EDITORIAL: Audit industry bloodied by Irba mess, as Jenitha John quits
After braving an avalanche of scalding criticism over her appointment, Jenitha John has resigned as CEO of the audit regulator, the Independent Regulatory Board for Auditors (Irba), following a bruising eight months in the job.
It was an appointment, made by Irba’s former board, that always seemed destined for disaster. As the former top audit executive of FirstRand with a vaunted 25-year career, John was highly rated.
But she was brought in to oversee SA’s audit industry — already vulnerable from a series of accounting scandals — even though she herself was enmeshed in Tongaat Hulett’s 2018 accounting fraud. Angry investors wanted to know how John, as the former chair of Tongaat’s audit committee from 2011 to 2019, hadn’t spotted this fraud.
Khaya Sithole, accounting lecturer and commentator, says the whole ordeal has been hugely damaging for Irba. "If we go back to April 2020 when John was appointed, it was clear the board didn’t understand the value of perception, particularly for a regulator trying to rescue an industry which had taken a significant knock," he tells the FM.
That board showed a profound lack of ethical wisdom, and poor leadership, he says. "How did a regulator, which operates in such a delicate space, get it so wrong? How could it appoint someone whose pre-existing entanglements in a corporate scandal were so acute, and so obvious, that her position was untenable from the outset?" he asks.
John’s appointment created such intense friction at Irba’s new board that, three weeks ago, finance minister Tito Mboweni dissolved that board entirely. Instead, he appointed two caretakers for Irba — former JSE president Roy Andersen, and Nonkululeko Gobodo, founder of SizweNtsalubaGobodo — on a three-month basis to keep things running.
Finally, this week, Andersen and Gobodo announced that John felt "it would be in the best interests of Irba for her to stand down as CEO". They said it was "unfortunate that negative perceptions about John persist and this has unfortunately impacted her role at the IRBA."
Veteran Irba director Imre Nagy has been appointed acting CEO for now.
As much as her critics will feel vindicated, John will feel she’s been unfairly dealt with in this ordeal.
She has told the FM how, at Tongaat, she’d gone the extra mile to tackle former CEO Peter Staude. In one e-mail in June 2018, she demanded a special board meeting to discuss financial red flags, including some around the sugar company’s cash flow.
"I have suggested the engagement of an independent party," she said. Staude resisted, but John said it was within her mandate to ask for "independent outside professional advice".
Still, for shareholder activist Chris Logan, John didn’t do enough. "I had no sense that she was onto this, and keen to deal with it," he says.
But the intricacies of her true culpability for the Tongaat fraud were always going to be obscured by the bigger picture — which was that, in an industry battling to bury the ghosts of Steinhoff, VBS Mutual Bank and EOH, the soap opera was unwelcome.
Lwazi Bam, CEO of Deloitte, tells the FM that the stability of Irba was always the paramount concern. "We hope Jenitha’s resignation, and the dissolution of the board, will be the beginning of building a stable regulator. The process of rebuilding trust in our profession involves dealing with the entire ecosystem of financial reporting, and the regulator is a key part of that," he says.
Olivier Barbeau, managing partner of Moore SA, says: "If the profession is serious about repairing its reputation in the public eye, it needs to walk the talk about independence, objectivity and ethics."
Ignatius Sehoole, CEO of KPMG, says Irba’s success is critical for SA’s success. "The last thing you need are investors to look at SA, and say, why should I put money into the country when the quality of audits can’t be trusted and there’s no effective regulator. The public must know Irba works."
And that, Sehoole rightly says, is an imperative larger than any single person.
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