IRBA Newsletter Issue 54

Issue 54 | April-June 2021 8 LEGAL cont. In determining the appropriate sanction for the charges, the committee considered and accepted the following uncontested evidence of the IRBA, which sought to depict the seriousness of charges 1-6: a) Both the Legal Practitioners Fidelity Fund (LPFF) and the Legal Practice Council (LPC) have a statutory duty to warn the public against legal practitioners whom the public should not approach for legal services due to a lack of integrity. To this end, both the LPFF and the LPC rely largely on the strength of the audit reports by RAs. b) Inappropriate/incorrect audit reports are a threat to the sustainability of the LPFF, as inappropriate audit reports inherently heighten the risk in claims arising from theft and/or misappropriated funds. c) The main purpose of an engagement on a legal practitioner’s trust account is for the auditor to evaluate the compliance of a legal practitioner’s trust accounts with the Act and the Rules, which the respondent failed to do. d) The respondent’s conduct increased the risk to the public and that of audit failures, which conduct is unacceptable for an RA. e) The six charges are tantamount to interference with the statutory obligations of the three statutory bodies, the LPFF, the LPC and the IRBA, and constituted a bar to the regulators’ ability to discharge their functions in an efficient and effective manner, as envisaged in the applicable legislation. In relation to charges 7 and 8, the committee accepted the IRBA’s evidence that the respondent was unwilling to show remorse and his post facto modification of working papers compromised the integrity of the audit process and reports and was amounted to misleading the IRBA. The committee held that charges 1-8 were interrelated, as they all relate to the same set of facts, and thus elected to view these charges cumulatively for the purpose of sanctioning. The committee was satisfied that the evidence presented showed the seriousness of the charges and that the respondent lacked an appreciation of such severity and thus poses a risk to the profession. The committee accepted that the respondent’s conduct was not a once-off mistake but rather repetitive in nature, noting that the same defects were noted in the audit of six clients. In relation to charge 9, the committee held that dishonesty in the auditing profession is something that is frowned upon, especially because it entails a deliberate misrepresentation of facts as if they are true. Further, this particular case falls on all fours and, having found the respondent to have been dishonest, it follows that his name should be removed from the register. The committee further held that the country cannot afford unethical auditors, as that damages the profession and the country as an investment destination. There is therefore a need for the restoration of a tradition of excellence in the South African auditing profession and for practitioners in their audit work to provide assurance that the users of audited financial statements can rely on them with confidence. In view of the above, the committee imposed the following sanction: a) Cancellation of the respondent’s registration with the IRBA and removal of his name from the register of auditors with immediate effect; b) Payment of R856 653,32 towards the costs incurred by the IRBA, which represents 80% of the costs; and c) Publication in IRBA News and the media of the respondent’s full names, the name of his firm, the charges levelled against him, as well as the decision of the committee and the sanction imposed. The IRBA received communication from attorneys to the effect that they hold instructions from the respondent to review the decision of the committee in respect of this matter. As at the date of publication, though, the application had not yet been filed and/or served on the IRBA. IRBA vs Pierre Le Grange The IRBA, following an investigation, preferred four charges of improper conduct against Mr Pierre Le Grange (the respondent) who was, at all relevant times, a sole proprietor of Pierre Le Grange and Co. The charges against the respondent emanated from a complaint received from the Law Society of the Northern Province, in relation to audit work performed in respect of an attorney trust account. The nature of the charges against the respondent can be summarised as follows: • Charge 1 related to the respondent’s failure to retain and/or produce audit files. • Charges 2 and 3 dealt with the respondent’s failure to modify the audit opinions issued in respect of attorneys trust accounts for the 2014 and 2015 financial years, notwithstanding trust account shortages, payment transfers from a trust account to a business account not supported by valid trust expenditure and the issuing of uncrossed trust cheques against the Law Society Rules. These charges also incorporated the respondent’s failure to report reportable irregularities to the IRBA at the sight of the client’s non-compliance with the Attorneys Act and the Law Society Rules. • Charge 4 related to the respondent’s failure to declare assurance work done on an attorneys trust account for the years 2014 and 2015. The IRBA contended that the respondent’s conduct, as outlined above, contravened Rules 2.1, 2.4, 2.5, 2.6, 2.7 and 2.17 of the Rules Regarding Improper Conduct, while the respondent denied guilt in respect of all charges. The matter proceeded to a merits hearing, wherein the Disciplinary Committee was called to determine the respondent’s guilt in respect of the charges preferred. The merits hearing was convened on 16 November 2020. At the hearing, the respondent changed his plea and pleaded guilty to all four charges. The effect was that the respondent, by operation of law, was then regarded as guilty of all charges, for all intents and purposes.