ACCA - The future of Audit.

SPECIAL EDITION • 2021 CFO.CO.ZA

FUTURE OF AUDIT POWERED BY CFO MAGAZINE

With insights from leading CFOs CJ Kujenga, Shabeer Khan, Riaan Koppeschaar, Nico Esterhuizen, Sean Capazorio

FEATURING

Victor Sekese, Wiseman Nkuhlu, Ajen Sita, Dion Shango and many more

iOCO Group CFO Jo-Ann Pöhl

THE VALUE-ADD OF AUDIT PROUDLY BROUGHT TO YOU BY

Approved Employer Programme For more infomation, get in touch with us on: infoza@accaglobal.com or 011 459 1912

CONTENTS

SPECIAL EDITION • 2021 CFO.CO.ZA

FUTURE OF AUDIT POWERED BY CFO MAGAZINE

With insights from leading CFOs CJ Kujenga, Shabeer Khan, Riaan Koppeschaar, Nico Esterhuizen, Sean Capazorio

FEATURING

Victor Sekese, Wiseman Nkuhlu, Ajen Sita, Dion Shango and many more

40

iOCO Group CFO Jo-Ann Pöhl

page 42

THE VALUE-ADD OF AUDIT PROUDLY BROUGHT TO YOU BY

CFO South Africa is the organisation for finance executives in South Africa. Our goal is to connect finance professionals online and off in order to share knowledge, exchange interests and open up business opportunities.

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MANAGING DIRECTOR

COMMUNITY MANAGER

PROOFREADING

Joël Roerig jroerig@cfo.co.za +27 76 371 2858

Brian Chivere bchivere@cfo.co.za +27 60 505 7727

Toni Muir

EDITOR-IN-CHIEF

SALES MANAGER

Georgina Guedes gguedes@cfo.co.za +27 83 651 2789

Karen Martin kmartin@cfo.co.za +27 82 920 8259

ASSOCIATE EDITOR

LAYOUT & DESIGN

Tamara Oberholster tamara.oberholster@gmail.com +27 72 202 6193

Elizabeth Ferraris

CFO MAGAZINE • CFO.CO.ZA

PHOTOGRAPHY Lizelle Furter, Patrick Furter PRINTING Novus Print Peter Wilding peter.wilding@paarlmedia.co.za +27 11 201 3400

Highlights 8

Finance leaders on the future of audit

Building strong foundations 12

Prof Wiseman Nkuhlu on audit and ethics

15

Jamil Amponah: Africa needs to focus getting basics right

CFO priorities 18

Is the audit business model outdated?

21

Optimise before you digitise, advises Exxaro FD

24

Prioritise performance in public sector audit, says

18

Shabeer Khan 27

NGO auditing: not to be underestimated and requires specific skills

Evolving audit 30

Climate reporting is on the cards, says Ajen Sita

33

Dion Shango talks transparency, technology and talent

36

Imre Nagy on closing the expectation gap

39

Planning ahead for mandatory audit firm rotation

Digital transformation 42

Audit: a value-add, not a necessary evil

45

Will blockchain replace audit?

48

Tech and governance must go hand in hand

51

PwC on people-led digital transformation

24

Addressing the entire ecosystem 54

Encouraging a competitive market

56

Do UK reforms have application in SA?

59

Regulate directors, suggests Victor Sekese

Final word 62

ACCA South Africa’s Nico Esterhuizen on the future of audit

33 CFO MAGAZINE • CFO.CO.ZA

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FROM THE EDITOR

Looking into the future

W

hen CFO South Africa approached me to take on the ACCA South Africa series, Future of Audit, it was something I immediately wanted to do. I looked forward to the opportunity to investigate themes such as digital disruption, ethics and accountability, regulation and mandatory audit firm rotation, among others.

I knew it meant the opportunity to speak to a range of different stakeholders in the audit ecosystem to capture their visions of the future, whether utopian or dystopian.

But, to be quite frank, I expected we would cover all the main themes in the space of a few articles. However, as I’ve explored the subject of the future of audit in more detail, I have learnt more than I expected to, heard a range of vastly different opinions and uncovered more and more angles I wanted to explore. It’s been wonderful to have the chance to dig so deeply into the theme.

As a journalist, I often only have a few hundred words to cover a topic, and this series has given me the opportunity to do more than scratch the surface – to really interrogate the subject on many levels.

I’m thankful to ACCA South Africa and to CFO South Africa for the opportunity to look at ideas like whether the audit business model is still relevant, how education needs to shift to meet an evolving business environment and the nuances required in public sector or non-profit auditing.

I’ve had robust discussions about whether or not blockchain will kill audit, the expectation gaps around fraud detection, and the likelihood that audit will need to begin to encompass sustainability reporting.

It’s been a fascinating journey and I’m grateful to everyone who shared their views and input with me, from CFOs to representatives from audit firms, regulators, public sector organisations, technology companies and other thought leaders.

You’ll find all of the topics I’ve mentioned above (and more!) in this special edition of CFO Magazine. I hope you’ll find it as interesting and thought-provoking as I have, and that it will prompt you to think more deeply about the future of audit, and what that will look like.

Tamara Oberholster Associate Editor

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KEY THEMES

FINANCE LEADERS SHARE THEIR INSIGHTS INTO

THE FUTURE OF AUDIT

Can the audit profession restore trust? Will new technologies cannibalise jobs? Find out from the experts. We asked audit professionals, regulators, technology experts and CFOs for their thoughts on the future of audit. Here’s what they had to say.

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Professor Wiseman Nkuhlu – restoring trust is crucial Professor Wiseman Nkuhlu, chairman of the board at KPMG South Africa, says his primary concern when it comes to the future of audit is to restore trust in the profession. “There needs to be a restoring of pride in the social purpose of audit,” he says. “For us to continue doing the great things that we’ve done as human beings, we have to work through organisations, collaborating together. And that requires trust. Auditors play an important role in enhancing trust of an organisation. We must just get that back in terms of restoring the pride in the audit profession. And auditing firms should take voluntary responsibility for restoring that trust.” See more on page 12.

Sitho Mdlalose – the future is digital “The word that springs to mind when I think of the future of audit is ‘digital’,” says Vodacom Tanzania FD Sitho Mdlalose. “The future of audit for me is really about the future of business in general, and that’s digital.” Like all areas of business, audit will need to keep pace with rapid digitalisation. With technologies like blockchain and automation on the rise, Sitho highlights the need to establish audit teams that are both tasked with creating value through insights and that can “think digital”.

CJ Kujenga – think out of the box CJ Kujenga, CFO at Ascendis Health, says auditors need to rethink their entire business model. “My concern is that we bring in really bright students and almost ‘dumb them down’ immediately because we make them focus solely on this tickbox approach to an audit,” she says. “Yes, there are regulatory requirements, but unless we allow people the room to think – to really understand a business, its strategy, its business model – we’re creating a group of people who can’t grapple with the complexity of modern business.” See more on page 18.

Shabeer Khan – elevate the role of internal audit Shabeer Khan, CFO at the Department of Trade, Industry and Competition (dtic), believes the role of internal audit needs increased emphasis. “When we see business failures, the tendency is for the public to look only to the external auditors.

While they have an important role, I think we need to find a way of elevating the role of internal audit,” he says. “Internal audit is closer to the business, and can add a lot more value. They can provide timely information on where things are working or not working, so that these can be addressed timeously.” See more on page 24.

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KEY THEMES Shamit Govind – the future will be about reinvention and disruption Shamit Govind, partner at KPMG South Africa and head of the firm’s Emerging Tech Unit, believes that the future of audit will centre around reinvention and disruption, but that it’s important for governance to keep pace. “Creating a new tech is not actually that hard, but embracing the governance within which it has to operate within the organisation is important,” he says. “To ensure that the culture and the governance are set up such that the technology can actually fit in and be used from a mainstream perspective and provide a return on investment – that’s critical.” See more on page 48.

Mokgadi Malematsa – smaller firms need a long-term vision Mokgadi Malematsa, director at PSTM, says smaller firms have a responsibility to prepare for opportunities and underscores the value of building relationships with bigger firms. “In the past, we’ve partnered with a bigger firm to help train some of our staff. The capital outlay for them is the same, whether they’re training five or 10 people,” she says. This means the smaller firm is able to access training for employees, and the larger firm is able to boost its training and development numbers, which assists in meeting targets.

