New auditing standards to boost investment
South African business will speak the common language of investors around the world for the first time when South Africa adopts global auditing standards on January 1 next year, the chairperson of the South African Auditing and Assurance Standards Board (AASB), Suresh Kana, said in a statement on Tuesday.
The AASB announced the decision to adopt these standards verbatim following its meeting last month.
The announcement to adopt international standards on auditing (ISAs) with effect from January 2005 coincides with a decision by the South African Accounting Practices Board to adopt International Financial Reporting Standards (IFRS) from the same date, the statement said.
Kana explains that a set of South African financial statements will now be interpreted and understood in the same way anywhere in the world.
“Similarly, for those relying on the auditor’s report on these financial statements, irrespective of the country in which the report is used, a common set of principles can be applied without the need to have an understanding of the national standards used in the country where the report is issued.
“Together with the initiatives to adopt IFRS and world-class corporate governance principles such as King II, this step will further enhance the stature of our economy as a leading global player, and increase our desirability as a destination for foreign investment,” said Kana.
He added that the Department of Finance’s vigorous economic policies to integrate South Africa into the international financial markets need to be supported by convergence with international standards.
These will simultaneously provide the public with the assurance that South African capital markets are operating effectively and that its reporting complies with the highest standards.
According to Kana, South Africa has for all intent and purposes already been applying the ISAs and the adoption on January 1 should therefore not result in a major change.
“Almost a decade ago, the local profession undertook to harmonise the South African Auditing Standards [SAAS] with ISAs so the major differences are only in respect of additional guidance contained in SAAS,” he said.
While South Africa is to adopt the ISAs in January, Europe has delayed convergence until 2007.
“There are various options to converge with international standards,” said Bernard Agulhas, director of auditing standards at the Public Accountants’ and Auditors’ Board.
“These range from merely bringing national standards in line with international standards to adopting the international standards verbatim.
“The AASB will ensure that the additional national guidance [at present] contained in the SAAS is incorporated in appropriate pronouncements issued by the board, as this guidance has proved to be valuable to auditors in the past.
“For the interim period to January 2005, the AASB will issue new auditing standards with a SAAS/ISA label and plans to still follow a due process when exposing international standards locally,” Agulhas explained.
“Where a need to provide additional guidance or to accommodate local laws and regulations is identified, these will be provided in appropriate pronouncements to be issued by the AASB.”—I-Net Bridge