FREQUENTLY ASKED QUESTIONS (FAQs) ON THE ETHICAL ISSUES SURROUNDING THE CHARTERED ACCOUNTANCY PROFESSION
The Chartered Accountancy profession in South Africa is currently faced with significant criticism following the purported misdemeanours of Chartered Accountants [CAs(SA)] in unethical business activity.SAICA has prepared a FAQ to inform and update members and associates about the current state of what SAICA is doing to address these events in order to restore the trust in the profession.
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- What are the significant principles and processes SAICA applies in addressing the issue of purported unethical business activity or impropriety? and; Generally what sanctions/penalties can SAICA impose on members found guilty of wrongdoing?
- SAICA institutes disciplinary proceedings against members on receipt of a formal complaint and becomes aware of alleged member misconduct. In cases where members are alleged to be involved in illegal activities, SAICA liaises with the relevant authorities mandated to carry out public prosecutorial processes such as the Independent Regulatory Board for Auditors (IRBA), the Special Investigating Unit (SIU), etc. upon finalisation of these investigations, SAICA will be in a position to complete its own disciplinary processes against any individuals that have not complied with SAICA’s By-laws and Code of Professional Conduct.
- In order to ensure that due process is adhered to during the course of SAICA’s disciplinary processes, SAICA does not comment on any disciplinary matters (whether foreseen, pending or ongoing) which have not been finalised. SAICA will provide a full statement of the facts surrounding the outcome once the disciplinary process is complete and the Disciplinary Panel has instructed the secretariat to publish such information.
- Depending on the nature of the breach of the provisions of the Code of Professional Conduct by any member and upon finding such a member guilty of improper conduct, SAICA’s Disciplinary Committees may order that the member concerned be cautioned; reprimanded; fined to a maximum amount of R500 000 (five hundred thousand rand) per charge; suspended from membership for a period not exceeding five years, excluded from membership or disqualified from applying for membership permanently or for such period as the Disciplinary Committee may determine, or subject to such conditions as the committee may determine.
- Are there any complaints that SAICA has received in relation to KPMG and its handling of the Gupta accounts? If yes, how many?
In order to ensure that due process is adhered to during the course of SAICA’s disciplinary processes, SAICA does not comment on any disciplinary matters (whether foreseen, pending or ongoing) which have not been finalised. SAICA will provide a full statement of the facts surrounding the outcome once the disciplinary process is complete and an intention to the effect on issues by the Disciplinary Committee.
- Apart from relying on investigations being conducted by other bodies like IRBA, will SAICA be conducting its own investigations as well? If a CA(SA) is implicated in dealings that amount to jeopardising the finances of a company, or alternatively are illegal or unlawful (e.g. assisting in laundering money), what steps can SAICA take against them?
Investigations are also be carried out where SAICA becomes aware of alleged member misconduct. However, as SAICA does not have the same powers as those of public prosecutorial bodies, the Institute defers to these authorities prior to finalising its disciplinary processes against its members in cases where members are alleged to be involved in illegal activities. SAICA liaises with the relevant authorities mandated to carry out public prosecutorial processes. Upon the finalisation of such public prosecutorial processes, SAICA will be in a position to complete its disciplinary processes.
- Most of those involved in the KPMG saga would have been CAs(SA), but in addition a number of high profile individuals involved in the #GuptaLeaks saga are CAs(SA) too (e.g. Anoj Singh; Mark Pamensky). As such, is SAICA concerned about the reputational damage of the #GuptaLeaks saga to the CAs(SA) in general? And if so, are any steps planned to restore public trust in the CA(SA) brand?
SAICA is concerned with the reputational damage caused to the CA(SA) designation by a minority of its members. Our first priority is to obtain the facts relating to impropriety and take appropriate.Communication with our members to remain committed to responsible leadership and ethical behaviour has been a key activity in the initial phase of these events given that our CAs(SA) are SAICA’s most valued brand ambassadors.