Taking this a step further, Mokgadi says, small firms could second trainees to bigger firms to help expand their experience, and to provide project-specific support to larger firms.

Ajen Sita – companies must consider the environment Ajen Sita, CEO of EY Africa, says the focus on long-term value reporting and on climate and sustainability will become critical in audit. “One of the many lessons coming out of the last number of years, and the pandemic in particular, is that we've got to pay more attention to the environment, whether it comes to energy security, food security or just the wellbeing of the population as a whole,” he says. “Companies will only attract capital if they are progressive in their environmental response – and will have to report to stakeholders about what they're doing. Naturally, there will be an expectation that auditors will provide assurance around those sustainability and climate reports.” See more on page 30.

Victor Sekese – minimum requirements for board members It’s important to focus on broadening the accountability frameworks within which organisations operate. Victor Sekese, CEO of SNG Grant Thornton, recently completed his master’s dissertation on audit regulation. “My submission was that we need to start putting minimum requirements in place from a regulatory point of view for someone to be considered to be a board member. I’m arguing that you should need to be a member of a professional industry body, for example, the Institute of Directors, which is a body that is dedicated to directors, looking after the needs of directors, and capacitating directors to be able to meet their duties,” he says. See more on page 56.

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Alex de Bruyn – blockchain will begin to replace auditors Alex de Bruyn, founder and CEO of Doshex, a South African company that was a Blockchain Trailblazer Award finalist at IBM Think 2020, says blockchain will begin to replace auditors, as verification happens in real-time. “With blockchain, we can inspect transactions independently. We don't need to trust third parties to get those audited for us,” he says. “Blockchain deals with the idea of data mistruth in real-time. We can understand what did or did not happen, as it happens. The consequences of that may still require a human opinion or judgment to be passed, but that’s the role of a judge rather than an auditor.” See more on page 45.

Imre Nagy – keep the basics, evolve the product The future of audit should be linked to the fundamental purpose of financial reporting, says Imre Nagy, the acting CEO of the Independent Regulatory Board for Auditors (IRBA). “The purpose of an audit is to gain confidence in financial statements and reports by investors,” he says. But while the purpose remains the same, Imre says the audit product needs to evolve. It needs to develop alongside business as the world changes, and remain fit for purpose. See more on page 36.

Peet du Plessis – professionalise the public finance role “The position of treasurer in local government, now known as CFO, was (since 1988) a professionalised position whereby a person had to be registered as a municipal accountant with a specific qualification, before he/she could be appointed,” explains Peet du Plessis, President of the Chartered Institute of Government Finance, Audit & Risk Officers (CIGFARO). “This requirement was repealed by the Local Government Municipal Finance Management Act, (MFMA) Act 56 of 2003, as amended. This action by National Treasury in the MFMA created a vacuum, which allowed for the appointment of persons in the position of CFO who are not qualified as professionals in the field.” Peet says the organisation is lobbying for the professionalisation of the public finance role.

Michael Hewson – avoid transfer pricing audit shocks Michael Hewson, Graphene Economics founder and director, believes that multinational enterprises need to ensure their audit committees, tax teams and CFOs are all aware of and involved in managing the risks that transfer pricing audits can pose – sometimes several years down the line. “Transfer pricing relates to the setting of the price for goods and services that are sold between controlled (or related) legal entities within an enterprise,” explains Michael. “Transfer pricing principles govern how all cross-border related party transactions are accounted for, and how profit is distributed, depending on the contributions made by each entity. As revenue authorities, particularly in Africa, look to maximise collections, corporate tax and specifically transfer pricing are increasingly coming under the spotlight.” l Access the full ACCA Future of Audit series on the CFO South Africa website cfo.co.za/partners/acca/.

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BUILDING STRONG FOUNDATIONS

CARROTS AND STICKS FOR AUDIT COMPLIANCE

Prof Wiseman Nkuhlu says there should be consequences for unethical conduct and complicity in fraudulent activities.

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P

rofessor Wiseman Nkuhlu, chairman of the board at KPMG South Africa, says his primary concern when it comes to the future of audit is to restore trust in the profession. “There needs to be a restoring of pride in the social purpose of audit,” he says. “For us to continue doing the great things that we've done as human beings, we have to work through organisations, collaborating together.

And that requires trust. Auditors play an important role in enhancing trust of an organisation. We must just get that back in terms of restoring the pride in the audit profession. And auditing firms should take voluntary responsibility for restoring that trust.”

Prof Wiseman was the first black African in South Africa to qualify as a chartered accountant CA(SA) and has contributed enormously over the course of his career, not only to business in South Africa, but also to education and development. He is the chancellor of the University of Pretoria, a member of the advisory board of the South African Institute of Chartered Accountants (SAICA), and the chairman of the board at KPMG South Africa.

KPMG South Africa has certainly been walking the talk when it comes to working to restore trust, and Prof Wiseman has helped to steer this process. The firm’s reputation was severely tarnished after it came to light that senior partners at the firm, which had audited Linkway Trading, a company owned by the controversial Gupta family, appeared to have been aware that Gupta businesses had categorised family wedding costs as business expenses, for tax deduction purposes.

Although the auditor was not found to have engaged in fraud, corruption or illegal activity, the negative perceptions remained. KPMG South Africa subsequently embarked on a comprehensive renewal plan, which is when Prof Wiseman was brought on board as chairman.

“We said, first we must make sure that the leadership at the top is the kind of leadership that will set the right tone on integrity and quality,” he says. “We also needed to accept that the firm has a role beyond just commercial success. It also needs to make sure that in its capacity as an auditor, its power is not used to cause harm to society.”

This core belief in the social role of the business underpins every aspect of the renewed KPMG South Africa, from hiring practices, to corporate governance and even its business model. A Board Oversight Committee on Public Interest and Ethics has been appointed and is chaired by an independent nonexecutive director. “This is to make sure that the matter

of serving the public interest is paramount,” says Prof Wiseman. “The tendency is for audit firms to highlight primarily their capabilities to design and deliver smart and innovative solutions to their clients and not say much about their social role to serve the public interest through enhancing trust in financial reporting and capital markets.”

In February 2021, KPMG South Africa also announced that it will cease providing non-audit-related services to all JSE-listed audit clients, with effect from 31 March 2021. Prof Wiseman explains that this was done to address the issue of auditor independence in the public’s view, although the provision of non-audit services to listed clients is highly regulated. Rather than stick to the letter of the law, KPMG South Africa wants to lead the way and set the bar in improving public perception of the audit profession.

Ethical auditors for the future Prof Wiseman believes that instilling an understanding of business’s role in society needs to happen not only within industry, but in education too. He says that over the past few decades, business qualifications have become very focused and narrow, shaped predominantly around teaching techniques for extracting value and maximising shareholder profits.

“There is very little about the social sciences or people in the courses,” he says.

“We need to find a way of bringing those into the BCom and MBA courses. Just teaching ethics on its own without linking it to the need for why you’d want people to be ethical (for the sake of sustainability) doesn’t work. It's when you care about the fears and concerns of others that you can sustain whatever you do in the longer term. We must not teach ethics for the sake of ethics, but because ethics are about the greater good.”

This approach, he believes, will help to shield society from the man-made disasters that rampant greed and a narrow focus on maximising self-interest can cause. He cites financial crashes and climate change as examples of these.

Balancing carrot and stick Prof Wiseman believes that creating a future where audit is esteemed and valued means putting in place mechanisms to encourage good behaviours and prevent bad ones. He believes it would be naïve to expect everyone to act in the greater good at all times

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“It's when you care about the fears and concerns of others, that you can sustain whatever you do in the longer term.”

– a misunderstanding of the human condition. People, he says, are motivated both by a fear of shame and a promise of praise.

“What really directs people’s behaviour is partly a question of fear of disgrace or fear of being seen as less than the professional they think they are by their peers,” he explains. “And the other thing that really makes people behave is fear of consequences.

Therefore, in addition to reinvigorating pride in the audit profession, there should be severe consequences for unethical conduct and complicity in fraudulent activities and corruption.”

He suggests that professional bodies have a major role in instilling pride and desire for recognition and admiration for integrity and excellence in their members. They play their role in setting up codes of ethics, encouraging and rewarding exemplary behaviours, and generally setting the right tone. On the other side of the coin is industry regulation and the justice system.

