Regulatory burdens have the potential to
further amplify the South Africa audit profession’s crushing skills
shortage, according to two industry leaders.

There is a danger of small- and medium-sized firms being pushed out
of audit due to the costs associated with quality control reviews,
according to South African Institute of Chartered Accountants
president Ignatius Sehoole. South African audit firms must be
reviewed by the Independent Regulatory Board for Auditors (IRBA).
However, where in other jurisdictions costs are shared by
government and other stakeholders, in South Africa they are paid
for in full by the firm.

Sehoole said this is an unmanageable burden in some cases: “While
it is still a significant cost for the Big Four, one can argue that
because of the size of the firms they are better able to absorb
those costs. But our medium to small firms… some I understand have
actually closed shop.

“A lot of them are quite optimistic that if they were to be
reviewed they would pass with flying colours. But because of the
nature of their clientele and the size of the firm, they just can’t
afford it. I think in a country like ours where a skills shortage
is a problem, it is a pity losing skills in an area where it is
needed simply because the costs are prohibitive.”

IRBA acting chief executive Bernard Agulhas said another regulatory
burden threatening to push people out of the profession and into
business is the punishment of up to ten years imprisonment and a
ZAR10 million ($1.3 million) fine for an auditor who does not
report a client’s reporting irregularity.

Carolyn Canham