The message below was sent to SAICA Members on 02 July 2018
Johannesburg – 12 July 2018 - "Now is the time to stand up and be counted", says South African Institute of Chartered Accountants (SAICA) Acting CEO Fanisa Lamola in this call to action.
The Chartered Accountancy profession is arguably facing the toughest challenge of its 125-year existence in South Africa. Chartered Accountants [CAs(SA)] have been tarnished by accusations of state capture and corporate scandals. To have these all happening simultaneously is completely unprecedented and have created the proverbial perfect storm. It is a storm that threatens the value and reputation of the profession. Modern, financialised economies are based on trust in highly trained professionals like CAs(SA) whose skills and judgement determine everything from the credibility of corporate valuations to the integrity of state expenditure. Almost a third of our large listed companies are led by CAs(SA); they also dominate leadership positions at key state institutions. Recent corporate scandals have eroded credibility and trust in a profession whose very reputation is based on ethics and standards. So this is a matter of national interest.
What this crisis has in many ways also done, is served to highlight some of the deficiencies in the constitution, structure and governance of SAICA, a self-regulating professional organisation with more than 46 000 individual members around the world. The SAICA Board, which met last week after engaging members at the Annual General Meeting (AGM), is acutely aware of the urgent need to address a number of burning issues.
The SAICA Board initiated a thorough governance review of the organisation and profession. The composition and tenure of the Board, as well as SAICA disciplinary structures, will form part of that review. The review will be conducted by specialist advisors on corporate governance. We hope to provide initial recommendations by December 2018.
We are also relooking all our disciplinary processes and how we communicate these; how we engage in national debates on matters impacting the accounting and auditing professions; and also how we work with other industry bodies and statutory authorities to root out corruption, fraud and incompetence. This requires a multi-stakeholder approach that includes global and local accounting member bodies, as well as financial regulatory authorities such as the Finance Ministry, SA Reserve Bank and Independent Regulatory Board for Auditors (IRBA). A thriving, growing, modern economy that attracts investment and is a trusted member of global financial markets, needs to trust CAs(SA) - all of them.
CAs(SA), including those who are Registered Auditors, must behave ethically and professionally. This means taking a leadership position, being courageous in doing the right thing and not being bullied into submission - whether by the blandishments of wealth, or threats and intimidation. It is apparent that SAICA's recent communication of its disciplinary hearings has resulted in an active public campaign to discredit our processes and some of our executives. We must expect this as greater transparency exposes shortcomings of members and institutions alike.
It is important to understand the process that SAICA follows in disciplining errant members, including those who work at the Institute. In the coming months we expect to have dozens of public disciplinary hearings, so it is important to explain the process.
The first thing to note is that SAICA can only discipline its members, namely individual CAs(SA), and not accounting, auditing and consultancy firms. Investigating individual firms and Registered Auditors for their audit conduct falls under the jurisdiction of IRBA, so audit complaints are referred directly to IRBA.
Where we do have jurisdiction and where individual CAs(SA) transgress, irrespective of their profile, they will be held to account. SAICA unfortunately does not have powers of search, seizure or subpoena, so we also rely significantly on the investigative capacity and findings of external prosecutorial authorities which have these powers to form part of our hearings. All CAs(SA) are bound by the SAICA Code of Professional Conduct and, as such, are treated equally and are subject to the same rules. We will act without fear or favour, because members who fail to uphold the highest ethical and professional standards, compromise our public and private sector institutions and our economy as a whole.
Disciplinary hearings of SAICA members have always been public, they have just not been announced. All that has changed is that SAICA now publicises when these hearings will be held when it is in the public interest to do so. The Board is considering further changes to the SAICA constitution to allow the publication of the outcome of disciplinary hearings. This is in line with worldwide best practice. This profession is built on trust and the series of investigations now underway, while significantly uncomfortable for us, will lay the basis for greater public understanding and transparency by uncovering serious lapses by individual CAs(SA) and ensuring accountability where our code of conduct is breached.
The challenge for us is that investigations take time to be conducted fairly and thoroughly, particularly as we rely on other bodies to issue subpoenas and carry out investigations. Due to the complexity and volume of complaints (265 cases are currently in the disciplinary process pipeline), the SAICA Board has approved the establishment of a specialist compliance division to speed up the investigation and disciplinary process.
Also, given the public nature and the lack of clarity on the number of people implicated in the KPMG matter, the independent Ntsebeza Inquiry was set up to help expedite the process of determining whether there were members within KPMG that needed to be referred to SAICA's Professional Conduct Committee. We hope to hear back imminently from this inquiry so that SAICA can take these disciplinary matters forward.
We do anticipate that upcoming disciplinary hearings will elicit significant public scrutiny. Here we must be transparent, but also fair. While the hearings and charges will be public, we will refrain from debating the detailed merits of each person's case in the media because this might compromise the administration of justice in the disciplinary proceedings. Alleged misconduct by SAICA or its members which emerges, whether through our or other public processes like the pending Zondo judicial inquiry into state capture, will be investigated by SAICA and appropriate action will be taken.
Which brings us to allegations aimed at SAICA management and directors. When these arose, the Board immediately tasked its Audit Committee to commission a forensic report into the allegations. The findings of the report, conducted by PwC, highlighted a number of weaknesses in our internal controls and processes are being put in place to address these. Importantly, PwC made no adverse findings against SAICA's executive management.
The Board subsequently strongly confirmed that it has full confidence in the integrity and professionalism of the SAICA executive management team and will continue to support them in the execution of their duties.
Driving the reform of the profession, under the guidance of the Board and the corporate governance review, will require full-time leadership. Our current CEO, and former Auditor General, Terence Nombembe has been seconded to the Deputy Chief Justice Zondo's commission of inquiry into state capture to lead their forensic teams. The nation will benefit from his extraordinary experience. However, with his contract with SAICA expiring in February 2019, the SAICA Board has started a search for a permanent CEO.
In conclusion, SAICA is advancing on many fronts. We are taking a hard look at ourselves to ensure that we are able to act in the public interest and support our members and the sector for the next 125 years. Our efforts are focused on digitisation, compliance, ensuring ongoing value in the future of the CA(SA) profession and supporting the National Development Plan in partnership with other state and private sector players. This means doing all we can to restore trust in the profession and ensuring that our members, irrespective of what roles we happen to occupy, re-commit to putting the public interest first. These are our values, and this is our promise. We as SAICA, and our members, need to re-dedicate ourselves to the values of integrity, skill and professionalism that are the bedrock of this great profession. To do this, we need reform. It must be considered and deep. We have begun this through our own Courageous Conversations.