Godongwana keeps maximum fines for rogue auditors at R25m

Delinquent auditors and audit firms continue to face fines of up to R10 million and R25 million, respectively, should they be found to be in breach of South Africa’s Auditing Profession Act, following the National Treasury’s withdrawal and reissuance of the maximum fines notice last week.

On Friday, Finance Minister Enoch Godongwana gazetted a notice withdrawing the notice of maximum fines for improper conduct of registered auditors, which was issued on 15 June 2023, and at the same time issued a new maximum fine notice which will be open for a 30-day comment period.

Just like the notice issued in June last year, the new notice proposes a maximum amount of R5 million and R15 million per charge respectively for auditors and audit firms who admit guilt in line with section 49(4)(a) of the Auditing Profession Act. Those who are charged and found guilty of misconduct will face fines of up to R10 million and R25 million according to the gazette.

The proposed fines represent a substantial jump from the R200 000 per charge fine which the industry was previously limited to for misconduct.

Public protection statutory body the Independent Regulatory Board for Auditors (Irba) stressed the minister’s actions would not result in the reversal of fines which were publicised in June 2023. Irba added that the previous maximum fine amounts will remain applicable for improper conduct committed from June 2023 until a new notice for maximum fines is adopted.

Read: Fines of up to R25m for delinquent audit firms – Godongwana

The comment period will remain open until 4 February 2024, whereafter it is anticipated that the final monetary sanctions for delinquent auditors and auditing firms will be published in March 2024.

Irba CEO Imre Nagy reiterated that the proposed fines provide guidance on the industry’s limits and are therefore not fixed guards of punishment.

“The Irba will in all cases apply proportionality and scalability when sanctioning in matters of improper conduct, as we have always done. There are varying degrees of improper conduct and not every matter is sanctioned by way of maximum fines,” Nagy said.

“The Irba also has non-monetary sanctions at its disposable for improper conduct, which although it remains improper conduct does not have massive public impact. These non-monetary sanctions are generally remedial in nature, encouraging continual professional development,” added Nagy.

Investigation backlog reduced

According to an update by Irba, the period between 2021 and 2023 saw a 30% cut back in the body’s investigations backlog, helping the body make significant progress on matters which occurred as far back as the 2018 financial year. The reduction it said was also assisted by the appointment of additional investigators.

The statutory body noted that at some point its investigations department was faced with more than 230 open matters at the peak of the backlog.

 “With a full staff complement, the department was able to achieve or exceed the target of completed investigations for the past two financial years,” Nagy said.

“Furthermore, despite the challenges faced, we were able to prioritise and complete investigations into audits of high-profile entities in the 2018 to 2023 financial years. Of the 20 state capture matters opened against registered auditors, we have completed 15 matters. From these outstanding matters, three matters have been referred for disciplinary hearings,” she added.