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‘SA auditing firms must revamp and emphasise accountability’ – Auditing experts at UFS-hosted panel discussion

01 August 2023 | Story Kekeletso Takang | Photo Supplied

Business Acumen Day 2023 — The UFS School of Accountancy hosted a panel discussion in the Centenary Complex with the topic ‘The audit profession’s response to the financial reporting scandals of the past decade: Has enough been done?’. Panellists included Prof Bernard Agulhas, Rob Rose, and Patricia Stock, and the session was facilitated by Prof Philippe Burger and Conrad de Wee.

Auditing firms in South Africa should go back to basics and emphasise accountability in revamped corporate structures to avoid repeats of the big auditing scandals of the past decade such as the Steinhoff, VBS, Tongaat Hulett, and Bosasa scandals. This was some of the opinion expressed during a panel discussion hosted by the University of the Free State (UFS) School of Accountancy and featuring auditing and accountancy experts.

The discussion tackled the topic ‘The audit profession’s response to the financial reporting scandals of the past decade: Has enough been done?’, and featured a panel of experts including Rob Rose, Financial Mail Editor and author of Steinheist; Prof Bernard Agulhas, former CEO of the Independent Regulatory Board for Auditors (IRBA) and current Adjunct Professor of Auditing at the UFS; and Patricia Stock, audit partner and CEO of MGI RAS and former South African Institute of Chartered Accountants (SAICA) board member.

The event took place on 19 July 2023 in the Centenary Complex on the UFS Bloemfontein Campus. It was facilitated by Prof Philippe Burger, Dean of the Faculty of Economic and Management Sciences, and Conrad de Wee, Chairman of the SAICA Central Region Council and Senior Manager at auditing firm Mazars.

Prof Agulhas said a lot has been done to prevent a repeat of the root causes of the financial reporting scandals of the past decade. “Everyone has responded. The profession, regulators, universities, labour markets, the public, and professional bodies.” Still, he said a lot more needs to be done. “We have to go back to basics. Look at the framework, ISA standards, skills, and competencies. Professionals must be adaptable and responsive. Firms must set the tone at the top and create a conducive environment. Establish a culture of accountability. We have to go back to behavioural competencies. Universities can also investigate the inclusion of forensic auditing as part of the curriculum.”

The panel felt that accountability is central to going back to basics. Rose said he believes businesses need to change their organisational cultures. “The likes of Glencore and Tiger Brands are making an immense effort to revamp. There are numerous ways companies can go about it, including setting the tone at the top and establishing accountability structures in-house. Also, not only having fraud-detection systems, but also implementing them.”

He also questioned why no one is holding bankers accountable for failing to uncover recent corporate scandals. “In the case of Tongaat Hulett, how did they miss all the issues through their risk assessment? At the end of the day, they should also be held accountable.”

Where it all went south

Prof Burger said the World Economic Forum had for seven years, until 2017, rated South Africa number one for the strength of auditing and reporting standards. “And then we started to see things go wrong, with the likes of state capture, Steinhoff, VBS, and others. In light of this, has enough been done to equip external auditors to deal with fraud in organisations, and to ensure that they act in the interest of the public?”

Prof Agulhas, speaking from his experience as a regulator, said, “Initially, South Africa was one of the few developing countries to adopt international standards. For seven years, we have received a good rating from the World Economic Forum. But if we can be honest, while our professional qualifications are among the best in the world, we were not that good at implementing these standards due to behavioural issues on the part of certain accountancy/ auditing professionals.”

Stock, sharing her perspective as an audit practitioner, commented: “We are noticing a growing trend among firms to improve on reporting, and audit committees are holding professionals accountable. While this is said, we should also acknowledge that there is a need to look at the whole ecosystem relating to financial reporting.”

Auditing in the era of artificial intelligence

When questioned about the impact of technological advances on auditors, Stock said she believes artificial intelligence and technology integration offer the auditing profession a wonderful opportunity. She stressed that technology will not replace human capital. “We need critical thinkers and value creators. Technology won’t replace that, especially where Environmental, Social, and Corporate Governance (ESG) is concerned.”

Interaction between universities and industry

Prof Burger posed the question, “When looking at the interaction between universities, industry, and trainees, would you say this model is still fit for purpose, and are these individuals ready?”

Stock responded, “The profession needs the diversity of minds. We need their enquiring minds. We need to hear the voices of our trainees. In fact, one of the scandals of the past decade was picked up by a trainee, but was unfortunately ignored by the more senior staff.”

