Auditors are not, in fact, serving the client who pays them – they are serving in the public interest, and where there are auditors who have lost sight of this, it must be urgently addressed.
This is according to Ignatius Sehoole, CEO of KPMG SA, who was speaking at the opening of the Customer Experience Management Africa Summit in Cape Town on Wednesday.
Sehoole is a former president of the South African Institute of Chartered Accountants (SAICA). He was appointed to head up KPMG SA in November, with effect from May this year, after the company suffered reputational damage relating to work it did for Gupta-linked companies, as well as on the South African Revenue Service 'rogue unit' report.
Audits are done for the benefit of the users of the resultant financial statements, namely investors, shareholders, the public and communities in which companies operate, Sehoole said on Wednesday.
"The users of the financial statements must be able to trust the information contained in them, because it had been verified by an independent third party," he said.
"We lost sight of that. That is one of the key issues the auditing profession needs to address."
Referring to KPMG itself, Sehoole said there had been "little oversight and poor decisions were being taken".
The duty of a chartered accountant is duty of public interest, according to Sehoole, as well as "the code of conduct of SAICA and what we need to get back on track".
Sehoole said reforms at KPMG included structurally separating the executive committee and the board. Independent managing directors were also introduced to scrutinise operations, including the risk management and compliance committee.
"So, for the first time we opened ourselves up to scrutiny from outside the firm. We also looked at our client list to see whether the clients we have are within the risk profile acceptable to us," said Sehoole.
"After all the mess we went through we lost clients and we ended up deciding to let some others go too. It is something we should have done before. Even the ones we still have we continue to evaluate. And before we start any new assignment for a client, we re-evaluate again to see if anything changed since the previous time we did work for them."
Recently, the firm declined to do work for two potential new clients because their risk profiles were not acceptable, Sehoole said. "We do this because we must send the right message out there," he explained.
The company needs a culture where employees are not afraid of "stepping out of line" for fear of retribution if they voice concerns, he added.
"Employees must be able to talk about anything. We have an international hotline they can use," he said.