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“I cannot overemphasise the need for effective courts and adequate criminal justice,” he says. “We also need an effective, well-equipped Independent Regulatory Board for Auditors (IRBA) in the country. Along with all the guidance that we provide, when there are those who will still break the rules, and prove themselves to be unethical and who cause harm to others, there must be consequences for these perpetrators. There are always those who take their chances if the consequences are not there.”

This, he says, means the IRBA must be properly equipped in terms of competent staff at the right levels, with the competencies for investigations and for effectively monitoring the standards in the profession.

“All of us must pull in the same direction,” he stresses.

“If you say that you're an auditor, you want people to respect you and that you can be trusted to deliver an audit of the highest standard and not turn a blind eye to wrongdoing. That respect is what motivates you to have courage to do the right thing.” l

BUILDING STRONG FOUNDATIONS

BACK TO AUDIT BASICS FOR

AFRICA

Africa faces similar auditing challenges to global counterparts, plus several of its own, says Jamil Ampomah.

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BUILDING STRONG FOUNDATIONS

T

he accounting and auditing profession in Africa varies from country to country, says Jamil Ampomah, Africa Director at the Association of Chartered Certified Accountants (ACCA). Different countries are at different stages of development, and this is clear to ACCA through its engagement with members across 45 African countries.

“Regardless, the most important thing to remember is that audit remains very central; the auditors’ role to verify the authenticity of transactions remains quite critical,” he says. “It's broadly accepted that economic viability and the attraction of foreign direct investments hinge on strong financial statements. It’s our opinion that in the future, audit will still be very important.”

Jamil points out that the quality of audit work underpins investor confidence, and in turn decisionmaking, and should therefore be a key focus area.

Corporate failures around the world have damaged confidence in audit quality, which needs to be addressed. He says South Africa is a good example. The country was ranked first globally for audit standards for seven consecutive years on the World Economic Forum’s Competitiveness Report, until 2017. It currently ranks 49th out of 141 countries.

Jamil says that this can damage investor confidence and have detrimental effects for the country, and stresses that corporate failures are an issue that need to be addressed not only in Africa, but throughout the world.

He also believes it’s important to address the expectation gap that exists. ACCA has covered this is detail in its report Closing the expectation gap in audit. Part of this is the evolution gap – the difference between what auditors are supposed to do and what the public expects them to do. Jamil believes that collaboration between industry stakeholders, not only within each country but globally, is important in seeking to bridge these gaps. This is why ACCA engages with practitioners, regulators and industry bodies in every

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country in which it operates, as well as facilitating regular roundtable events between its members.

To close the knowledge gap (which ACCA defines as the difference between what the public thinks auditors do and what auditors actually do), there needs to be engagement with all the parties involved in the financial reporting ecosystem. “The future of audit is not just going to rest on audit,” says Jamil. “It is going to rest on all actors within the ecosystem. To close the expectation gap means being clear about the responsibilities of all the players.”

He says this includes board appointments, audit committee appointments and company management.

“Before the external auditor comes in to do their work, you want there to be that level of confidence that there are the right checks and balances in place,” he says. “I think there’s also work to be done in the education around what the auditor’s role is about and the perennial question around whether it’s the auditor’s role to detect fraud. The primary responsibility for preventing fraud never changes: it rests with management. I think that is something that we need to be very clear on, as well as the role of other experts in complementing and supporting audit work, which will become critical in future. As we become more technology-driven, the need for experts in technology, whether it's artificial intelligence or forensics, becomes even more critical.”

Africa-specific challenges Jamil says that in many countries on the continent, there is work to be done in defining audit thresholds.

“What we sometimes find is that audit is mandated for all organisations, even very small business entities,” he says. “For a one-man business, for example, the value of an audit is not clear – it’s just seen as a cost. We need to look at setting the right thresholds for organisations that need to be audited.”

Many African countries also have a high proportion of state-owned institutions. “In some economies in Africa, you actually have more than 50 percent of

“The primary responsibility for preventing fraud never changes: it rests with management.”

organisations falling within the public sector, so public sector auditing is important because you want to make sure that your organisations are run effectively, that they have the right governance frameworks in place, which then ensures that the right audit committees are set up and the right questions are asked, and ultimately, the financial reports that are audited deliver the level of confidence that is required. That is an area of concern that needs to be addressed for the future,” he says.

Building capacity within the profession is an ongoing challenge, both in terms of practitioner numbers and within audit regulators. “When we tend to talk about the future of audit, we quickly move to evolution and we start talking about technology and new trends and artificial intelligence, but I think for Africa it's very important to really be clear about the basics, in terms of some of the challenges that we face,” says Jamil.

“Then we can begin to look at how we address them.”

Auditor education and the incorporating of more technicians and specialists into the profession is something he believes will play a part in solving Africa’s audit challenges, and that it’s also important to acknowledge that unpredictability will also be with us for some time. “The audit profession needs to be ready to be able to adjust and adapt to the constant change that we are going to be seeing,” he says. “I think this needs to be reflected in how we continually develop the skills of our people to be able to be ready and relevant in the future. We cannot continue to be complacent as auditors. There has to be an element of soul searching and going back to understand our role and how we need to adapt to meet the needs of those who consume the audit report.”

Ultimately, he says, this requires real change from all players in the financial reporting ecosystem. “It's not simply the work of one party. It has to be everyone involved in that ecosystem,” he concludes. l

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CFO PERSPECTIVES

TIME FOR AUDIT FIRMS TO RETHINK HISTORICAL MODELS Ascendis Health CFO CJ Kujenga says audit needs to add business value and to grapple differently with complexity.

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udit firms have to really rethink their historical model if they want to be future fit, or even “current fit”, says CJ Kujenga, CFO at Ascendis Health. She believes the traditional business model of hiring in recruits with accounting degrees straight out of university and putting them through a three-year programme to churn out CAs does not take into account the complexity of business or the need for lateral thinking.

CJ has experienced audit from both sides of the boardroom table. Before she took up her first CFO role (at Adcorp in 2017), she had served as an audit partner and the strategic growth markets leader for Africa at EY. “My concern is that we bring in really bright students and almost ‘dumb them down’ immediately because we make them focus solely on this tick-box approach to an audit,” she says. “Yes, there are regulatory requirements, but unless we allow people the room to think – to really understand a business, its strategy, its business model – we’re creating a group of people who can’t grapple with the complexity of modern business.

“Auditors need to think beyond the signing of an audit report. They have to start thinking in a more sustainable fashion about the business in five or 10 years’ time. Otherwise, we’ll continue to have the ‘surprises’ like Steinhoff and the other corporate failures we’ve seen in recent years.”

CJ believes that a major part of the problem is that the auditing business model is very risk averse and designed to view the world in black and white. “It’s a very rigid model coming up against a rapidly evolving and increasingly complex commercial world,” she says. “You can’t respond effectively to complexity by assuming there is a structure to do so. This approach might work 80 percent of the time, but the problem is that the remaining 20 percent often has more of a significant impact on the fundamentals related to the business sustainability perspective than the audit was able to absorb from a complexity perspective.”

While there’s been much talk in the industry of the audit product needing to evolve, CJ says this cannot happen until the business model changes. “We need to move past the idea of bringing in a bunch of people who have all done a similar undergraduate degree, who all see the world in the same way, and who are given a black-and-white checklist and told that’s all they need to think about,” she says.

“The way audit firms recruit, train and incentivise needs to evolve. We need to bring in people who think differently. It doesn’t all have to be accountants. And there has to be a more solid focus on understanding how business works.”

New skills for a changing world While CJ says the exact skills required will differ per industry, audit teams should include people who are not only focused on the numbers, but who have real business insight or experience. “We need more diverse teams – people who are lateral thinkers who can ask different questions; people who have more experience in certain aspects. Even allowing your trainees to come in and be curious about organisations will mean they will ask different questions.”

The fee model is a big part of the problem, CJ says. The hours-based approach encompasses only the regulatory and compliance measures and steps and doesn’t allow space and time for looking deeper into how the business functions and what the sustainability risks are.

“Probably 75 to 80 percent of the audit procedures can be regulated or automated, but the reality is that there's an additional 20 percent that actually is more of an art,” she says. “There, you've got to make sure that you’re tapping into proper understanding of the business and asking questions beyond just the finance teams.

Spending enough time really immersed in an industry and in a business is where you get to understand the risks, which might come from the culture and how decisions are being made. It’s a different way of thinking about an audit.”

