Johannesburg - Former finance minister Trevor Manuel said on Tuesday that the auditing profession needs time to heal following the blow out at KPMG.
Manuel was speaking at the Deloitte Risk Conference 2017 conference, where he touched briefly on KPMG and considered what it would mean if the big four firms came down to three. Manuel said that it is going to "take the adults in the room" to deal with the situation.
“It would be a profound tragedy for risk going forward,” said Manuel, referring to a world without auditors. He explained that South Africans should consider what it means for the economy if trust is lost and if the key assurance that auditors provide to investors is removed.
Manuel gave credit to KPMG, which lost its top nine people. “To lose the top nine people as KPMG has done, and with it a collective 400 years of experience of the profession, is a big decision. A big decision that ought to lay the basis for a new beginning.
“My own sense is we must cut them some slack and support a process that must be a about a new beginning.”
At the same time, Manuel took aim at the fact that auditors have about 30 to 40 pages of disclaimers to cover themselves in the case of a flawed opinion. Referring to the people who lost their jobs at the South African Revenue Service as a result of the report, Manuel said that the clock could not be rewound.
“We must turn to the profession and (have) got to say to the profession: 'We need a healing process and make sure we do not have a further decline in trust'."
During his address, Manuel said he does not think the crisis in the profession is terminal, but the fact that the World Economic Forum re-ranked the quality of South Africa’s audit quality from 1 to 30 within a year’s time is cause for concern.
Deloitte Africa CEO Lwazi Bam, who opened the conference, said the auditing profession as a whole must perform an introspection to fix what is wrong.
Society is collectively calling for the audit opinions of audit firms to be audited, explained Bam. “For a profession built on integrity and trust, if those voices grow our profession will be in trouble,” he said.
“We need introspection to see what has gone wrong and fix it.” Bam said that society’s expectations of the profession have changed and it is not enough just to comply with standards.
He emphasised that the issue is not strictly limited to KPMG. “At KPMG I am convinced the majority of people, partners and professionals are good people.” He said that they are people of integrity who wake up every day, willing to do their very best for the profession.
“What we get from society, expectations are higher. We as a profession must respond and we must respond adequately.”
He explained that firms perform a risk assessment process at least once a year where they list risks and rank them. But through this process, the black swans are often missed. “What we going through in the profession is an indication of that black swan.” He went on to contextualise this in terms of what is happening in the country.
Bam said that society viewed business as exploitative and self-interested. “Society perceives business as aiding corruption.” There are “minority elements” contributing to the tarnishing of business’s image.
Bam said that if business is to have a credible voice and speak out against the big challenges in the country, it should clean its own house.
SUBSCRIBE FOR FREE UPDATE: Get Fin24's top morning business news and opinions in your inbox.