The homicide of Gauteng Department of Health senior official Babita Deokaran on 21 August 2021 outdoors her home in Johannesburg, after she uncovered greater than R100 million in dodgy funds to Tembisa Hospital, was maybe probably the most flagrant assault on a whistleblower lately, but it surely was not the one one.
In 2018, the late Auditor-General Kimi Makwetu pulled his audit workforce out of Emfuleni Municipality, south of Johannesburg, when one of many auditors was shot whereas sleeping in a guesthouse in Vanderbijlpark. The 32-year-old staffer had been investigating accounting irregularities within the municipality.
As Moneyweb reported, Mercy Phetla, chief monetary officer and appearing municipal supervisor at Mamusa Local Municipality in North West province, acquired demise threats after she uncovered corruption and irregular funds inside weeks of taking over her place in April 2021.
Read: Death threats towards municipal CFO who uncovered shady dealings
Speaking on the Leaderex conference on the Sandton Convention Centre this week, nationwide head of audit on the Auditor-General of SA (AGSA) Bongi Ngoma defined the difficulties in attracting high accounting expertise to the general public sector.
“We have to deal with issues such as the complexity of the work and the safety of our staff,” she stated. “We’ve had to put in mechanisms to deal with threats and intimidation, and implement extraction tactics for threatened staff.”
Among probably the most harmful provinces for a public auditor are KwaZulu-Natal and the Free State.
The thought of getting extraction groups to take away auditors from the trail of hazard is inconceivable to accountants of a earlier age. Yet right here we’re.
There are additionally stories of auditors having to be escorted by safety or police on extra harmful assignments. Whoever stated accounting was a boring profession?
Mechanisms additionally must be put in place to guard audit trainees going through coercion from colleagues to flout requirements of accounting ethics, added Ngoma.
“Training in ethics does not translate into safety,” stated Freeman Nomvalo, CEO of the SA Institute of Chartered Accountants (Saica). “If we count on change to occur in SA, we are able to’t count on these in authority to drive that change.
“Integrity demands that we [as auditors] disassociate ourselves from misinformation. There’s not many examples of that in practice.”
State seize was facilitated by folks inside public organisations, added former AG Terence Nombembe. “Related parties [were] an issue. This is how state capture succeeded. Do we have sufficient instruments to pick this up?”
There is an expectation about what auditors are required to perform. “Auditors are watchdogs, not bloodhounds. The market is looking for something else,” stated Nomvalo.
More chunk
The enhanced Public Audit Act launched the idea of fabric irregularity in monetary audits carried out by AGSA, with the ability to pressure accounting officers to get better the loss or stop it from occurring in future, underneath penalty of being issued personally with a certificates of debt.
Under the Audit Profession Amendment Act, auditors have search and seizure powers when enterprise an investigation.
These legal guidelines are a nod to the improved function that auditors are anticipated to carry out.
Their charges could also be paid by the consumer, however auditors act within the public curiosity (giving rise to arguments that shoppers ought to not be allowed to pick out their very own auditors, however ought to go away this to an impartial physique).
The Zondo Report into state seize made a number of suggestions to avert any additional cases of state seize, amongst them beefing up the AGSA in order that it might audit all state-owned enterprises (SOEs), together with the secretive intelligence companies.
Where that is not potential, personal companies must be appointed to conduct audits, offered they will reveal that they’ve the required expertise and understanding of public accountability.
The varied volumes of the Zondo Report are riven with cases of auditors bingeing on the general public purse, in dereliction of their function as public watchdogs.
Investigative and advocacy group Open Secrets detailed the malfeasance of the accounting profession in its report The Enablers, who had been ably abetted by legal professionals, bankers and personal sector operators.
Zondo drives dwelling the purpose that it was each personal and public sector enablers who delivered SA’s plumpest treasures into the arms of crooks.
The South African Revenue Service (Sars) would not have been rendered a hole husk had it not been for Bain & Company, discovered by Zondo to have colluded with former president Jacob Zuma and ex-Sars chief Tom Moyane within the seize of the tax company.
Bain was lately slapped with a three-year ban from doing authorities work within the UK over its function in state seize in SA. The agency admitted to creating errors, however denied “wilfully or knowingly” supporting state seize at Sars or anyplace else.
Read:
Bain, Zuma and Moyane colluded to grab and restructure Sars (Jan 2022)
State seize scorecard: R500bn looted, zero belongings recovered (July 2022)
Bain will get three-year ban from UK authorities over ‘grave misconduct’ in SA (Aug 2022)
Profile of disgrace
It is disconcerting that so many accountants had been key actors in state corruption. Zondo listed them.
The AG discovered that South African Airways (SAA) didn’t precisely worth belongings or accurately file irregular or wasteful expenditure. All this occurred underneath the tenure of former SAA chair Dudu Myeni, with interim CFO Phumeza Nhantsi failing to lift any suspicions over a corrupt plane refinancing deal being awarded to a comparatively unknown firm known as BNP.
Another chartered accountant, Yakhe Kwinana, served on the SAA board for a number of years as head of audit and threat.
Zondo discovered she had no clue about being a CA and, along with Myeni, hounded out subordinates who protested their illegal conduct.
This was the management imposed on SA’s nationwide flag service.
Zondo beneficial that Kwinana be investigated by Saica as as to whether she had “the requisite knowledge and appreciation of her obligations as a chartered accountant” and whether or not she must be allowed to proceed practising within the profession.
Zondo criticised for concentrating on the profession
Former professor of auditing at Wits University, Steven Firer, writing in Financial Mail, criticised Zondo’s concentrating on of the audit profession.
“The Zondo fee seems to have proceeded on the belief that an auditor is the guarantor of the accuracy of an organization’s monetary statements. Hence, any failure within the accounts of Eskom, Transnet or the Passenger Rail Agency of SA — whether or not by way of fraud or connivance — should lie with them.
“But Zondo didn’t acknowledge how important the method during which an auditor workout routines judgment actually is.
“And the commission just as profoundly failed to recognise that it is a company’s management – not the auditors – which is responsible for the accuracy of financial statements,” stated Firer.
Auditors have by no means been anticipated to uncover each occasion of fraud or administration’s failure to pay what’s owed, he added.
The problem of ‘materiality’ repeatedly surfaces as a characteristic of accounting judgment. Should auditors give attention to a lacking quantity of R5 000, or ought to they give attention to the larger quantities?
In flip, Zondo’s critic is criticised
In response to Firer, biscuit entrepreneur Simon Mantell factors out that SOEs are ruled by the International Standards on Auditing (ISA) and statutes such because the Public Finance Management Act (PFMA).
“They must also be considered against the many years of clean audit opinions given to SOEs when corruption, tender fraud and procurement malfeasance were actually so rife and so material that they could only have been missed by the incompetent, the blinkered or the dishonest,” wrote Mantell.
It was left to investigative journalists and others, to the disgrace of the audit profession, to reveal the state seize story.
“Conscientious audits would have resulted in audit opinions that were, at best, materially qualified, or, at worst, adverse,” writes Mantell.
“These would have made it impossible for lenders, under their own governance requirements, to supply credit lines to SOEs, and the state-capture game would have been over a long time ago.”