Starting the shift CJ says that for this shift in auditing to take place, the regulator has to allow audit firms more flexibility in their approach and in the skills they source. “There’s been this great call for separation of external audit from advisory parts of the business in audit firms. I’ve got a very different view,” she says. “I actually think that if you had more advisory-type thinking and partners in audit, you’d get more value and start to see what the proper issues are in businesses. The challenge is that the way that the firms are set up – their pricing models, etc. – makes that very difficult.”

She says audit pricing should take a leaf from consulting firms, which tend to offer a value- or solution-based pricing model rather than an hourly fee model. “They can then have the flexibility to bring in the right skills, the right expertise. When auditors go in to do an audit, they should be thinking of the problem statement being, ‘Is this business sustainable in the medium to long term?’ not just, ‘Is the historical data that we need there?’ but ‘Is this business being operated in a way that is going to be sustainable?’.”

CJ believes that as ERP systems continue to evolve towards continuous auditing, external auditors will

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“I actually think that if you had more advisory-type thinking and partners in audit, you’d get more value.”

need to focus less on financial and historical data and more on making management aware of business risks and problems in the business.

“I’ve been involved in businesses where I’ve come in and found all these issues, and I’ve asked where management and the board were, but also the auditors, because the auditors would probably be able to show me a clean audit file, with all the relevant supporting documentation. But when decisions were being made to spend money that the business could not sustainably have had, when delays were being made around repayment of certain debts, why were they not flagging the risks?

“I’m not expecting the auditors to be the primary owners. In this ecosystem, the board has a role to play; management has a role to play. But I do think that I would find a lot more value in audit if I felt like the things that kept me up at night were the same things that keep the auditors up at night. But that’s not always the case.”

New ways of thinking CJ believes that if audit firms are to survive, they

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need to adapt to changing user needs and embrace new ways of thinking. “I feel very strongly that a lot of people see the world in black and white: they say, this is problem X and you can solve it by applying best practice Y. However, the reality is most problems are not like that. Many problems have a lot of grey in them.”

She says that undergraduate degrees need to teach a different method of problem solving for when the answers are not known. “We need to teach how you take steps forward and how to get comfortable navigating in a world where you don’t have all the answers, but you’ve got to make solid decisions,” she says. “A lot of that comes with experience, and that’s fine. But as we’re looking at what’s happening with business today, with innovation and change, it’s important to start bringing some of that disruptive way of thinking into our accountants’ minds.

“We need to arrive at a new, automated, high-value business model for audit, which leverages technology to automate routine processes in the audit, thus allowing people to have more time to understand the companies and more opportunities to provide increased value to them.” l

CFO PERSPECTIVES

OPTIMISE BEFORE YOU DIGITISE Digitisation offers massive benefits but requires strategic thinking and infrastructure investment, says Exxaro FD Riaan Koppeschaar.

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s business evolves, so too must audit methodology and the audit product itself, says Riaan Koppeschaar, finance director at Exxaro Resources. Whereas auditing has to date concentrated on providing assurance focused on financial information, Riaan believes the industry will need to begin to address other market needs, such as audits related to climate change or ESG investing. As one of the largest South African-based diversified resources groups, Exxaro needs to keep ahead of such developments to ensure the company’s long-term sustainability.

From an auditing perspective, Riaan says the company has worked hard to stay ahead of the curve and had already moved its financial systems to the cloud before Covid-19 struck. “I think that was obviously a big positive,” he says. “With the onset of Covid, when we had to audit in the cloud, it was possible for people to get access to the various systems remotely, to extract information, and for us to give access to the auditors.”

Nevertheless, given that Exxaro’s business takes place across several sites, including mines at various different locations, undertaking the entire audit virtually was no easy task. “Obviously, there were challenges like physical asset verification – things like stock counts,” he says.

However, between the Exxaro team and the auditors, resourceful solutions were employed. “Where there were locations where auditors could not get onsite, we had our people video calling with them on the phone and the auditors would direct them to what they needed to see, so they could show them the stock and verify serial numbers and things like that,” says Riaan.

“And in our new Belfast mine, which we commissioned last year, it’s very much digitised, so we already had a drone system in place to manage stock counts.”

Drones do flights over the mine’s stock piles to survey them, and then the data is fed into auditing software that automatically calculates stock volumes and attaches values to them. In the long term, this not only cuts down on costs and improves efficiency, but also ensures that people don’t have to risk their safety by manually venturing into the stock piles.

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“In some of our audit processes we’ve also implemented robotics to run the process,” says Riaan. “Auditors are now using more and more robotic tools to perform audit procedures, which means that whereas in the past they were only doing samples on a manual basis, they can now run through our whole database to provide 100 percent verification. I think that’s one of the changes that we will see more and more in future.”

Riaan believes that this will improve audit quality, and that cloud-based systems are more secure from a data management perspective. “You've got a central repository of all the information that you can retain – it’s not spread over different servers, all over the place.

And then over the longer term, there are also cost benefits associated with the cloud and software-as-aservice. You don't need to buy servers anymore and you pay for what you use. It’s a much more scalable model that ensures you’re not paying for idle capacity.”

Investing in digital transformation Of course, moving the audit online meant Exxaro, like many other organisations, had to beef up its IT infrastructure and its cybersecurity.

“I think the big thing that people underestimate is the need for a very strong ‘backbone’,” he says, referring to the connectivity required to ensure digital systems are able to function. “It doesn’t help you try to audit virtually or do these things in the cloud and you've got an unreliable Wi-Fi system.”

While this may sound like common sense in an office environment, Exxaro’s connectivity needs extend to harder-to-reach areas, like underground mining operations. “We’ve had to install WiFi underground in some of our mines, so we’ve been investing in 5G networks, which initially comes with a capital outlay, but if you don’t have that you’re not going to be able to get the benefits of digital systems,” he says.

Exxaro has been investing in digital transformation of more than its financial systems and asset management.

It’s also been working to digitise certain aspects of the HR function, as well as its supply chain. Riaan says it’s important to prototype the solution and trial it in

“Auditors are now using more and more robotic tools to perform audit procedures.”

a specific part of the business to test its effectiveness before rolling it out throughout the group.

“To get the full benefit, you must have a holistic solution, not a ‘point solution’ that only addresses one area, but not the whole value chain. If you’ve got an inefficient process, it doesn’t help you to digitise it – then you just get garbage faster. You need to optimise the whole process first, otherwise digitisation is not going to assist you,” he says.

Exxaro went as far as sourcing routers and dongles for employees during the hard lockdown to ensure they were connected. “It’s important not to assume that all your employees have access to reliable internet,” he says. “Of course, a challenge that’s more unique to South Africa is that all of this sounds very nice, but you run into major problems when loadshedding happens and people can’t get into digital meetings or do their work.”

The human role Despite the drive towards digital transformation, Riaan believes that completely virtual audits are not necessarily ideal and that a hybrid model is more likely to be adopted in future. “I think it’s still good to have a human interface and that there will always be some kind of personal contact required,” he says.

Even where digital solutions can be employed for the sake of cost, accuracy or human safety (such as drone surveying of stockpiles), Riaan says that auditors might still undertake site visits, but run many of their processes virtually at the site.

“Keeping contact with teams and connecting with people and giving feedback – that is still very important, and I don’t see that changing,” he concludes.l

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PRIORITISE PERFORMANCE The dtic’s Shabeer Khan says the future of public sector audit is performance auditing, moving beyond a check-box mindset.

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habeer Khan, CFO at the Department of Trade, Industry and Competition (dtic), says that audit remains an extremely important assurance tool that ensures accountability, whether in a listed entity or within the public service.

This assurance needs to meet the needs of various stakeholders, from the board and its sub-committees, to investors and regulators. In the public sector, the stakeholders include every taxpayer in the country.

value. They can provide timely information on where things are working or not working, so that these can be addressed timeously.”

“Irrespective of which direction audit evolves into, it's important that with each step in this direction, we ensure that the expectations of the different stakeholders are met,” he says. “As a CFO, I would want to see the future of audit keeping pace with the rapidly evolving business environment as new technologies are deployed. As technology moves the world forward, it’s becoming more important that auditors are abreast of these technological developments.”

“Continuous auditing tools assist the business quite early on to understand whether there are any weaknesses or irregularities,” Shabeer says. This allows businesses to understand what is happening in realtime, rather than waiting until after the financial year-end and an auditor providing an opinion on the state of affairs for the past 12 months.

