ROB ROSE: Hiking the price for shoddy auditing

Financial Mail | Business Live

The price for negligent or shady auditing has just risen hugely, but will it make a difference to the number of accounting scandals in South Africa?

Imre Nagy, CEO of the Independent Regulatory Board for Auditors (Irba), would like to think so.

Last week, finance minister Enoch Godongwana ratcheted up the amount that errant auditors can be fined 25-fold, from R200,000 to R5m, and to R15m for audit firms. And if a case goes to Irba’s disciplinary committee, auditors can be fined as much as R10m, and firms R25m.

“We wanted fines that could drive the right behaviour, and allow for proper consequence management,” Nagy tells the FM. “Previously, an auditor might have thought ‘Look, I might be taking a chance, but I can pay a R200,000 fine out of my pocket’, but they can’t do this with a R5m fine, and it may not be covered by their professional indemnity insurance either.”

But will the higher amounts make a difference? After all, audit firms have often stepped in to cover an auditor’s fine anyway.