PUBLIC ACCOUNTANTS’ AND AUDIT PROFESSION BILL PRESENTATION BY THE PUBLIC ACCOUNTANTS’ AND AUDITORS’ BOARD OCTOBER 2005

Audit Profession Bill Presentation by the PAAB Introduction R Benjamin-Swales: Chairperson of the PAAB K Hoosain : CEO Prof J Rowlands : Chairperson of Education Committee B Agulhas: Director - Auditing Standards C Garbutt: Manager - Legal

Audit Profession Bill Presentation by the PAAB Opening remarks Education and training Disciplinary process Reportable irregularities Erosion of the attest (audit) function Some other issues

Audit Profession Bill Presentation by the PAAB Opening remarks Thank you for the opportunity to give input to the Committee PAAB supports the Bill and the move to independent regulation of the auditing profession Comments are to enhance the practical implementation and improve the wording to better achieve the intention of the various sections that we have commented on

Audit Profession Bill Presentation by the PAAB Education and Training Partial accreditation should be allowed by the RBA – Request S7(1)(a) to be amended The RBA is charged with the responsibility of protecting the public through the regulation of audit services, therefore it should determine whether or not a person meets the competence requirements – Request that S37(2)(a) be amended RBA should be allowed to recognise education and training programmes of an educational institution, in part or in full – Request introduction of a new S 7(2)(b) Other recommendations include the appropriate use of the words “qualification”; and “may” versus “must” Add definitions of “accreditation” and “recognition” Included a proposed redraft of the relevant sections

Audit Profession Bill Presentation by the PAAB Education and Training Reasons for partial accreditation and recognition in whole or in part Currently there is only one accredited body - SAICA “All or nothing” process will be a barrier to new entrants Need flexibility to improve access and promote transformation Outright refusal of accreditation is punitive, not constructive Parliament and Government have oversight over RBA – If national objectives are not being achieved, they can call the RBA to account or intervene

Audit Profession Bill Presentation by the PAAB Disciplinary Process Accountability of firms in disciplinary process – definitions of a registered auditor and firm No specific provision for complaint to be discharged No provision to settle a complaint by consent order Lack of provisions against self incrimination Competent sanctions – suspension provisions to be revised, provision for disqualification from registration

Audit Profession Bill Presentation by the PAAB Reportable Irregularities Definitions – “management board”, “nominated registered auditor”, “reportable irregularity” – lack of consistency and clarity Reporting without delay – no opportunity to discuss with client Materiality in relation to third parties Inappropriate sanction – fine or imprisonment or both “any unlawful act” – many laws that may not impact on the financial statements “otherwise dishonest” – need clarity on what this means

Audit Profession Bill Presentation by the PAAB Erosion of Audit Function Registered auditors are subject to stringent regulation, which is needed to protect the public interest and the integrity of the profession. Necessary to protect the identity of the designation and all variations thereof that are commonly used and understood locally and internationally. Those wanting to be known as such and do the work as auditors must meet the requirements and register with RBA. Need to repeal or amend sections of other legislation that allow persons not registered with RBA to do audits

Audit Profession Bill Presentation by the PAAB Some Other Issues Improvements to some definitions Add S2 (f) co-operative relationships with other international regulators Add under S4 … to conduct inspection required… Add under S9(b) … and remuneration payable… S11 & S28 clarify or avoid the word “executive” in it’s context S12(1) Consider 3 year term as opposed to 2 years Add under S20 - (2)(f) an Inspection Committee Add under S43 - submit an annual return of information Amend S47(1)(b) from annually to once every three years S50(3)(a)(ii) Penalties to be clarified, may not be enough, RBA should annually determine