Shabeer has been CFO at the Department of Trade and Industry since 2013 and continued in the role of CFO in the newly formed Department of Trade, Industry and Competition in 2019. He also serves in various governance roles as a non-executive director of the Coega Development Corporation and on numerous audit committees.

Before that, he served in various roles in the Office of the Auditor-General of South Africa. He thus has a solid understanding of the broader public services audit ecosystem. In fact, he was one of the eight candidates shortlisted for the position of AuditorGeneral in 2020, and scooped three awards (Young CFO of the Year Award, the Public Sector CFO Award and the Compliance & Governance Award) at the 2020 CFO Awards.

Shabeer says that auditors need to work side by side with business leaders to evolve the audit product and to close expectation gaps. He also believes that the role of internal audit needs to be emphasised. While it is accepted within the financial reporting ecosystem, it is not fully understood by the broader public.

“When we see business failures, the tendency is for the public to look only to the external auditors. While they have an important role, I think we need to find a way of elevating the role of internal audit,” he says. “Internal audit is closer to the business, and can add a lot more

He believes that addressing this public expectation gap requires both audit assurance providers working hand in hand. He is also an advocate of continuous auditing.

Real-time corrective measures

“That’s almost too late,” he says, “Where I see the future of audit is as a tool to effectively provide realtime information, which will then enable the business to proactively implement corrective measures as and when required, rather than dealing with an issue at a later stage.”

The future of public sector auditing Shabeer says that the Auditor-General plays a key role in building a capable state. A capable state is a state that is free of corruption, delivering on its constitutional mandate and dealing with the challenges of poverty, under development and facilitating economic growth.

He believes that to fulfil this role effectively, national audit offices should consider moving from statutory regulatory audits towards value-added performance auditing, something which South Africa’s national audit office has done well.

“It’s all well and good to receive an unqualified audit opinion, but in the public sector it is also important to ensure that monies that were appropriated for a specific purpose have been spent in accordance with that purpose,” he says. For example, if funds were set aside for the provision of human settlements, were the monies actually spent on housing; were the houses of the right quality and was value for money achieved?

“Performance auditing moves beyond just making sure the numbers are correct; it’s focusing on service delivery,” Shabeer says, adding that many national audit

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“When we see business failures, the tendency is for the public to look only to the external auditors.” offices have now adopted this approach in mature environments and economies.

“We need to move past the compliance ‘check-box’ mindset and ensure that whatever we do, we add value,” he says. “That's where performance audits play an important role in promoting an innovative state, and also advising, for example, which laws and regulations are prohibiting the country from growing.

“My observation is that we need to have a state that is performance driven, rather than compliance driven.

Because, at the end of the day, you don't want a noncorrupt or a compliance-driven state that is ineffective.

Or an effective state that is spending huge amounts of money, which is wasteful expenditure. You need to have that balance.”

A collaborative effort Shabeer points to the dtic’s industry masterplans as an example of the power of collaboration between government and its social partners. “While the

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state has an extremely important role to play in driving change, we will only see success through collaboration,” he says. “If the state is moving in one direction and business or labour moves in a different direction, success may be difficult to achieve.”

The state’s role includes ensuring that success is inclusive. Shabeer says that the Auditor-General of SA plays a critical role in ensuring that government priorities are achieved. For example, the Preferential Procurement Policy Framework Act mandates public sector procurement of locally manufactured goods in certain sectors. Another example is the state’s commitment to paying SMMEs within 30 days.

“The Auditor-General of SA ensures, as part of its regulatory and compliance audits, that these fundamental compliances are adhered to,” says Shabeer. “So, as the state deploys various policy instruments to ensure economic growth towards building a capable state, the Auditor-General of SA's role becomes imperative in ensuring that these policy and regulatory instruments are adhered to.” l

CFO PERSPECTIVES

GETTING SPECIFIC Nico Esterhuizen, the CFO of JAM International, says non-profit accounting holds subtle but important differences from its commercial counterpart.

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Joint Aid Management (JAM) International is an African humanitarian aid and development group of organisations that works across the continent, with various different programming efforts, and we are supported by fundraising offices in eight countries, mainly in the northern hemisphere, opening one or two more in the near future,” explains Nico Esterhuizen, CFO of the organisation, and chairperson of the Association of Chartered Certified Accountants (ACCA) South Africa.

ensure the reporting is understood in its context.

Nico adds that large donor partners, such as the UN agencies, have their own reporting and auditing requirements too. “For example, in Uganda we work in refugee camps, and a contract with a UN agency, such as the Food and Agriculture Organization (FAO), will mean for the contract alone, a registered external auditor in Uganda will be appointed to audit the project, adding more auditing time to the organisation,” he says.

“Each one is a separate legal entity because, unlike commercial businesses, we can’t hold shares, and there are more entities that you might want to have in a similar sized commercial business. And many of them have their own accounting standards and auditing requirements.”

To try to simplify matters, JAM International works with an audit firm with global presence – Grant Thornton (in South Africa known as SNG Grant Thornton). “That helps us to gain efficiency and reduce some of the time spent auditing,” Nico says.

For example, the JAM International office in the USA must comply with US Generally Accepted Accounting Principles (GAAP), and any other NGO accounting standard that might be required by the state of Washington. Each office is required to meet additional tax and compliance requirements. “For example, in South Africa, our local entity is subject to the Companies Act, and needs to meet various SARS requirements to be able to maintain its Public Benefit Organisation (PBO) status (to issue Section 18A certificates for tax deductions to donors),” Nico explains.

This level of complexity affects how multinational charities structure their operations. For example, JAM International has set up its primary office in Mauritius.

“Foreign exchange is not controlled as tightly as in South Africa, so it’s much easier for me to send dollars to our programmes in South Sudan than it would be through the SARB,” Nico says.

Some countries have specific NGO accounting standards that must be met. In other countries, JAM International complies with International Financial Reporting Standards (IFRS). Nico notes that these are commercially focused standards. “As NPOs, however, our income statements for reporting purposes would be quite different from our statements that we would use for management accounting,” he says.

JAM International spends time communicating and explaining these differences to its stakeholders to

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Grant Thornton’s offices have NGO divisions, and Nico says this is helpful, as income may look different for NGOs (for example, goods in kind). Having non-profit experience is helpful in understanding the business model and the type of transactions that take place.

Nico says that it’s important for the auditors to understand things like the finance, insurance and deal structures peculiar to non-profits, which involve a degree of complexity. “NPO accounting is not just money in and money out,” he says. “Goods in kind can easily make up 50 percent of income. You need to understand what you’re reading – that it’s not necessarily accrual accounting. It might be a mix of accrual and receipt – or ‘service-based’ accounting.”

Mapping the future of NGO auditing He believes that 4IR offers both opportunities and challenges for the NGO sector, as for all other sectors.

“It gives us the opportunity to reach more people at a lower cost through the use of technology,” he says. “But technology also opens up new risks, which external auditors will need to assess. And they’ll need the skills to do that.”

SNG Grant Thornton is already undertaking IT application and general control audits for JAM International, as Nico believes the NGO is moving towards being more of a technology-driven business, not only in its back-office processes, but also with regards to programming.

“Technology also opens up new risks, which external auditors will need to assess.

And they’ll need the skills to do that.”

This can be challenging in areas with limited access to connectivity, which is why JAM International is investing significant capital into satellite and mobile technology.

The value of ACCA Nico, as an ACCA qualified fellow chartered certified accountant and chairperson of ACCA in South Africa, says he finds great value in his association with the organisation, particularly in terms of research. “ACCA is the world's largest professional accountant body, and has tons of valuable research available to members that we can pull from,” he says. “That adds real value for me, as I’ve been able to use this research for my own decision-making in the business.”

ACCA’s global presence and structured continuous learning approach means that hiring an ACCA qualified accountant ensures consistency, Nico says.

“Consistency in itself leads to better results. And then there’s the value I find in the preparation ACCA is doing for the future. For example, what happens if blockchain becomes the norm? How do we prepare for that?

ACCA makes a point of keeping us abreast of what’s happening and how to prepare through continuous learning and research.”

Nico says ACCA also opens up additional routes into the profession for people who might not be able to pursue the traditional path through a university degree.

