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Articles: Auditing welcomes more black graduates

Posted by admin on Saturday, March 18, 2006 - 09:55 AM

THE number of qualified black, Indian and coloured auditors and chartered accountants in SA is slowly increasing, statistics show.
Sue Blaine

The results of last month’s Public Accountants’ and Auditors’ Board (PAAB) exam, one of two exams taken after seven years of study, show that 57% of the black, Indian and coloured candidates passed. Board CEO Kariem Hoosain says that the number of non-white auditors has more than doubled from 361 in 2000, to 747 last year. Successful candidates can choose whether to register as chartered accountants or auditors. While the pass rate of 57% may seem low, the overall pass rate was just 63%, with only 66% of white candidates passing. However, PAAB sees a pass rate of more than 60% as acceptable, says Laine Katzin, acting director of the board’s education department. Cheryl James, CEO of Fasset, the education and training authority for the financial and accounting services sector, says: “It is very important to bring about a change in demographics in this sector.” Fasset has instigated several programmes in SA to help increase the number of black, Indian and coloured chartered accountants and auditors, in line with the financial sector charter requirements. There are about 4500 auditors registered with the board and more than 2000 black, Indian and coloured auditors in SA. This year, a total of 1475 candidates passed, up considerably from the 1144 who passed in 2000. According to statistics from the South African Institute of Chartered Accountants, SA had 24383 registered chartered accountants last month, of which 627 are black, 386 coloured, and 1593 Indian. The low number of blacks, Indians and coloureds in the profession has its root in poor mathematics performances at school level. This is why Fasset’s efforts begin with coaching projects, in which grade 11 and 12 pupils in KwaZulu-Natal, Eastern Cape and North West are tutored to improve their mathematics, English and accounting. There are also undergraduate programmes at the universities of Stellenbosch and Fort Hare, and post-graduate programmes at the University of Johannesburg, the Forbes Lever Baker Institute for Accountancy and Management and the National School of Accounting. PAAB has also joined a Fasset programme that assists students who do not pass their board exams the first time, to write again. This year, the overall rewrite pass rate was 42%. Half of those in the Fasset programme passed. In addition to a rigorous seven-year study programme culminating in the two board exams, SA’s auditors are subject to reviews every three years — a process introduced last year — and have to keep up to date with developments in the profession. There are 14 South African universities accredited by PAAB to educate would-be auditors or public accountants. Once candidates have finished a three-year undergraduate degree, they must complete a further year-long course culminating in exams which, if they are successful, will earn them a certificate in the theory of accounting. After that, there are two board exams, one to test technical and academic skills and another to look at the candidate’s ability to deal with practical issues that may arise in their work. Candidates must pass both exams before they can be admitted to the board as professionals. PAAB is a statutory body that regulates the public audit function and functions in terms of the Public Accountants’ and Auditors’ Act and the new Auditing Profession Act, which was signed into law on January 12 this year. There has been worldwide reassessment and improvement of the auditing practice since investors lost more than $60bn in the spectacular collapse of US energy company Enron, whose books had been audited by the international auditing firm Arthur Andersen. In SA, auditors have been criticised over their handling of the audits of several major companies. Ernst & Young officials appeared before a PAAB hearing last year in respect of their handling of Regal Bank, which collapsed in 2001. They were cleared when the charges against them could not be proved. Ernst & Young auditors were also criticised in the case of the collapse of Masterbond in 1991, which left thousands of investors out of pocket. Auditing practice has also been called into question due to the failure of health company Leisurenet, medical scheme Macmed, and the collapse of Saambou Bank in 2002. It is partly due to these auditing failures that the new act was scripted. It will see PAAB, which was started in 1955, subsumed by the Independent Regulatory Board for Auditors, which is mooted to come into effect on April 1. PAAB director of auditing standards Bernard Agulhas says the act will have greater regulatory power. “Trevor Manuel believes that with greater regulator powers, the public will be better protected.” Deepak Nagar, who will become chair of the new board, says: “It marks a new beginning for the auditing profession, which has worked hard to restore the confidence of the public and business communities in the work we do.” Under the Auditing Profession Act, auditing firms and auditors will be required to register with the board. Auditing firms can be held accountable for the wrong-doing of an employee, whether the employee is an auditor or not. The new board’s disciplinary procedures will also radically change the depth of responsibility an auditor has in reporting any irregularities discovered in company accounts.

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