Where we are now

The panel discussion was attended by stakeholders from the School of Accountancy, which included managers and directors of various auditing and accounting firms, representatives of professional bodies, members of management from large businesses, and university staff members. Interactive polls and the opportunity to submit questions allowed guests to participate in the discussion, which ended with a consensus that while much effort has been made to restore the credibility of the auditing profession, there is still further work to be done.

The panel discussion was made possible with the financial support of Standard Bank.

News Archive

UFS responds to concerns around high costs of higher education

2015-10-15

Dear Students

UFS responds to concerns around high costs of higher education

There is an understandable and shared concern among students in the country around the high costs of higher education. As you know, this also is a matter of deep concern on our campuses, which the University of the Free State (UFS) has made a priority in discussions with student leaders - and through new strategies to relieve the burden of costs on poor students and their families. In fact, in the past two weeks, the UFS leadership has again engaged students on the matter of fees in the future.

This is what we have done so far. We have maintained our position as one of the universities with the lowest tuition fees in the country. As you would have seen from recent newspaper reports on the cost of a degree at various institutions over the past five years, the UFS has had consistently low fees. This is not an accident; both the University Council and the executive leadership of the UFS is of one mind that we must offer a high quality education at minimum cost to all our students, despite the rising costs of operating a large multi-campus university with 30 000 students. Our commitment to you is to continue to keep those costs to students as low as possible, without compromising on the quality of education.

In addition, we took a decision earlier this year to become the first university to drop application fees for first-year students. We are proud of that achievement, since so many students fall at this first hurdle as they contemplate post-school education and training. We also waived registration fees for postgraduate students and now Research Master’s and PhD students can study tuition free under certain conditions. We raised more than R60 million from the private sector to enable talented students, who do not receive NSFAS funding, to complete their degree studies at the UFS. We set aside some of the university’s own funds to enable even more students to access finance for their studies. And we now have a special office set aside to counsel and assist students to apply for more than one scholarship to support their studies. The university does not follow a policy of maximizing exclusions. It has endeavoured and succeeded to turn around the majority of its potential deregistration cases. During 2015 we had 2 700 students at the risk of being de-registered, but our serious efforts resulted in only over 200 instances of exclusion we could not mitigate. As is the practice for the past few years, these students’ debt for 2015 has been reversed.

But, we do not only look for funds from outside to support our students. Last year we set up a Staff Fund to which ordinary members of the academic and support staff can contribute from their own, and sometimes very modest, salaries to enable Kovsie students to finish their degrees. We have volunteers who work on the No Student Hungry (NSH) Bursary Programme to raise funds for students who cannot afford a regular meal. We have an open line to rural and township schools to nominate poor students with good results for support by the Rector’s Fund, and some of those students are now in their final year of studies. And many of our staff support individual students in their homes and with their families, without being asked to do so. This is what we call the Human Project and it remains central to the way in which we deal with students.

We will of course continue to make representation to government, the private sector, and individuals to increase funding, especially for first-generation students, and for families where more than one student is at university. We will continue to take to the road to raise funds from companies and foundations to finance our students. We will expand on-campus opportunities for limited working hours for students who wish to earn some money to support their studies. As we have said often before, no student who passes all their courses or modules will be turned away simply because they do not have the funds to study.

The UFS discusses and agrees to fee increases with our students well in advance of the next academic year. None of these decisions are taken without the agreement of the student leadership and thus far these engagements, while tough, have always been done in good faith and with the students’ interests at heart.

It is important for you to know that, with the declining government subsidy, in real terms, and the expanding needs of our students, we will not be able to keep the university running without fees - even though this source of revenue comes mainly through scholarships and bursaries. We need to compensate staff, purchase new library books and renew journal subscriptions (which is very difficult given the low value of the Rand), upgrade computers and software, pay rates and taxes, purchase laboratory equipment, pay the water and electricity bills, expand internet services, upgrade campus security, and hire more academics to keep class sizes reasonably small. It is important for you to know that the university has managed to avoid increasing student fees as a result of much higher municipal rates. Our lecturers are not the highest paid in the country and financially we run a tight ship. We consistently achieve unqualified audits and we are known to be one of the universities that manage its NSFAS contributions with great efficiency. We do this because of our commitment to ensure that our students are able to enjoy a high quality of education on a stable campus where there is a deep respect for all campus citizens.

Despite all these efforts, the most important message we wish to communicate, is that the door remains open for continued discussion with student leaders as we continue to find ways of keeping university education open and accessible to all qualifying students. At the same time, the UFS leadership is involved in discussions with government about how to best manage the escalating cost of higher education for our dents.

Thank you for your support and understanding at this time and be assured, once again, of our commitment to students as a matter of priority to the university leadership.

Best regards

Prof Jonathan Jansen
Vice-Chancellor and Rector

University of the Free State
19 October 2015

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