…as PAAB potters about with mandatory rotation
Though the audit sector globally has faced several challenges related to compliance and independence in recent years, the local audit fraternity have been given a clean bill of health by the Public Accountants and Auditors Board.
The board says the audit fraternity in Namibia has been spared from similar and recent scandals reported in South Africa which are currently under investigation by the Independent Regulatory Board of Auditors (IRBA) in South Africa.
The mandate of the Board is to prescribe educational and training requirements for Public Accountants and Auditors; to register and regulate Registered Accountants and Auditors in the country.
Namibia currently has fourty (40) companies listed on the NSX, of which the majority of the financial statements are signed off by Audit partners in the Big Four audit firms.
PAAB’s Head of Secretariat Zaa Nashandi this week urged auditors to promote integrity in financial reporting and build a basis for providing confidence in the capital market and to investors.
“PAAB has taken note of the current developments taking place regionally and internationally and continues to follow them with keen interest. However, at this stage the PAAB has not taken any position on this matter. The PAAB’s mandate focuses on setting up an independent and effective regulator including addressing internal capacity issues,” Nashandi highlighted.
Regarding instances of reclaimed audits for some state-owned entities due to concerns about the ethical conduct and independence of some audit firms, Nashandi said PAAB has not received any complaint in that regard.
While the independence of auditors continue to receive more attention internationally, Nashandi said PAAB continues to adopt and maintain internationally recognised auditing standards which are clear on matters impacting the independence of auditors.
“The PAAB continues to inspect and review audits performed by auditors to ensure compliance with professional standards and independence requirements.
The KPMG saga
Recent controversies around audit firms around the world (especially the KPMG saga in South Africa), Nashandi said PAAB has kept a keen eye on the development within the audit profession in the region and internationally.
PAAB, Nashandi said, has entered into a MoU with the South African audit regulator (IRBA) for purposes of mutual cooperation, information sharing and support.
“To ensure that audit work conducted in Namibia complies with international audit standards, PAAB conducts periodic quality reviews/ inspections at auditing firms,” he said during an interview this week.
Namibians and Namibian companies have in the recent past expressed subtle concerns with KPMG in Namibia, especially in light of its South African counterparts having been found wanting on so many compliance issues.
The PAAB is cognisant of the effect on the KPMG brand internationally as a result of the SA controversies, said Nashandi.
“However, and whilst calling for calm and patience on the finalisation of the ongoing investigations in SA, the PAAB wishes to caution against conclusions that the Namibian KPMG chapter is implicated in any way,” he said.
Nashandi said PAAB has not to-date received any complaint against the conduct of the KPMG Namibia.
“It is important for the public to note that while KPMG is an international audit firm, each country office is an independent office, subject to the regulatory and statutory laws of the jurisdiction in which it practices (as with any other international firm). This means that one country office does not have any material influence or say in how another country office is operated,” he explained.
On mandatory rotation
While mandatory rotation will be enacted by 2023 in South Africa, Nashandi revealed that the PAAB has resolved to task one of its sub-committees to investigate the possibility of introducing mandatory audit firm rotation (MAFR) in Namibia.
MAFR (Mandatory Audit Firm Rotation) refers to the rotation of the audit firms.
A different audit firm is appointed after the prescribed rotation period and the new firm designates the new key engagement partners for the audit.
Nashandi said the decision to introduce mandatory rotation will have to be considered in the best interest of the public and investors.
Critics of mandatory rotation however cautioned that such rotations undermines quality, bleeds institutional knowledge and experience, limits auditor specialisation, strains resources, intensifies market concentration, and limits the ability of audit committees to determine the best firm for their needs.
The audit body is currently in the process of drafting a new Public Accountants and Auditors (PAA) Bill to repeal current PAAB Act which is Act 1951 of 1985(as amended) in 1994. The specific amendment in 1994 resulted in the appointment of 4 members by ICAN to the PAAB Board.
The new Bill, according to Nashandi, is expected to be the catalyst for required reform in the audit and accounting profession. A large focus for the Bill will see the audit fraternity no longer able to regulate itself. The current legislation is limited in its protection of the public in that if an audit firm is found guilty of transgressions, it pays a maximum penalty of N$ 4000. The Bill is expected to be completed by July 2018 for submission to the Minister of Finance.
ICAN stands firm
Meanwhile, accountants in Namibia are also not immune transgressions while executing their duties, the Institute for Chartered Accountants of Namibia says it continues to develop measures to protect the public.
ICAN CEO Koos Du Toit said no profession is immune to the challenges of unethical behavior, adding that each profession has to continually strive to ensure that its members are appropriately trained and updated on ethical practices.
In the past self-regulation was the way to go but it’s no longer the case. This gave birth to fears that ICAN is not doing enough to protect the public from the potential mismanagement by its members.
“The Institute has a very robust investigation and disciplinary process that is enshrined in the constitution of the Institute. The Institute has also acted against members found in default through lodging complaints against members with the Public Accountants and Auditors Board which is the Statutory Regulator of the audit profession,” Du Toit said.