“Many people don’t have the option of a university degree purely due to logistical issues,” he says. “ACCA allows you to become a world-class professional accountant in a different kind of setup, getting the same kind of knowledge, and the same standards, but in a different format. It is one of the main benefits that it brings to South Africa, which I hope more people will embrace and make use of.” l

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EVOLVING AUDIT

CLIMATE REPORTING ASSURANCE Audit will play an expanded role in fraud identification and sustainability reporting, says EY Africa CEO Ajen Sita.

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jen Sita, CEO of EY Africa, believes that digitisation is clearly a significant business trend shaping the corporate landscape globally, and that as companies automate their businesses, both the approach and the nature of the audit product will have to evolve.

“Instead of looking at the traditional approach of sample testing, we are now able to understand whole systems and whole populations of data, which means data is going to become a critical part of the future of audit,” he says.

Ajen has spent his entire career at EY (apart from working for a clothing store during his holidays while studying) and has certainly had the opportunity to consider the future of audit. In addition to his current role, he is part of the EY EMEIA Board, Global Emerging Markets Committee and Global Accounts Committee, and previously he led EY Africa Assurance services.

Ajen is chairman of the Thuthuka Education Upliftment Fund, which drives the race and gender transformation of the accounting profession in South Africa.

“The audit product itself will need to evolve too, to deal with two areas that it hasn't addressed historically,” he says. “The first is the expectation gap around fraud.

We are seeing poor economic conditions around the world and with the resulting pressure, there is a rise in corporate fraud. Auditors need to play an expanded role in identifying and reporting on this fraud.”

He also believes that the focus on long-term value reporting and on climate and sustainability will become critical. “One of the many lessons coming out of the last number of years, and the pandemic in particular, is that we've got to pay more attention to the environment, whether it comes to energy security, food security or just the wellbeing of the population as a whole,” he says. “Companies will only attract capital if they are progressive in their environmental response – and will have to report to stakeholders about what they're doing.

Naturally, there will be an expectation that auditors will provide assurance around those sustainability and climate reports.”

However, before audit can begin to play a bigger role in this regard, Ajen believes significant work needs to be done to understand the root causes of the largescale corporate fraud and company collapses that have

dented trust in the profession, and to rebuild that trust.

“In a globally connected and digitally enabled world where transactions are happening in real time, the glue that holds it all together is trust,” he says. “The world is calling for greater levels of trust and transparency because we're having to transact and interact in a digital way. Consequently, audit will continue to be relevant now and into the future, but its role will evolve to play a broader role in trust in society – going beyond just trust in financial statements, to new levels of trust in dealing with all sorts of interactions, from online purchasing to banking and government liaison.”

Audit in Africa When it comes to audit within Africa, Ajen says there are both challenges and opportunities. “African economies today are strongly connected into the global community. In fact, it is well reported that intra-Africa trade is less than 15 percent of all trade and that most of our trade is with other markets of the world,” he says. “That is important because the factors that are playing out in the rest of the world are also playing out in Africa.”

However, he says there’s no denying that Africa continues to suffer significant shortages, not just of suitably qualified chartered accountants, but also of technology professionals. “I believe that addressing this critical skill shortage is fundamental to a sustainable and viable profession and underlying economies in the various countries on the continent. We have a strong opportunity too, as Africa houses the largest percentage of young people of the world, and so we should be focusing on investing in the education of our young people and building the future skills they will need. The world will need it. Given the ageing populations of the mature markets, for their skills requirements in the next 10, 15 years, they will come to recruit from Africa, and we must be ready, not only for our own needs but for the world at large.”

Working to create a bright future for audit According to Ajen, the market opportunity today and into the future for audit continues to be strong.

“It is therefore important that as firms, we evolve that product to be responsive to the future needs of investors and broader sets of stakeholders.

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“In a globally connected and digitally enabled world where transactions are happening in real time, the glue that holds it all together is trust.”

Those evolutions include increasing investment in digitisation, greater levels of diversity of skills that are embedded in the core audit product from accountants to engineers, to technology people, and including climate change and sustainability skills into the core audit product.”

The audit business remains EY’s single largest business globally. Over the last three years, the company has invested in excess of a billion dollars in new technologies and methodologies to modernise its audit product. “Today, our audit teams are globally connected in cloud-based auditing tools and have shifted the balance of audit work from physical testing of samples to the digital world of a hundred percent population,” says Ajen. “The firm has taken active steps to build strong pipelines of future recruits through programmes that are conducted at a school level to create an interest in the profession through bursaries, mentorships and even lecturing at universities to

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inspire future generations of chartered accountants, as well as technology skills.”

He emphasises the need for collaboration on this front.

“We realised this is something we can't do on our own and we work in partnership with industry bodies, such as SAICA and their Thuthuka programme to transform the profession, and also ensure that we are representing the demographics of the market in which we operate.”

He believes that it is the responsibility of all stakeholders – the profession, the regulators and other parties in the value chain – to create a positive future for audit. This should include creating the conditions to attract and retain talent in the profession, ensuring that the audit product is evolved to meet changing market demands, and developing a stronger ecosystem of auditors, boards, regulators and others charged with governance to ensure trust in the capital markets system. l

EVOLVING AUDIT

TRANSPARENCY TECHNOLOGY AND TALENT Business is becoming increasingly complex, and audit needs to evolve accordingly, says PwC Africa CEO Dion Shango.

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The pace at which the world is changing is mind boggling, and the need for change in audit is clear,” says Dion Shango, CEO of PwC Africa.

“The question is what form that change should take.”

Dion believes that the starting point should be working to address the audit expectation gap, including educating users of the audit product on its limitations, as well as evolving the audit product to meet shifting user needs.

PwC’s three Ts In preparing for the future of audit, Dion says there are three key themes on which PwC is focusing: transparency, technology and talent.

“What I mean by transparency and openness is that the more that people see how audit works, how it fits into the financial reporting ecosystem, the better. And we as PwC certainly are committed to being as open and as transparent as what regulation and competition law would permit. We are also committed to expanding audit so that it meets a wider set of stakeholder needs, as opposed to just the traditional shareholder,” Dion explains.

“Just as technology is transforming how our business works, it is also placing new demands on us as auditors.

It's transforming the way we audit. And it's enabling the type of step changes in the speed or the nature of auditing that we would have never imagined a couple of years ago.”

When it comes to the issue of talent, Dion says that audits will only ever be as good as the auditors who are doing the audit work on a day-to-day basis. “What that means for us at PwC is that there has to be a huge focus on culture and values. And we need to continue to invest in making sure that we have specialist skills, that as an organisation we promote the boosting of social mobility, and that we’re making sure that people are given the type of opportunities that will see them grow and develop,” he says. “Most importantly, we need to ensure that there is a good dose of diversity and inclusion within our firms to ensure that we take into account as many perspectives as possible.”

Interestingly, as PwC Southern Africa has grappled with the advent of mandatory audit firm rotation (MAFR) in South Africa, Dion says that despite the cost and disruption involved, one benefit has been the effect on culture at the firm.

“Your typical auditor is not very good at sales,” he says, smiling. “Having to go out and sell yourself and justify why you want to be the new auditor of a particular organisation is daunting and challenging for most of us in this profession. This has been a fantastic opportunity for us to develop the skills of auditors in

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slightly different ways, and challenge them in different ways. Some people have found it incredibly difficult, but invigorating and refreshing in other ways. I think MAFR has a positive impact on our culture, with people really being a lot more passionate about the brand, about the firm, about what it is that we do, and how we articulate the value and quality that we bring to our clients.

The benefit is that auditors are getting much better at telling the story of what it is that we do, how we add value, and why we should continue to see audit as a profession that is necessary within society.”

Shifting understanding of public interest Whereas traditional definitions of public interest tended to centre on the needs of capital markets and providing reliable financial information that could be used by shareholders, Dion questions whether this definition is still widely accepted and fit for purpose.

He says there’s a need to debate whether more should be done to address the need to assess the viability of a company's business model in the future, and not just its historic performance, as recorded in the financial statements.

Furthermore, he says, investors are increasingly looking at non-financial information to assess companies.

“There's a question about the extent to which that information requires assurance from an audit – is it something that should be built in?”

The public conception of public interest also increasingly includes issues like sustainability and social impact, which are not areas traditionally focused on in an audit report. These issues could potentially fall under the purview of statutory audit, rather than just the quality assurance that some companies provide from time to time, Dion notes.

