Auditing in SA tragic state

Question 1

who should do something about the tragic situation
regarding auditing in our country

Answer 1

1 The auditing profession in South Africa is regulated by the Independent
Regulatory Board for Auditors (IRBA). (1)

1.2 To ensure best audit practice in South Africa, the IRBA’s Committee for
Auditing Standards has adopted the full suite of International Engagement
Standards (IESs) issued by the International Audit and Assurance Standards
Board with effect from 1 January 2005.

Question 2

The statement that auditors “sometimes indirectly benefit from the dubious steps
taken by irresponsible management” is simply not true.

Answer 2

If an auditor is aware of “dubious steps taken” (which affect the fair
presentation of the financial statements) and does nothing about it, the auditor
could be faced with legal claims, sanction by the IRBA, and the loss of
reputation (and consequently business). (2)

4.2 One of the best examples to illustrate the foregoing is the collapse of an
international auditing firm (Anderson) following the Enron debacle.

Question 3

The “independence” of external auditors is critical for their work to have value. (1)
Therefore,

Answer 3

The Codes of Professional Conduct of the SAICA / IRBA (which auditors have
to adhere to) require that they do not undertake engagements where they will
not be independent in fact and in appearance. (1)

3.2 Moreover, if the company follows sound corporate governance practices, the
audit committee will, in addition to the duty referred to in point 2, ensure that
the independence of auditors is maintained by, for example, acting as an
intermediary in dealing with disagreements regarding accounting matters
identified by the external auditor.

Question 4

Auditors are required to be experts in financial accounting, and in terms of the Codes
of Professional Conduct they should not undertake work if they are not competent to
complete it to the required standards.

Answer 4

That’s a good application of professional conduct
The fact that sometimes material misstatements are uncovered in financial
statements after the audit opinion has been expressed, is due to the audit only
providing “reasonable assurance” that the financial statements are free from
material misstatement. (1)

5.2 Due to the inherent limitations of an audit, it is not possible to provide absolute
assurance that financial statements are free from material misstatement.{ You can find these points in 210 engagement letter}

Question 5

Regarding your concerns about “enforcement of compliance with standards

Answer 5

auditors in performing audit engagements have to adhere to
the requirements of International Standards on Auditing, and this is monitored
by the Inspections Department of the IRBA