SAICA WEIGHS IN ON IRBA’S REPORT

0
237

On 16 March 2017, the Independent Regulatory Board for Auditors (IRBA) released its Public Inspections Report, 2016, following shortly after the International Forum of Independent Audit Regulators’ (IFIAR) 2016 Survey of Inspection Findings on 3 March 2017.

Willie Botha, Senior Executive: Assurance and Practice at The South African Institute of Chartered Accountants (SAICA), said, “We welcome the IRBA Report as a further reference point to enhance audit quality. Consistently high audit quality is essential to the fulfilment of the objectives of an independent external audit. At the same time, audit quality is a complex subject that is difficult to describe in terms of a single universally accepted definition. Ultimately, it comprises a framework of integrated elements that create an environment which maximises the likelihood that quality audits are performed on a consistent basis.”

Renewed emphasis

Botha added that the reporting of inspection findings by audit regulators globally is in the interest of audit quality while enhancing transparency about the auditing profession. “It provides an opportunity for auditors to identify and understand any potential deficiencies that exist and to work towards solutions that will ultimately enhance consistency in the execution of high-quality audits.”

“Recent developments around recommended governance practices in the King IV Report on Corporate Governance in South Africa have placed renewed emphasis on the roles and responsibilities of governing bodies and audit committees, including the exercise of oversight over the external audit,” he continued. “Although the primary responsibility for performing quality audits rests with auditors, other participants in the financial reporting supply chain also have important roles to play.”

Remedial process

The 2016 IRBA Report covers 20 firm-level inspections and 237 engagement-level inspections performed during the period under review. The IRBA Report shows that for firm-level inspections (that focus on firms’ systems of quality control) and engagement-level inspections (that focus on the performance of individual audits) there has been an increase in the number of firms and number of engagements respectively, that had at least one significant finding during inspection, compared to the results from the 2015 IRBA Report.

At firm level and engagement level respectively, three audit firms and 33 engagement partners were referred for investigation, and 14 firms and 112 engagement partners were identified for re-inspection and are subject to the remedial process to drive improvement in the quality of audits performed by the auditors concerned.

Level of compliance

“It is important to study the IRBA report in its full context to understand the nature, extent and impact of the various findings at firm level and at engagement level,” Botha said.

Without diminishing the importance of reported external inspection findings and the necessary areas for improvement, which they highlight, these findings must be read and understood in proper context. Unsatisfactory inspection findings with regard to a particular audit do not necessarily indicate that the financial statements concerned are misstated, or that an inappropriate audit opinion was expressed. Because of the inherent characteristics of the inspection process as described in the IRBA Report, the inspection results cannot be extrapolated across the entire auditor population. Inspections findings do, however, imply that the auditor’s performance in relation to identified areas falls below the expected level of compliance with relevant auditing pronouncements, codes and legislation; this deserves the attention of audit firms, audit regulators, standard-setters, professional accountancy organisations and others.

Proactive engagement

“That is why audit firms and audit practitioners are encouraged to lend their support, commitment and full participation to those measures that the IRBA has implemented, including proper root cause analyses of inspection findings and implementation of responsive action plans.” Such measures are yielding positive results as is evident in the statement in the IRBA Report that “those auditors that effectively identified the underlying root causes and implemented proactive action plans demonstrated significant improvement during follow-up inspections”.

“SAICA will use the IRBA Report and related resources, information and feedback (locally and internationally) in order to understand inspections results and their implications, as well as how best to respond in terms of supporting our members. Our analysis of the IRBA Report will be an important reference source in this regard,” Botha said.

“SAICA will also continue with its programme of proactive engagement with the IRBA Inspections department on matters relating to the inspections process and common inspections findings through relevant SAICA structures,” he concluded.


Willie Botha | Senior Executive | Assurance and Practice | SAICA | mail me |


Advertisement