Much of South Africa’s commercial law is years out of date and this has severe implications for auditors, accountants, directors and investors, says South African Institute of Chartered Accountants (Saica) executive president Ignatius Sehoole.
Addressing members of Saica and the Public Accountants’ and Auditors’ Board (PAAB) in Cape Town on Thursday, Sehoole said the Companies Act needs urgent revision and the Accountancy Profession and Financial Reporting Bill’s many positive recommendations should be implemented as soon as possible.
“South Africa is generally very slow to respond to the legislative requirements of a changing marketplace and this impacts on the image of South Africa as a capital market,” said Sehoole.
The Accountancy Profession Bill is likely to be redrafted by mid-2004 following professional and government comment, and should be implemented early next year. Recommendations include ensuring that auditor independence is not compromised, introducing term limits for audit partners and senior staff, more accountability between auditors and their clients, and improved disciplinary procedures.
The draft Bill also proposes a new regulatory body to replace the PAAB, possibly with some external funding to increase independence and clout. It should be properly empowered and produce an annual report for the Minister of Finance and Parliament.
“The PAAB supports and welcomes change,” PAAB CEO Claude O’Flaherty told Saica members at the Western Cape workshop. “Our strategy has been to make improvements to the existing system within the confines of the law. We know what new regulations are in the pipeline, so are setting the scene for a seamless transfer.”
The PAAB has focused on improving discipline, transparency, disclosure and good corporate governance, said O’Flaherty. It has ensured that King II principles are implemented, changed the composition of PAAB executive committees, enhanced the website and newsletter and improved communications with all stakeholders.
Now it will look at changes to its practice review inspection programme to place more emphasis on listed and other public interest audits.
Sehoole and O’Flaherty urged all chartered accountants both in public practice and company management to strive for the highest professional standards, but said it was also up to other members of the business community to ensure integrity in their business dealings.
“Auditors play an important part but are not custodians of corporate governance,” said O’Flaherty. “It is also up to directors, investors, analysts and other stakeholders to drive business ethics.” — I-Net Bridge