IRBA NEWSLETTER ISSUE 47

Issue 47 | July - September 2019 12 LEGAL DISCIPLINARY COMMITTEE The Disciplinary Committee considered two matters during the period under review. R Kruger This matter relates to the conduct of Ms René Kruger (the practitioner) of the erstwhile audit firm René Kruger Ouditeure. Following an investigation by the IRBA, she was charged with seven counts of improper conduct. Three of the charges related to misrepresentations made by the practitioner to the IRBA during the annual inspection process, while the remaining four charges emanated from professional work done by the practitioner in auditing the annual financial statements of Bonamanzi Vakansieoord (Pty) Ltd and its related companies from 2003 to 2011, as well as those of a company called Zachen Publishers (Pty) Ltd. The merits hearing commenced in 2017 and was finalised in April 2019, with the practitioner being found guilty of six of the seven charges levelled against her. In respect of the first and second charges , the practitioner was found guilty of contravening Rules 2.1.1, 2.1.20 and 2.1.21 of the old Disciplinary Rules. Both charges related to the practitioner’s failure to fully disclose her list of assurance clients in her declaration to the IRBA during the annual inspection process in 2009 and 2010 respectively. In relation to the third charge , the practitioner was similarly found guilty of contravening Rules 2.1.1, 2.1.20, 2.1.21 of the old Disciplinary Rules and Rules 2.1, 2.6, 2.17 of the Rules regarding Improper Conduct. The essence of the third charge was that the practitioner had failed to fully disclose her list of assurance clients in her declaration to the IRBA during the 2011 annual inspection process. In addition, she had mispresented her involvement in the audit of the financial statements of Bonamanzi (Pty) Ltd, for the year ended 31 March 2011, and some of its related entities, for the year ended 28 February 2011. The practitioner had contended that in 2011 she had ceased to be the auditor of Bonamanzi (Pty) Ltd and its related entities and had only performed accounting services for these entities. The practitioner alluded that the signatures on the auditor’s reports accompanying the 2011 audited financial statements for the aforementioned entities were not hers but a forgery. Ultimately, after analysing the evidence placed before the committee, including that of two expert document examiners advanced by the IRBA and the practitioner, the committee rejected the practitioner’s version on this charge. It found that the 2011 auditor’s report on the audited financial statements of Bonamanzi (Pty) Ltd and its related entities did not contain a forgery in respect of the signature and were, in fact, audited by the practitioner. Considering the seriousness of the findings made by the committee relative to the practitioner’s signature on the disputed audited financial statements, the committee directed the IRBA to refer its findings to the National Prosecuting Authority for further investigation and, if warranted, criminal prosecution. The crux of the fourth charge was that the practitioner had failed to report a reportable irregularity in circumstances where only one of the two directors of Bonamanzi (Pty) Ltd had approved and signed the audited annual financial statements for the year ended 31 March 2010. This act resulted in a contravention of Section 298 of the repealed Companies Act 61 of 1973, which required the annual financial statements of a company, other than the auditor’s report, to be approved by the directors and signed on its behalf by two of its directors. The statutory contravention represented a material breach of a fiduciary duty owed by the directors to the company; and the practitioner was accordingly found guilty of a failure to report a reportable irregularity and, in particular, of contravening Rules 2.1.1, 2.1.5 and 2.1.20 of the old Disciplinary Rules. The fifth and sixth charges related to failures in respect of multiple aspects of the audit of the annual financial statements of Bonamanzi (Pty) Ltd for the years ended 31 March 2011 and 2010 respectively; and this gave rise to various breaches of different International Standards on Auditing. The practitioner was found guilty of contravening Rules 2.5, 2.6, 2.7 and 2.17 of the Rules regarding Improper Conduct and Rules 2.1.2, 2.1.5, 2.1.20 and 2.1.21 of the old Disciplinary Rules. The practitioner was found not guilty of the seventh charge in respect of Zachen (Pty) Ltd. The committee reconvened in June 2019 for the purpose of handing down a sanction in respect of the above charges. In sanctioning the practitioner, the committee considered the fact that the six charges in respect of which the practitioner was found guilty were serious in nature, involved conduct that misled not only the IRBA but also other minority shareholders in Bonamanzi (Pty) Ltd. As such, the committee found that the interests of the auditing profession and those of the minority shareholders were adversely prejudiced by the practitioner’s conduct. The committee took into account that the practitioner did not live up to the professional standard expected of a registered auditor in the manner she sought to fulfil her audit obligations towards Bonamanzi (Pty) Ltd and its related entities. Also, the committee took into account the personal background and financial circumstances of the practitioner, as well as the adverse impact that the disciplinary proceedings had on her personally and on her professional practice. It took the view that, given the nature of the findings against the practitioner, cancellation of the practitioner’s registration with the IRBA would be a befitting sanction. However, it noted that the practitioner was no longer registered with the IRBA, as she had voluntarily resigned in 2014; thus, that sanction was no longer available to the committee. Consequently, the committee concluded that the imposition of the maximum fines in respect of most of the charges was both appropriate and justifiable. Accordingly, the practitioner was fined R100 000 for each of the first, second, third, fifth and sixth charges and R50 000 in respect of the fourth charge. In addition, the practitioner was ordered to pay a contribution of R502 602.50 towards the IRBA’s costs.