ACCOUNTING STANDARDS
HILARY JOFFE: KPMG scandal spotlights forensic audits
‘Whether and how the board can or should broaden its scope beyond audits to the more diffuse sphere of forensics will be interesting to see’
The Independent Regulatory Board for Auditors already has an investigation under way into KPMG’s auditing of the Gupta companies; now it is contemplating stretching its powers to investigate the firm’s forensic report on the South African Revenue Service’s (SARS’s) so-called "rogue unit". Board CEO Bernard Agulhas has told Parliament this is justified because a registered auditor signed off the SARS report. But the stretch is an interesting one because an audit and a forensic audit are very different things. They are conducted by different sets of people, using different processes, in a different market. And until now there has been no clear regulatory framework for forensic investigators, only some of whom are chartered accountants or auditors in companies such as KPMG. When the external auditors conduct an audit they look at only a sample of the company’s transactions, based on an agreed level of "materiality", using specialised procedures and systems designed to detect any defici...
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