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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 finances are fundamentally sound
2007-12-01

The finances of the University of the Free State (UFS) remain fundamentally sound and a higher than expected surplus of about R26 million was achieved in the 2007 budget.

This announcement was made last week during the last meeting of the UFS Council by Prof. Frederick Fourie, Rector and Vice-Chancellor.

“Up to now, we could finance the considerable investments in the infrastructure from discretionary funds, in spite of the fact that Council granted us permission during 2005/06 to take up a loan of R50 million for this purpose,” said Prof. Fourie.

The higher than expected surplus of about R26 million will be used among other things for the financing of infrastructure in order to further postpone the taking up of a loan.

In support of the drive to reposition the UFS nationally as a university that is successfully integrating excellence and diversity, R5 million will be made available from the surplus for this purpose.

The Council also approved the following allocations for 2008 for the key strategic pillars of a good practice budget for the university:

Information sources: R21,1 million
IT infrastructure: R3,5 million
Replacing expensive equipment: R7,05 million
Research: R18,1 million
Capital expenditure: R28,2 million
Maintenance capital assets: R18,2 million
Reserves: R6,3 million
Personal computers for the computer laboratory: R3,5 million

For the Qwaqwa Campus R2,5 million has been set aside for these issues.

In terms of strategic priorities R8 million was allocated for the academic clusters, R2 million for equitability, diversity and redress and R6 million for equity.

The projected income for 2008 will be R849 million, while the projected expenditure, excluding transfers, will be R694 million.

“Council further approved that discretionary strategic funds be largely voted to the further upgrading of the physical infrastructure, especially the Chemistry Building, the computer laboratory building, examination venues and the Joolkol,” said Prof. Fourie.

According to Prof. Fourie, funds have been reserved for the development of the academic clusters, as well as the continuation and acceleration of the transformation programme of the UFS.

“We have also managed to revise the conditions of employment of contract appointments and align it with the latest labour practices. The phasing in of the fringe benefits of this specific group of staff members will commence in 2008,” said Prof. Fourie.

Given the dependence of the income of the UFS on student numbers, a task team was formed last year to investigate the continued financial sustainability of the UFS. The core of this task team’s recommendations is:

to increase the third income stream by using the academic clusters as the main strategy; and to apply strategies such as the recruitment and extension of the postgraduate and foreign student corps, increase the income from donations and fundraising, etc.

Media Release
Issued by: Lacea Loader
Assistant Director: Media Liaison
Tel: 051 401 2584
Cell: 083 645 2454
E-mail: loaderl.stg@ufs.ac.za
30 November 2007
 

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