- Is SAICA launching its own investigation, independently of IRBA, into the conduct of KPMG relating to the Gupta-family accounts and the SARS report?
SAICA supports an independent inquiry into the conduct of its members employed by KPMG, but will not be launching its own investigation.
- Is it working with IRBA on this investigation?
SAICA is not conducting the investigation, but supporting/facilitating it. Nevertheless, in terms of the SAICA constituency By-Laws, there is a point of deferral of matters to IRBA, where a SAICA member who is a registered auditor is involved as such. There will be a handover process between SAICA and IRBA once investigation is complete.
Conduct of SAICA members employed by KPMG.
- How long is it envisioned to run for and who will be conducting the inquiry?
- How will SAICA ensure that the process is independent?
The entire panel of the enquiry and the secretariat supporting the panel is independent. Please refer to the media release on this matter here.
- What has transpired from the discussions with KPMG and are they amenable to the cooperating with the inquiry?
We have noted KPMG’s support for the inquiry in the various statements issued by KPMG CEO.
- Have terms of reference been set for this as yet?
Terms of reference have been set. It can be viewed here.
- CAs(SA) working for KPMG are SAICA registered. How does SAICA handle this – and any similar case – where there are reports/proof/acknowledgement that work was not done to standard? and: Information obtained from Linkway wedding invoice reflects expenses only and no profit or commission as is required under transfer pricing laws. On transfer pricing, KPMG, as auditors, should have ensured that all transactions between Gupta entities was at arm’s length. It is not clear whether KPMG had done this and if not, whether the irregularity was ever reported to SAICA or the FIC. Was SAICA ever informed of any irregularities by KPMG? If so is SAICA investigating KPMG?
SAICA has noted recent media reports regarding KPMG’s alleged involvement with Linkway Trading (Pty) Ltd.SAICA members are bound by a Code of Professional Conduct, which include the fundamental principles of integrity, objectivity, competence and due care, professional behaviour and confidentiality. Auditors, in particular, also have to comply with the Code of Professional Conduct for Registered Auditors and are required to perform their audits in accordance with International Standards on Auditing.The independent Regulatory Board for Auditors (IRBA) is the audit regulator in South Africa and has clearly defined processes for the monitoring and, if applicable, investigation and discipline of auditors. These processes must be allowed to take their course as and when required.As the IRBA is investigating the matter, SAICA is awaiting the outcome for the IRBA investigation. Once the outcome of the IRBA investigation is known, SAICA’s own disciplinary process will activate to sanction any CA(SA) found to have acted unprofessionally.
- What would it take for an individual CA(SA) to be stripped of their designation?
Each matter of improper conduct is judged on its own merits and having regards to the aggravating and mitigating circumstances involved.Where the Professional Conduct Committee believes that the alleged improper conduct will require the imposition of a sanction of exclusion from membership of SAICA, the matter will be referred to the Disciplinary Committee for hearing and Findings.The SAICA By-laws also make provision for the Board (through the Disciplinary Committee) to cancel the membership of any member who has been removed from an office of trust on account of proven misconduct or convicted of theft, fraud, forgery; uttering a forged document or perjury and has been sentenced in respect thereof to imprisonment without a fine, or to a fine amount to be determined by the Board.
- Are Anoj Singh and Gary Pita registered with SAICA?
Mr Anoj Singh and Mr Garry Pita are members of SAICA.
- Has SAICA received any complaints against them (Anoj Singh and Gary Pita) and what actions is it taking?
- Can SAICA confirm at this stage if it has launched any probe into the conduct of Anoj Singh?
- What action has, or will be taken against Mr. Mark Pamensky?
In order to ensure that due process is adhered to during the course of SAICA’s disciplinary processes, SAICA does not comment on any disciplinary matters (whether foreseen, pending or ongoing) which have not been finalised. SAICA will provide a full statement of the facts surrounding the outcome once the disciplinary process is complete.
