Auditors to be called to account
Enron, Worldcom, Xerox, Merck: capitalism is finally catching up with itself. Whether this is true is probably part of a larger ideological question.
What is certain is that standards of corporate governance are on the decline throughout the world, not only in the United States.
Accountants and auditors are often as much to blame for these deviations as companies’ directors and non-executive directors.
The draft Accountancy Profession Bill, which may be tabled shortly, should therefore be welcomed by directors, accountants, auditors and shareholders alike. The measure is an attempt to enhance accountability in South Africa’s accounting profession and to enhance the public’s confidence in companies and the way in which they run their finances.
The draft Bill would repeal the Public Accountants and Auditors Act of 1991. It proposes to consolidate the laws governing accountants and auditors and to regulate these professions. The Bill provides for oversight bodies such as a Representative Council of Accountants, a Regulatory Board for Auditors, an Independent Standard-setting Board for Ethics and an Independent Standard-setting Board for Auditing.
These bodies would ensure that auditors and accountants render effective service to all sectors and function in an open, responsive and accountable manner.
The Regulatory Board for Auditors would protect financial interests in South Africa through services rendered by registered auditors, maintain standards in South Africa that compare with those in the rest of the world and promote the standards of qualification for auditors.
The board would be able to do whatever was reasonably necessary to achieve its objectives, including investigating improper conduct and conducting disciplinary hearings.
The main function of the Independent Standard-setting Board for Ethics would be to promote the understanding of professional ethics among professional bodies accredited by the Regulatory Board for Auditors and of registered auditors and to promote high and internationally comparable standards of professional ethics.
It would be able to determine what constituted improper conduct by registered auditors, as well as develop rules and guidelines for professional ethics and prescribe a code of professional conduct.
The Independent Standard-setting Board for Auditing would develop and maintain auditing pronouncement standards in the public interest and ensure consistency between South African standards and those of the International Auditing Practices Committee.
The draft Bill stipulates the composition of each of these bodies and how they should be run.
The proposed legislation is still being debated by the government and the profession. This Bill, together with the recommendations contained in the second King report, are essential elements in overhauling corporate governance in South African companies.
Judith February is the manager of the Institute for Democracy in South Africa’s governance unit