Internal auditing bodies make their voices heard in public institutions
Professionals out to salvage their image
Auditing professional bodies say they will “aggressively drive changes” to salvage their image in 2019.
The auditing profession has been under fire since the implication of KPMG in state capture and the implosion of Steinhoff. Questions have also been raised about the role of internal auditors in shining light on activities that cannot easily be picked up by external auditors.
Representatives of the bodies told the Public Sector Forum on Monday that intimidation of internal auditors and total disregard of professionals’ recommendations are among the issues speeding up corporate and public institutions’ capture in SA. Another concern they raised is the promotion of police officers without the relevant experience to investigate financial statements.
Jaco de Jager, chief audit executive in the Association of Fraud Examiners SA, said 26 professional bodies had joined forces to minimise instances where “a guy who was working in the police office filling [in] charge sheets suddenly becomes a financial statement expert” in public institutions.
“If we don't do that, we are not going to win this war. People will always sift through the cracks, tax wise,” said De Jager.
He said that in 2019 their members would change their reporting to note who was employed in certain critical positions in organisations, such as directors, risk managers and forensic consultants.
“The fraud examiner will start issuing reports to point out if the organisation does not have qualified staff that belongs to professional bodies,” he said.
Alice Muller, acting national leader in the office of the auditor-general said disregarding internal auditors’ recommendations had compromised defence against malpractice in organisations.
“You can issue the most impactful recommendation, but if it's not implemented, nothing will change.”
She said she had been in organisations where the same issue was raised “year after year”, but auditors’ recommendations were never considered.
Muller said auditors had no power to enforce implementation, but changes to the Public Audit Act expected to become law in March or April would change that.
“We will now be able to refer any material irregularity for investigation. We will issue remedial action that will be binding. If that remedial action is not implemented or adequately implemented, the auditor-general can in future issue a certificate of debt to repay the amount lost to the state,” said Muller.
Acting accountant-general Zanele Mxunyelwa said her office was one of those that would investigate matters brought forward by the auditor-general. She said internal auditors were facing immense pressure as values changed in public institutions and people who were supposed to set the organisational tone on ethics had been compromised.
“They override the same controls that they had implemented in the organisation. It’s not a problem of the noneffectiveness of the internal auditor to provide assurance. It's an issue now of a systemic corruption.”
The professional bodies present at the forum have also created the Anti-intimidation and Practices Forum to protect auditors and forensic investigators from being victimised, murdered or having their identity revealed when they are whistle-blowers. The forum will lodge cases of fraud on behalf of these professionals to relevant authorities such as the Auditor General or Hawks.
“That way we'll take away the leverage that the company has on the professional and protect our members,” said De Jager.
The bodies have also changed the disciplinary process of their own members when they are found to be in breach of their profession’s code of ethics. Up to now, professionals who belonged to two or more professional bodies, like those who simultaneously hold CA, CFA and auditing qualifications, could choose where they wanted to go for disciplinary hearings. De Jager said this allowed professionals to choose to be disciplined by the professional body with the lowest penalties.
“It shouldn’t have been happening. We are going after our members too because it’s our reputation that's being tarnished and we are not going to tolerate this anymore,” said De Jager.