- Are all chartered accountants required to be registered with SAICA, and if so, does a lapse of such a membership mean an individual can no longer operate as a CA(SA)?
In terms of the Chartered Accountants Designation (Private) Act, 67 of 1993 only members of SAICA are entitled to use the designation of Chartered Accountant, CA(SA). In the event that a person’s membership with SAICA lapses for whatever reason, that person will no longer be entitled to use the Chartered Accountant designation.
- Can SAICA confirm that Matsobane Matlwa is a CA(SA) and he is registered with SAICA?
Mr Matsobane Matlwa is a member of SAICA and holds the designation Chartered Accountant, CA(SA)
- What has SAICA done to address reported unethical business activity?
In 2016, 507 complaints were opened at SAICA. Of these, 330 involved trainee accountants accused of improper conduct in relation to examinations. (185 cases have been finalised, leading to 16 individuals being disqualified from applying for membership for periods between 3-12 months. 145 cases are ongoing.)A further 39 trainees in non-exam cases were brought to the attention of the Professional Conduct Committee (PCC), leaving 138 complaints that were brought against members. Overall, as at December 2016, SAICA attended to 203 of the complaints opened in 2016: 130 cases were resolved through the PCC, a further 19 at the Disciplinary Committee, 20 complaints were resolved outside of the committees, ten were complaints against persons misrepresenting themselves as SAICA members and 24 complaints involved persons holding both membership to SAICA and registration with the Independent Regulatory Board for Auditors (IRBA) and were referred to (IRBA) to investigate as part of the agreed process between the two organisations. 10 matters related to complaints of persons misrepresenting themselves as Chartered Accountants.
How has SAICA addressed these issues in the media?
IMPACT ON TRAINEE CAs(SA)
- How do these improprieties affect prospective CAs(SA) who are currently completing training contracts?
The alleged improprieties have absolutely no impact (….. professional) whatsoever on any trainees who are currently completing or who have in the past completed their training contracts at KPMG.
- How will employees of KPMG in South Africa will be impacted by these developments? Are their careers in danger as Chartered Accountants and Auditors? What should trainees and employees at KPMG do?
The process for qualifying as a chartered accountant is rigorous. Along this road, prospective chartered accountants are required to develop and demonstrate the competencies required of a chartered accountant. Part of SAICA’s role in relation to the training programme is to put measures in place to ensure that, irrespective of the specific organisation where a trainee gains experience, the quality and standard is the experience meets SAICA’s minimum requirements. At point of qualification, all newly qualified Chartered Accountants (SA) have demonstrated that they have achieved the competencies prescribed by SAICA.
KPMG is currently an accredited training office and there is no evidence to suggest at this stage that this status will change. Change to an accreditation status would only take place after the relevant process has been followed. Until this time, KPMG trainees will be treated exactly the same as all other trainees.The question of whether or not to remain with KPMG as a trainee accountant or employee rests with the individual.Should a trainee decide to cancel their training contract with KPMG and enter into a new training contract with another training office, their new contract will be subject to the cancellation penalty. Once a person enters into a new training contract, they may appeal the cancellation penalty to SAICA, and the relevant SAICA Committee will consider all the factors before deciding whether or not to waive the cancellation penalty. SAICA cannot guarantee in advance that the penalty will not applied.
- SAICA has indicated that recent changes to its Code of Professional Conduct pertaining to NOCLAR will assist to stimulate greater accountability among organisations, help to protect stakeholders and strengthen the reputation of the profession. What does this refer to?