Prioritising education and ethics Dion acknowledges that no one actor in society possesses all the knowledge, skills, tools and resources to be able to create a successful future of audit alone. “It's quite clear in my mind that we have to constantly and continuously work collaboratively with the academic fraternity, those that are responsible for the early academic training of our future talent, providing us with the skills pipeline that we need,” he says. “When I say academic fraternity, in my personal view, that means going down all the way to school level, and interacting much more frequently with the schools, with our stakeholders, such as the Department of Education, making sure that the way in which the syllabus is designed and taught is in a way that will equip our kids with the type of skills that they will need to add value in a fast-changing business world, and make sure that they are fit for the future in terms of their knowledge and skills.”

“Having to go out and sell yourself and justify why you want to be the new auditor of a particular organisation is daunting and challenging for most of us in this profession.”

Dion believes that society as a whole must “double down” on ethics and integrity – from the way honesty and integrity are taught from a young age at home.

This directly impacts on the quality of people entering the audit profession. “It’s important that we go back to basics in terms of how we raise our children, and teach them about the fundamentals of what is right or wrong,” he says. “This is incredibly important and should not be underplayed.”

In a similar vein, and pointing back to the theme of transparency, Dion says that just as auditors should debate their role in providing assurance over nonfinancial measures, including ESG, they also need to report on their own ESG measures. In this regard, PwC announced in 2020 that it plans to reach net zero carbon emissions by 2030. This will affect how the firm does business, from minimising travel to relooking its real estate, but with more than 280,000 employees

worldwide, Dion says the firm does not underestimate its social impact.

An exciting future While many discussions around the future of audit focus on challenges on the horizon, Dion flags that it’s important not to lose sight of the opportunities. “There is a fantastic opportunity that should not be missed by the auditing profession to reposition itself, and to once again reassert why it has been such a critical pillar of society for more than 100 years,” he says. “Yes, the profession has gone through challenges from time to time and this is not the first time it will have to evolve and adapt to the changing world. I have no doubt that it will once again rise to the occasion, through focusing on the right things, embracing technology, and always putting quality as our number one priority. It’s exciting times, the way that I see it.” l

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BRIDGING THE EXPECTATION GAP The IRBA’s Imre Nagy says the future of financial reporting is comprehensive regulation and accountability.

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he future of audit should be linked to the fundamental purpose of financial reporting, says Imre Nagy, the acting CEO of the Independent Regulatory Board for Auditors (IRBA). “The purpose of an audit is to gain confidence in financial statements and reports by investors,” he says.

But while the purpose remains the same, Imre says the audit product needs to evolve. It needs to develop alongside business as the world changes, and remain fit for purpose.

Imre says that this evolution also needs to address the expectation gap. Referencing a report published by the Association of Chartered Certified Accountants (ACCA), Closing the expectation gap in audit, he details three types of gaps. “The ‘knowledge gap’ is the difference between what the public thinks auditors do and what auditors actually do; the ‘performance gap’ is the difference between what auditors do and what they’re supposed to do; and the evolution gap is the gap between what auditors are supposed to do and what the public wants them to do,” he says.

Independent Audit Regulators (IFIAR) was established.

South Africa is a founding member and works alongside 53 other countries to serve the public interest, including investors, by enhancing audit oversight globally.

Sadly, several high-profile audit failures have again rocked the world over the last few years, proving that there is yet a long way to go. Cases like Wells Fargo in the USA, Carillion in the UK, and Wirecard in Germany show that this is a global issue, not just a South African one, Imre says. However, he admits that the frequency of audit failures in South Africa remains high, and a cause for concern.

Rebuilding trust As IRBA works to rebuild trust in the profession, Imre believes that the new leadership and new strategic plan will help to bring about necessary changes. The Auditing Profession Amendment Act (APA), signed into law by President Cyril Ramaphosa on 23 April 2021 and gazetted on 26 April 2021, will also help.

The future of audit also needs to be considered in the context of the broader financial reporting ecosystem, Imre says. Auditors are only one link in the governance chain and cannot replace other controls that should be in place. This is why one of the three focus areas of IRBA’s refocused strategic plan for 2021 to 2025 is comprehensive stakeholder engagement, focusing on driving broader reforms in the ecosystem, including a framework for comprehensive regulation. The other two focus areas are audit quality, and sustainability and relevance of IRBA and the audit profession.

Imre explains that the amended APA gives IRBA the necessary powers to deliver more effectively on its mandate by strengthening its independence, investigative and disciplinary processes, and removing some of the former limitations of the APA. Significant changes introduced include:

Comprehensive regulation Comprehensive regulation was one of the pillars of the previous strategic plan and something to which IRBA remains committed. IRBA in itself is a step towards this goal. Previously, the accounting and audit professions were both governed by the Public Accountants and Auditors Board (PAAB), which was self-regulated and had limited powers. Then, in 2005, South Africa became one of the first countries worldwide to adopt independent audit regulation and to create an independent regulator under the Auditing Profession Act (Act 26 of 2005). The newly formed IRBA had powers to lay down regulations and set standards, although it no longer incorporated oversight of the accounting profession.

Independent regulation aims to ensure audit quality is upheld, which is why the International Forum of

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he power to enter and search premises for the T purpose of seizing information relevant to an investigation;

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he power to subpoena persons with information T that is required for an investigation;

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he power to refer non-audit complaints for T investigation to registered accredited accounting bodies; and

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tricter monetary sanctions in relation to both S investigation and disciplinary outcomes.

The last point in particular releases IRBA from the previous restrictions of the Administrative Fines Act, which capped its fines at R200,000 per charge. The amendments to the regulation mean that the Finance Minister is able to set maximum fines, which gives IRBA the ability to impose more serious consequences on members it deems to require discipline. It is also now able to establish multiple disciplinary committees, which will increase capacity to tackle complaints and convene more than one disciplinary hearing at a time, thus ensuring that disciplinary matters are dealt with expeditiously and without undue delay.

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“The ‘knowledge gap’ is the difference between what the public thinks auditors do and what auditors actually do.”

Referring complaints not directly related to audits to other professional bodies will also free up capacity in investigations.

Imre is philosophical about auditor discipline. “If I drive a Ferrari and the maximum penalty for speeding is a R200 fine, I’ll pay the fine to enjoy the car if that’s the worst that’s going to happen,” he says.

“Unfortunately, increasing regulation and fines does affect the attractiveness of the profession. But we’re not doing it to make life difficult for auditors or make the profession unattractive. Regulators have to react to what investors are asking us to do, which is to do more to protect them, especially after experiencing catastrophic corporate and audit failures.”

Relooking remediation IRBA has also relooked its remediation practices. For more than three years, Imre says, the regulator has been working with firms to drive remedial action, with very limited results. “Our Inspections Committee even referred some firms for investigation, as well as to the board, where we’ve seen no improvement,” he says. “The board is empowered under section 4 of the Act to take any steps it believes necessary to protect the public, which can extend to suspending a firm’s licence to take on audit work. Although it hasn’t been done before, we might see that action going forward.

The board has the power to embargo firms from taking on new clients, or to put the firm on notice with the intention to suspend its licence if it does not demonstrate an improvement.”

He says IRBA has also enhanced its remedial process with audit firms. While it previously required firms to develop remedial plans, it will now be inspecting the 38

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firms’ implementation and own monitoring of these plans. It is also motivating for the outcome of these inspections to be made available to audit committees.

Next steps While Imre says the global journey towards audit reforms has only begun fairly recently, IRBA is already planning for the next steps. “There are three more things that we are looking for in the next tranche of amendments to the APA, which will be considered by the National Treasury within the next two years,” he says. “One is to include the rule on mandatory firm rotation within the Act. We also want to remove the confidentiality restrictions on our inspection reports, and then we’re looking at any other reforms that will strengthen the audit profession in the country.”

Digitisation is also on the agenda. As the profession deals with the impact of Covid-19, which has seen audits taking place virtually, Imre says IRBA has also been adapting to new ways of working, with inspections taking place virtually. “The firms have been amazing at providing us with access to data, and we’ve also signed MoUs with other regulators to get access to other relevant data and information. I’d say one of the biggest milestones for us in terms of our previous restoring confidence project has been the introduction of audit quality indicators. We've just issued our second report in March.”

