditors adapt international reporting standards for our local circumstances.
IRBA’s acting CEO, Imre Nagy, said while SA follows the international standards for accountants, there was no government body concerned with the interpretation and application of those for the South African environment. While it is the regulator for the auditing industry, IRBA has no jurisdiction over the setting of accounting standards in the country, he said.
“In the absence of such a body, there is a risk that there is self-regulation happening in the country, where interpretation of accounting standards is done by the private sector itself, which is such a risk,” said Nagy.
He said IRBA and the South African Institute of Chartered Accountants have been trying to set up a meeting with DTIC to raise their concerns. They don’t know why the council stopped operating.
“As you can imagine, if there is guidance needed on the interpretation of a particular accounting standard, it’s left to the interpretation by professionals without that level of oversight. It is a concern to us,” he said.
While SA’s accounting and auditing sector is facing this deficiency, it is also losing auditors. IRBA’s statistics presented to the committee show that the decline in the number of registered has been sustained for five years now. In 2017, it had 4 171 auditors registered with it. This has declined to 3 649 this year, a decline of 12% since 2017.
The availability of work for auditors and the scrutiny facing the profession since the breakout of accounting and auditing scandals like state capture, Steinhoff and Tongaat Hulett have contributed to emigration of auditors.
But since most of the auditors that left worked on non-assurance issues – doing mostly consulting instead of signing audit opinions, IRBA believes there is no reason to worry.
“We are confident that we still have a significant and appropriate number of auditors available to do the available audit work,” said IRBA’s director of legal services, Rebecca Motsepe.-fin24