In line with the changes to the International Ethics Standards Board for Accountants (IESBA) Code of Ethics for Professional Accountants (IESBA Code), the SAICA Code of Professional Conduct (SAICA Code) has been updated to include new ethics requirements and guidance relating to responding to non-compliance with laws and regulations (NOCLAR). The new NOCLAR provisions are effective as from 15 July 2017 and apply to all SAICA members and associates, whether in public practice providing professional services to clients, or whether in business carrying out professional activities for an employing organisation. The NOCLAR provisions establish a comprehensive response framework that guides members and associates in terms of the factors to consider and the steps to be taken when they become aware of NOCLAR or suspected NOCLAR. SAICA believes that these changes are a significant development in positioning the chartered accountancy profession to play a positive role in the fight against non-compliance and the adverse activities that often stem from it, such as financial fraud, corruption, money laundering, etc. This is expected to drive positive behaviour by SAICA members and associates, which in turn will impact on the behaviour of their clients and employing organisations, as applicable.
- What is NOCLAR?
NOCLAR stands for “Non-compliance with laws and regulations”. In the context of the SAICA Code of Professional Conduct, NOCLAR comprises acts of omission or commission, intentional or unintentional, committed by a client or by the CA(SA)’s employing organisation, or by those charged with governance, by management or by other individuals working for or under the direction of a client or the employing organisation which are contrary to the prevailing laws and regulations.
- Who do the NOCLAR provisions apply to?
The NOCLAR provisions have been incorporated in, and form an integral part of the SAICA Code of Professional Conduct (SAICA Code). The SAICA Code is applicable to all SAICA members and associates, as well as trainee accountants under registered training contracts. Furthermore, CAs(SA) who are registered as Registered Auditors (RAs) with the Independent Regulatory Board for Auditors (IRBA) are also required to comply with the IRBA Code of Professional Conduct for Registered Auditors (IRBA Code).It is important to note that the NOCLAR provisions apply to all members and associates, irrespective of role or function. Therefore, it applies to members and associates in public practice providing professional services to clients and those in business performing professional activities for an employing organisation.
- What are the objectives of NOCLAR?
In line with the opening statement in the SAICA Code, namely “A distinguishing mark of the accountancy profession is its acceptance of the responsibility to act in the public interest”, these provisions give recognition that in the appropriate circumstances further action may be required in the public interest in responding to NOCLAR. The requirements clarify that ‘turning a blind eye’ to potential NOCLAR is not an appropriate response from SAICA members and associates, while placing renewed emphasis on the roles of management and those charged with governance (TCWG) of organisations who have the primary responsibility to ensure that business is conducted in compliance with relevant laws and regulations.The objectives of the CA(SA) (or SAICA associate) are to comply with the fundamental principles of integrity and professional behaviour by alerting management and, where applicable, TCWG about the matter to seek to enable them to take appropriate action to rectify, remediate or mitigate the consequences of the identified or suspected non-compliance, or deter the commission of the non-compliance where it has not yet occurred, and to take such further action as appropriate in the public interest.Further action could, among other actions, include the reporting of a matter to an appropriate authority under the appropriate circumstances, despite the absence of a legal obligation to do so, and without being limited by the ethical duty of confidentiality. Disclosing a matter to an appropriate authority would be at the end stage of the process in relation to serious identified or suspected NOCLAR, after consideration of a range of factors, including the appropriateness of the response of management and, where applicable, TCWG.However, when applying the NOCLAR response framework, the CA(SA) (or SAICA associate) must still comply with the law and should not take any action that is contrary to the law. This would include considering whether specific legislation in the circumstances already imposes a reporting obligation, whether there are any laws or regulations that may preclude the reporting of a matter and whether there will be protection from criminal, civil or professional liability for communicating or reporting a matter.
- Where can a member or associate obtain more information about NOCLAR?
Visit the SAICA NOCLAR webpage. Apart from the SAICA Code and related publications, members and associates are also able to access additional resources relating to NOCLAR.
- What is the current status of SAICAs activities?
- Ntsebeza Inquiry Frequently Asked Questions
- Media coverage statistics To be updated as information becomes available
- Outcomes from investigations In order to ensure that due process is adhered to during the course of SAICA’s disciplinary processes, SAICA does not comment on any disciplinary matters (whether foreseen, pending or ongoing) which have not been finalised: