/ 10 October 2018

Lack of funding limits probes into auditors, MPs told

Bernard Agulhas
Bernard Agulhas, the CEO of the IRBA. (Daylin Paul/The Times)

Limited funding is proving to be a challenge for the Independent Regulatory Board of Auditors (IRBA), tasked with investigating industry failures, members of Parliament have heard.

IRBA’s CEO Bernard Agulhas on Tuesday briefed the Standing Committee on Finance on its annual report for the 2017/18 financial year.

He also briefed the committee on the progress made in investigations into auditors. Speaking on the sidelines of the briefing, Agulhas said the R39-million allocated by treasury pays for IRBA to deliver on all of its objectives.

But when it comes to investigations, IRBA needs to appoint three or four additional investigators, given the “high-profile investigations” that have come onto its agenda. IRBA can only afford to pay five investigators.

Among the high-profile investigations are probes into Steinhoff’s auditors Deloitte, African Bank, VBS Bank and Gupta-linked Nkonki.

To be able to conduct more investigations, funding is required to boost capacity, Agulhas explained.

Millions more needed

“Up until the end of this year we budgeted for R6-million to do these investigations and for the disciplinary hearings. But in fact we need an additional R16-million — up to March 2019.”

Agulhas said that for its medium-term budget policy statement, IRBA has increased its requirements to R25-million. “That is what we will need if we want to complete these investigations faster.”

IRBA in March managed to conclude an investigation into company Linkway Trading – linked to the payment of the Gupta wedding. Former KPMG auditor Jacques Wessels was charged by IRBA for improper conduct and tax evasion related to the Linkway account.

The hearing for the matter started just after the case was opened in June 2017, Agulhas told MPs. Although the matter was heard over a few days, the next step is for the sanctioning hearing to take place — which can only happen when all the disciplinary committee members and the legal counsels for both sides are available.

Although IRBA would like the hearing to be done before year-end, it might only be done in February 2019. Agulhas said this was beyond its control, as the decision rests with the disciplinary committee.

“We cannot enforce what we want, necessarily,” he told MPs. He said IRBA’s investigation was conducted quickly, faster than would have been expected.

One investigator for ‘complex’ Steinhoff

Agulhas said there were also a number of investigations linked to the Guptas underway, as several complaints had arisen against KPMG.

These investigations were completed and tabled before the investigations committee at a meeting, which will decide on the recommendations to be made to the disciplinary advisory committee.

As for the KPMG investigation related to the SARS rogue unit report, Agulhas said IRBA appointed an external service provider, as it did not have internal capacity. However, this service provider is busy with an existing investigation into African Bank.

The African Bank hearing is scheduled later this year between November and December, so little progress has been made on the SARS report.

Agulhas said the investigation into VBS Mutual bank was on track, and the Steinhoff investigation, a collaboration with foreign investigators, was also still underway.

“Steinhoff is extremely complex. It involves many companies and auditors. We made a lot of progress and have one investigator dedicated to Steinhoff.” Agulhas clarified that only Steinhoff’s auditors are being investigated, not former CEO Markus Jooste and former CFO Ben la Grange, as they are not auditors.

He also confirmed that this probe would not be concluded by the end of 2018, as it is too “complicated and complex” and must be done right. He could not say how long it would take to complete, but said these details could be provided to the committee at a later stage. — Fin24