Following many challenges, over the past few years Deloitte has been forced to reimagine its business — and in its mission to rebuild trust a new chief executive just might help.
Enter incoming Deloitte Africa CEO Ruwayda Redfearn, who told the Mail & Guardian in an interview that trust needs to be restored in the auditing profession after years of scandal — and that one of the strategies Deloitte has adopted is to be more “intentional and selective” about its choice of clients.
As Steinhoff’s auditor for years, Deloitte has faced lawsuits from investors who lost money when the global retailer’s share price collapsed in December 2017 amid an accounting scandal.
“We now think very long and hard about who our clients are,” Redfearn said, noting that the company had made “necessary changes” in the past two years.
Before Deloitte approaches a potential client, it considers the client’s risk profile, whether it will receive adequate compensation for its services, and whether it has the resources, experience and capacity to serve them.
Deloitte also audited African Bank’s financial statements before its collapse in 2014.
The Independent Regulatory Board for Auditors has had to establish whether the Deloitte auditors applied “professional scepticism” and did enough to ensure that the bank provided adequately for bad debt.
The Deloitte auditor on the African Bank audit was cleared on the charge that involved alleged dishonesty, failures of independence, objectivity and professional scepticism, as reported by Business Day.
However, the regulatory board, which is mandated to create an ethical, value-driven financial sector, has also been under public scrutiny for its own failures — internally and in ethically regulating the sector.
Redfearn said having a regulator “with teeth” was crucial.
“In all the cases, even those we have with the regulator at the moment, such as Steinhoff, we continue to co-operate … while understanding fully that it is in everyone’s best interest that we have a credible regulator.”
Through the years, the audit firm had learned hard lessons from its corporate mishaps and the need to maintain “professional scepticism”, Redfearn said. She is the current chair of Deloitte Africa and will take over as CEO in June next year, succeeding Lwazi Bam, who has been at the helm since 2012.
Bam, a Deloitte lifer, joined the firm in 1994 and was made partner in 2003. He has had an illustrious career, making headlines as one of the youngest chief executives in the industry when he was chosen to lead Deloitte at the age of 41.
With Bam’s imminent departure, Redfearn is focused on how to restore credibility to the firm and said Deloitte had recently brought in a number of global experts to help repair and reimagine its audit business and guide it on each process, from decision-making to how it conducts an audit.
“We have reimagined our business and we are learning lessons from everything that has happened; not just in South Africa, but also from the rest of the world. We’ve had to think very deeply about professional scepticism and challenge ourselves about what it means … because we do believe that as a firm we do have a broader role of restoring trust in the profession,” Redfearn said.
However, Deloitte and some other large auditing firms are not off the hook just yet, a fact Redfearn acknowledged: “It’s uncomfortable for the profession, but it’s welcome and it’s the right thing.”
This scrutiny and the resulting stagnancy in the profession had also dented the profession’s capacity to attract the right skills, she said. The audit “product” was outdated and had not changed in more than a century, even though business had become more complex and globalised with the advent of technology.
“We need to review what the role of an auditor is and what the audit product should look like, from a technological point of view. The skill set of the auditor will also have to change and auditors will need to be more analytical.”
Redfearn is passionate about the need for the profession to employ more black and female chartered accountants, motivated in part by her own experience as a trainee at Deloitte in 1997 when the company did not employ many people who looked like her. For this reason she sits on the board of the Thuthuka Education Upliftment Fund, an initiative to promote transformation in the profession.
Redfearn believes that her journey to chief executive was fast-tracked, because of the view the firm took on transformation in the early 2000s.
The latest entrants to the Upliftment Fund programme came to Deloitte’s Waterfall City offices to attend a course, and Redfearn said she felt proud that she could show them around and that they could feel represented.
“We have 300 of them starting next year in February. I want them to see me, and see themselves. We started our transformation journey long before it was sexy to do so,” she said.
“I became a partner within seven years, which is not a long time. I had some fantastic mentors and coaches along the way, who were determined to see me succeed, and so they gave me that experience that I would’ve received in 15 years in a very short period of time. But it also requires commitment from the individual.”
Redfearn said she stands on the shoulders of giants who came before her and had foresight. “I am talking about Jeff van Rooyen, Vassi Naidoo and Tim Store, people who championed transformation and were unapologetic about it,” she said.
“It’s still seen as remarkable that there is a woman leading the firm, but I look forward to the day when it is unremarkable.”
Anathi Madubela is an Adamela Trust business reporter at the M&G.