Auditing profession must look beyond the numbers for real transformation

He was speaking at the parliamentary public hearings on transformation of the financial services sector, outlining the IRBA’s concerns around the slow pace of transformation in the profession.

Source: Business Day Live

Moving beyond the numbers

He explained that transformation must move beyond numbers and begin to truly empower black accountants and black-owned auditing firms, which includes providing equal opportunities to access the audit market.

“Previously, the lack of progression of young black professionals to the highest level in audit firms has been explained by the assumption that many young black accountants complete their traineeship and leave auditing for more lucrative roles in government, the corporate sector or to explore entrepreneurial opportunities. This is frequently cited as a challenge for the sector in its transformation initiatives.”

The reality is, of the 4,283 registered auditors in South Africa, 74.8% are white and only 10.5% are black African. It is not just about increasing the number of black trainee accountants; it is about giving black accountants and auditors long-term prospects in the profession equivalent to that of their counterparts. It requires a cultural shift and a more inclusive approach which will provide black accountants with a positive experience at the firms and result in higher retention, Agulhas said.

Building a more diverse profession

High on the IRBA agenda is a desire to capacitate mid-tier and home-grown audit firms and build a more diverse profession with increased opportunities. Currently, exposure of black-owned firms to the auditing of JSE-listed companies is minimal, with up to 94% of the market capitalisation of the JSE being audited by the ‘Big Four’ audit firms comprising Deloitte, KPMG, EY and PwC.

“It is critical that our black-owned firms be given access to the same opportunities. We need to see them growing in scale and capability. This cannot happen unless we create the opportunity for them to have equal access to the markets. Of the 367 JSE-accredited auditors that sign off on around 300-odd JSE-listed companies’ financial statements, as few as nine black auditors have had the opportunity to do so, according to our research.”

Training and education

The IRBA had been receiving feedback from trainees with regards to their firm experience. Trainees had been raising concerns relating to unfair discrimination in areas of performance appraisals and job allocation, and lack of cultural diversity within the firms, according to Robert Zwane, IRBA director: education and transformation.

These concerns had and still continue to have an impact on the number of trainees being retained in the auditing profession and therefore on the numbers of trainees that may enter the IRBA’s audit development programme (ADP), and eventually qualify as RAs.

Still room for improvement

“Consequently, in 2015, the IRBA commissioned research amongst trainees and recently qualified CAs, to attempt to quantify the factors driving and limiting professional advancement in auditing, which could inform the board’s strategic objective for addressing diversity in the field.

“A largely consistent experience and set of attitudes was reported by trainees and qualified professionals alike, across the diversity of the segment. So, no matter race, geography, or size of firm, the experience of trainees and recently qualified CAs was consistent with the view that race and gender transformation has been underway but that it still has room for improvement in the future.

“Racial transformation is seen to be reasonable while studying with seven out of 10 respondents noting equal opportunities. However, black professionals perceive less equality during traineeship and beyond,” he said

With regard to perceptions of racial equality amongst the trainees, 90% of the African respondents felt that firms should do more to promote racial equality and 36% of the same respondents reported that they had experienced some racism from management.

Workshops

The IRBA will produce a detailed report and intends to explore the results in a series of workshops with audit firms before the end of this year. These will be facilitated with audit partners and audit managers respectively to attempt to reach some working resolution as to how best to balance the expectations of partners and young professionals, with a view to increasing retention of talent, and particularly advancing black talent, within the firms and the profession.