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How SA can achieve a clean ethics audit

Nov 27 2018 06:15
Heemal Bhaga Muljee

The last few years have seen South Africa top the leaders board regarding unethical behaviour. In recent times, Zupta state capture claims demonstrated just how entrenched unethical behaviour had become in this country.

Even the auditing profession, with its stringent independence and ethical requirements – taught as part of the curriculum at university – is now being dragged into the debacle.

Earlier this year, the Independent Regulatory Board for Auditors (IRBA) exposed several auditors accused of consistently contravening both its professional standards and the law.

South Africa's Auditor General, Kimi Makwetu – who last week called for stronger oversight in light of regressing state-owned enterprises – has previously said the credibility of the country's accounting profession is "in the gutter".

The industry as a whole took a mammoth knock, with scandal after scandal arising and one of SA's most trusted fields scrambling to pick up the pieces.

What were we left with?

I searched for a definition of ethics, and this is what I found: Moral principles that govern a person's behaviour or the conducting of an activity. One would think moral principles are foundations taught or demonstrated in childhood.

Unfortunately, the reality is that bribing traffic officers or making excuses not to receive a fine are considered by many as perfectly acceptable practices. Speeding is tolerable if you are late for work or to drop off the kids at school. Throwing waste out of the car window is also common. Or what about lying about your skills and experience to get a job, as some of our politicians in government are known to have done?

"There is a glaring absence of consequence for all wrongdoing," says Makwetu, and I agree.

A fish rots from where?

I see a blurred line regarding what South Africans find ethical. It seems we keep pointing fingers at one another, all the while influenced by the behaviour of others in justifying our compromised moral principles. If the masses are doing it, it's acceptable. Except we downplay the effects of this thought process on future generations.

President Cyril Ramaphosa has said we need leaders who will be guided by principle and adhere to what will be good for the people all round. Words to live by.

I see my child learning from the actions of others and myself and I wonder, how will they make the change?

How will young South Africans transform? 

I believe ethics cannot be taught; but rather demonstrated. The "do as I say, not as I do" mentality needs to end. It must start with the simplest of things, like accepting when we are wrong and learning from our mistakes.

This will create a culture of accountability, and that will be the biggest breakthrough. Young or old, auditor or politician, black or white – we will all benefit from accepting this truth and seeking to improve.

We are a young species who at times display great potential, and at other times are our own worst enemies.

In the auditing profession trust and credibility needs to be restored.

Rebuilding accountability

Certainly there are practical steps that can be taken to increase accountability. Auditors report on reportable irregularities to the IRBA, but these are not made public. Perhaps there should be a mechanism whereby this information becomes public knowledge so as to alert the public of the irregularity and give them the comfort that the auditors are delivering on their responsibilities.

Then there is the fact that certain audit firms turn away clients of questionable reputation and other firms accept them. The auditing profession should stand together and decline appointment as auditors of these clients, forcing shareholders and board of directors to deal with the individuals with questionable reputation and appoint individuals with good standing and reputation. 

Learning, too, can be improved. Audit committees need to improve on their skill sets and also be responsible for the audit tender process, rather than delegating this responsibility to management. The members of the audit committee are independent non-executive directors who should be able to select auditors not based on price or prior affiliations, but by expertise, capability and audit quality.

But the most important change must be universal. There is an expectation in the market that the role of an auditor is to detect fraud. This is not true. There must be further education to the public as to the role and responsibility of an auditor, and that will bridge the expectation gap.

Let us start with reflecting upon ourselves and being accountable to one another in the simplest of actions. Maybe, just maybe, the future generation of South Africa will sharpen the lines that have become so blurred of late, and build the will to do what is right. 

* Heemal Bhaga Muljee is BDO's National Head of Audit. Views expressed are his own.

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irba  |  auditing  |  audits  |  corruption


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