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Like it or not, the auditing profession has been called upon to

take a hard look at itself. The pressure from the market for change

increased significantly following the VBS Mutual Bank failure in

March. As the bank went into curatorship and more information

around the matter has been revealed, public sentiment towards the

role of the profession, its professional bodies as well as the regulator

has become increasingly critical.

The IRBA Board anticipated this and charged the executive

management in November last year to deliver a plan that would

address public perceptions and help to shape a new conversation

around auditing and help the profession in adapting to the changed


Consequently, the IRBA has for the first few months of the year

been working on a plan for the profession to restore confidence in

the public interest role of auditors and the regulator. Many of the

activities that we believe are integral to restoring confidence were

already projects that were underway at the IRBA. Nevertheless,

during this period we revisited all our projects and reviewed these

with consideration for the Board’s directive, which is to focus on

those key activities that will help us to meet public expectations.

Projects that were underway, which were viewed as critical,

were fast-tracked and others were prioritised. Among those fast-

tracked were the projects on Audit Quality Indicators and Audit

Firm Transparency Reports, both of which are expected to be

released shortly. The Auditing Profession Act Amendment Bill was

fast-tracked and is currently with the Minister for Finance, awaiting

submission to cabinet. It is expected that it will be open for comment

after the next sitting of Parliament. A review of the disciplinary rules

and process is also underway.

All initiatives were collated into one strategic plan, which was

adopted by the IRBA Board in May and we can now also proceed

with the new initiatives we identified.

We recognise that now is not the time to try to restore the status

quo but to adapt and transform to address the questions and

challenges the new landscape is presenting. Part of this is listening

to the market not only about what is expected from auditors but

also from the audit product. Closing the expectation gap will rely on

understanding what needs to change. The IRBA has for many years

employed a stakeholder approach to responding to the market. Our

readiness to recognise that we must also implement continuous

improvement is part of this philosophy.

We also recognise that complacency is the enemy of quality. If the

IRBA and the profession can root out complacency and replace it

with innovation rooted in the public interest, we will achieve mutually

beneficial solutions for firms and the users of financial statements.

It is time for auditors to reclaim their place as watchdogs and

guardians of good practice to ensure a better society for all.

At the root of this is audit quality. In May 2018, the IRBA released

its Public Inspections Report for 2017 which provides an analysis of

key inspection themes arising from firm and assurance engagement

(audit) inspections performed by the IRBA from 1 April 2016 to 31

March 2017. The nature and extent of the findings reported do not

significantly differ from what was reported in the prior two years.

At an audit engagement level, on the file inspections of 197 audits

conducted at 101 firms, significant findings were recorded on 124

files and 12 auditors were referred for investigation. This indicates

that 63% of audits from the high-risk files selected were deficient. In

some cases the themes identified were recurring, which highlights

a pressing need for audit firms to analyse, remediate and monitor

reported deficiencies more effectively.

The objective of the report is to promote improvement in audit

quality at a broader level and influence auditors to pursue consistent,

sustainable high-quality audits that adhere to the highest standards.

In response to this, a number of changes have been made to the

seventh cycle inspections process, with a new or increased focus

being included in the inspections approach on leadership, tone-

at-the-top, leadership involvement in remedial action processes,

independence and ethics, acceptance and continuance, and non-

compliance with laws and regulations.

At the core of restoring the reputation of the profession is the

auditor’s ability to instill confidence in investors and the public

again. Such confidence is enhanced when all the role players in

the financial reporting chain, including management, those charged

with governance and the investors themselves, assume the required

responsibility for creating the necessary trust in our markets.

Bernard Peter Agulhas

Chief Executive Officer

Issue 42 | April - June 2018