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  • Audit sector must support education for us to compete globally for investment

Audit sector must support education for us to compete globally for investment

06 November 2019

The collapse of South Africa’s business fortunes and lack of investment have coincided with a slide in the standing of our audit standards. If we are to reverse these trends, the audit profession must get more involved in training better auditors, writes Michiel Jonker, Director, IT Advisory at BDO South Africa

The most recent Global Competitiveness report by the World Economic Forum showed South Africa trundling in at a disappointing 60th overall, out of 141 countries. Only marginally better was our auditing and accounting standards ranking, where we have dropped to 49th.

It was only a few years back that South Africa was ranked number one in the world in this category. Our fall from grace coincides with our appearance at 73 out of 180 countries in the Corruption Perceptions Index.

It is true that such rankings are largely based on the perceptions of surveyed business leaders. But when it comes to investment decisions, perception is reality!

Quite simply, a country’s auditing and accounting reputation reflects how well we look after investors’ money. If we are so poorly regarded by the business sector, you can bet that international investors will think twice before choosing South Africa as an investment opportunity.

Clearly, our poor ranking reflects several recent South African audit failures and corporate collapses – one thinks of African Bank and Steinhoff – as well as the bottomless money pit that Eskom has become.

When it comes to failures of this nature, there are usually two possible causes – integrity and/or capability. Where one or both of these is absent in the assurance industry, there can be no assurances of accounting best practice.

For the auditing profession, our 49th ranking is especially concerning. We are in the business of providing assurance, and where this is absent, investment cannot be expected to come flowing in.

For our profession to regain our standing and to make us a more respected, competitive investment destination, we have to regain trust. This speaks to repairing those two components of what we do – integrity and capability.

Integrity is a fundamental character trait. It is debatable whether it can be taught. Ethics can, though. Ethics can also be protected through mechanisms – such as mandatory audit firm rotation.

Capability, on the other hand is definitely a taught competence. Here, our industry has to take a more active role in ensuring that the skills of working auditors, and new entrants to the profession, reflect global best practice.

Of course, accountants and auditors are products of our school and university system. If our business sector believes the quality of auditors and audit trainees has dropped, our education system may be failing us.

But the audit profession should not be a passive receiver of talent emerging from our education institutions. We need to proactively engage our universities about the precise skills we require.

Many current trainees, for instance, are almost IT illiterate – this at a time when the ability to analyse data and information technology systems on audits has never been more important.

In my experience, there is certainly scope to expand this skill set, and our educational institutions should investigate that, if their graduates are to have relevant skills. In this day and age, an understanding of IT systems may be equally important to a familiarity with debits and credits.

In terms of integrity, this may be the province of parents and how they raise their children. But if we, as an industry, begin engaging children early enough – in primary school or during early childhood development – we may also be able to build a healthy moral compass among our young people.

The auditing sector will have to become more actively involved in education at all levels, if we are to halt the decline in the two fundamental requirements for our profession. Capabilities must be better aligned to practice, and we must develop greater integrity.

This won’t necessarily mean monetary investment, but greater involvement and guidance in terms of curriculums and course design – starting at Grade 1.

There are numerous factors that impact our country’s ability to attract investment - over and above auditing and accounting standards. For example, policy uncertainty and productivity are foremost among these. However, to protect our industry and the economy on which it depends, we have to do what lies within our reach. As a sector, we must become more closely involved in the education and training of our people. We need better auditors, so we must help to create them, from the very beginning of their education journey.

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