State capture chickens come home to roost for accountants

The number of accountants being investigated by professional bodies is through the roof as the profession tries to arrest the reputational carnage wrought by a string of corporate scandals.

Last month the South African Institute of Chartered Accountants (Saica) reported that a total of 265 investigations were underway, more than four times the whole of 2013. The Southern African Institute for Business Accountants (Saiba) likewise reports a spike in investigations, driven in part by a growing awareness of the responsibility accountants have to report wrongdoing. A swirl of negative press reports highlighting the enabling role of accountants in mismanagement and fraud, both in the public and private sectors, has a lot to do with the recent investigatory zeal.

Trust in the profession dive-bombed after a string of accounting-related scandals, from state-owned companies to Steinhoff and VBS Bank. Some of those under investigation include big names such as VBS Bank former CEO Andile Ramavhunga and Eskom’s former chief financial officer Anoj Singh.

Addressing Saica in June, former finance minister Trevor Manuel said SA’s accountants had become too comfortable being ranked number one in the world. Even the Guptas got in on the act, using their money to purchase an audit firm with the presumed intention of coming up with the kind of audits results that would escape more serious scrutiny.

Then came the Steinhoff debacle and accusations of accounting fraud resulting in the wipe-out of billions of rands in shareholder value. Accountants started to feel the heat. “People are more aware that they can complain,” says Saiba CEO Nicolaas van Wyk. “And in some cases, the complaints are coming from those who are getting no joy in the courts, so they are trying another avenue of redress.”

Says Saica senior executive Willi Coates: “Given the current media landscape regarding the accountancy profession, people are more aware of their ability and right to complain about chartered accountants’ alleged unethical behaviour.”

It’s clear that becoming an accountant is no longer a soft ride. Van Wyk says it has always been a requirement in common law for accountants to report wrongdoing, but it wasn’t being done. “It boils down to the nature of the profession. Accountants must act in the public interest, and not like a business where profit is the overriding motive. Their first duty is to act in the public interest, then the client’s interest, and I think that’s where some of these bigger accounting firms lost the plot.

“They were more concerned with fees than the public interest. Big accounting has been acting like a business.”

Another reason for the surge in investigations by professional bodies is the increasingly onerous and complex regulatory environment. In 2017, the International Ethics Board for Accountants issued a guide for auditors and professional accountants known as Non-Compliance with Laws and Regulations (Noclar), which details what actions to take in the public interest when they become aware of a possible illegal act.

Among those under investigation by Saica are former Eskom chief financial officer Anoj Singh, former eThekwini city manager and recently appointed head of passenger rail agency Prasa Sibusiso Sithole, and Munroe Ivan Swirsky.

Singh is alleged to have flouted laws and regulations, and engaged in conduct he should have known might discredit the accountancy profession. His name has been tied to illegal payments while at Eskom of hundreds of millions of rands to consultancy firms Trillian and McKinsey without contracts in place. Saica’s charge sheet says Singh failed to disclose to the Eskom board “the true reason for Tegeta’s request of some R600 million from Eskom.” Tegeta was a Gupta-owned company that acquired the Optimum Coal mine, and managed to get a pre-payment of nearly R600 million from Eskom, which happened to be roughly the shortfall needed to cover the purchase price of the mine from previous owner Glencore.

Saica says Singh was also “knowingly associated with reports, returns, communications or other information” which he knew or should have known were false, misleading or furnished recklessly.

In June this year the Democratic Alliance raised the alarm over Sithole’s appointment to Prasa, claiming he had run up almost R2 million in bad debt and was slow to take action against firms that were involved in tender irregularities when he was city manager in eThekwini.

Both Sithole and Swirsky are charged with conduct that is “discreditable, dishonourable, dishonest, irregular or unworthy, or which is derogatory to the Institute, or tends to bring the profession of accountancy into disrepute”.

The outcome of these disciplinary hearings has not been finalised. Says Coates: “Saica is dependent on the findings of prosecutorial authorities to investigate members as we do not have powers of subpoena. These investigations are still ongoing and have not been finalised. Saica does not comment on any investigations or hearings that are still ongoing, as this might compromise the disciplinary process. Saica will release statements on each of these cases as and when they have been finalised and the independent Disciplinary Committee instructs management to publish the findings.”