As more data becomes available, Imre believes that useful trends for both the regulator and audit firms will begin to emerge. “This will help firms, audit committees and us, as a regulator, to focus on areas where there’s potential risk,” he says. l

EVOLVING AUDIT

MANDATORY AUDIT FIRM ROTATION PLAN FOR SUCCESS Aspen Pharmacare’s Sean Capazorio says embracing mandatory audit firm rotation early was a strategic decision for Aspen.

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n 2017, the Independent Regulatory Board for Auditors (IRBA) issued the rule that public interest businesses must change audit companies every 10 years, thus introducing mandatory audit firm rotation (MAFR). The regulation is aimed at improving audit quality by helping to ensure independence, as well as increasing market competition. It comes into full effect in April 2023.

Aspen Pharmacare is a global speciality and branded multinational pharmaceutical company with approximately 10,000 employees at 70 established business operations in 55 countries. Headquartered in Durban, the company decided to embrace MAFR two years ahead of the implementation, which group CFO Sean Capazorio says was a strategic decision.

“We took the view not to leave audit rotation to the last minute, but to go two years early to enable a comprehensive and detailed tender and auditor selection process. Going early increased our leverage position, enabled competitive bids and increased our ability to select a high-quality audit firm and lead partner from a larger pool, which would have diminished in size as more companies started to embark on audit rotation,” Sean says.

The company had previously been audited by PwC for roughly 20 years across its global business and has rotated to EY. In South Africa, it employs a joint audit model and has rotated from SNG Grant Thornton to Motlanalo Inc. “We were not compelled to undertake a local rotation, but saw it as an opportunity to invest in and partner with another empowerment audit firm in their growth journey,” Sean says.

Auditing a multinational entity Given the fact that Aspen operates across multiple countries on different continents, the audit process can be complex. “For our group audit process, we follow an IFRS-based audit (International Financial Reporting Standards),” says Sean. “Everyone is audited against the same standard. Then, within each jurisdiction we’re subject to the local statutory requirements (including tax regulations) in compliance with local GAAP (Generally Accepted Accounting Principles). So, for example, Netherlands would be audited according to Dutch GAAP (for local statutory purposes) compared to Ireland, which is IFRS based.”

Sean explains that each jurisdiction has its own requirements, with some requiring directors’ reports, for example, or consolidation of all affiliate accounts (as is the case in Australia). “Obviously, tax is very specific

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to each territory and the tax audit would be very specific to each entity,” he says.

MAFR is not in place in all the jurisdictions in which Aspen operates, but Sean says it wouldn’t make sense for the South African based holding company to rotate and to keep the rest of the group with different auditors. However, he admits that not all the auditors in local jurisdictions were thrilled by the change, given their long-standing relationship with Aspen.

Lessons to date Sean was careful to emphasise that Aspen was still working towards finalising its first audit report with the new audit partners at the time of writing, but says that several lessons had already emerged from the process.

These may prove valuable for other firms as they prepare for MAFR. “I think step one is to understand what your internal stakeholders are looking for,” he says. “We made sure we sought out input from all of our regions before the rotation, and we put a detailed scorecard together so that we could sort of get a sense of who, on balance, would be the preferred audit firm. You don't want to go with a global partner and then realise down the line that they've got quality problems in a specific region. It is critical to get buy-in from the local regional teams.”

Sean says it’s also vital that the new audit firm must have the ability to comply with and implement a comprehensive and pragmatic transition plan. “We’ve found that EY had that – they had a very focused transition plan with detailed milestones and would keep us continuously updated on the various elements.”

If possible, Sean believes it’s also valuable to involve the new audit firm in the previous financial year review.

“Unfortunately, we couldn't really do that in our case because of Covid-19. But if the new auditor can shadow the outgoing one, it certainly would help a lot towards a more seamless transition,” he says.

“Managing any early substantive work is also very important with the new audit firm because if you try and leave everything to the year-end, you’ll run into problems. We've identified quite a lot of areas together with the firm where we could do early audit work on specific higher risk or more complex areas, so we don't have to worry about those at the end of the process.”

MAFR pros and cons Sean believes that no matter how well a rotation is planned or managed, it will always be a difficult

“I think step one is to understand what your internal stakeholders are looking for.”

process. “It is disruptive, it is very time consuming, and it’s also stressful,” he says. “The new auditors coming in have to learn your business from scratch and everybody is under time constraints.”

In Aspen’s case, the rotation also happened during Covid-19 lockdowns, which meant that there was limited scope for in-person introductions or engagements, which added an extra challenge.

“I think the key thing for us was to select an audit firm that had proper leverage across the globe so that if we had a problem, we could just go through one contact point and then they could rectify that in whichever jurisdiction,” Sean says. “But it’s not an easy process.

You've got to get to know each other and they've got to understand our business. However, on the positive side, it does give you an opportunity to relook things in a different way and also just to make sure that what

you've been doing has been checked by a second set of eyes. That gives you extra comfort.”

Sean agrees that MAFR has a role to play in the future of audit in terms of upholding audit quality. He remains unsure, however, whether the 10-year rotation period is optimal and suggests this may need to be reviewed in future. He does believe that having different (and possibly both correct) views from two different firms does make for a more well-rounded audit approach, but says that in an ideal world, there should be a “crossover” period where outgoing and incoming auditors could work together to give an audit opinion before a full handover. While he admits that this might not be practical, it would certainly enable a smoother transition and is something worth considering as firms prepare for MAFR coming into effect and plan their own rotations. l

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DIGITAL TRANSFORMATION

AUDIT: A VALUE-ADD, NOT A NECESSARY EVIL Audit innovation is about improving the user experience, says iOCO CFO Jo-Ann Pöhl.

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udit has moved from being “an event” to an ongoing partnership between the business and its assurance providers, says Jo Pöhl, CFO at iOCO (a wholly-owned subsidiary of EOH).

“Ideally, we should always be audit-ready, with a continued focus on enhancing financial discipline and sound governance, whether it’s internal or external audit,” she says. iOCO is the core ICT business of the EOH group, which is in the middle of completing its second year of virtual audits. “The group had appointed new auditors at the time of the first virtual audit, which added to the complexity of the process but enabled us to learn a lot,” says Jo. “This has enhanced our efficiencies for this financial year.”

Jo is a qualified chartered accountant (CA(SA)) and FCCA and professional banker of the Institute of Bankers in SA (PBSA). She believes that digital transformation is enabling greater value-add by streamlining the audit process and making possible reviews and quality assurance that extend well beyond sample testing.

Covid-19 has accelerated this. “The reality is that audit shouldn’t be about whether there’s a little black book with any bad tick marks against your name, but rather validating what we believe we’ve done in terms of an effective and enhanced control framework, delivering on our mandate as finance, as well as our fiduciary duties as directors and managers. Audit shouldn’t be a necessary evil, it should be a value-add,” says Jo. “I think Covid-19 allowed us to completely rewire how we think, thereby influencing how we operate.

When you have a crisis that forces increased levels of transformation and digitisation, what you thought would take months – maybe even years – is suddenly expedited and possible. We’ve become better at learning, unlearning and relearning, which has enhanced our understanding around what is being tested and why, and the alternative methods that could provide sufficient assurance. We were already working with computer aided audit testing programs and now completeness testing takes this to a new level.”

However, what was theoretical suddenly became practical and Jo says iOCO had to unpack what a virtual audit entailed in terms of people engagement, how to

file audit evidence and solve for issues like electronic sign-off. “How we interact, how assurance is gained or how audit evidence is gathered has changed, and I don't think we will go back,” she says.

Jo says the virtual audit process has driven a re-evaluation of what can be done more efficiently and effectively, from detailed planning to early testing, and real-time walk-throughs to test key processes or controls.

Planning and communication are paramount Jo emphasises that audit is a partnership. She notes that establishing relationships is trickier virtually than face-to-face and so, in the second round of the virtual audit, the finance team was deliberate about getting around the table with the external audit team before kicking off. They’ve also been intentional in communicating in-office days and hours and setting up regular check-ins across all component audit teams within the group, which comprises multiple entities.

“Planning upfront is critical: the combined planning between client and audit firm, and the various teams themselves. We identified ‘stream leads’ upfront from the finance team and for the external auditors. Where you’re trying to connect dots across multiple streams, having a single team lead has helped us be much more aligned and efficient,” says Jo. The process has also prompted the re-evaluation of information security and version control measures.

Jo believes that they will begin to see the full value of virtual audit from year three, based on the efficiencies, lessons learnt and groundwork laid.

Jobs yet to be created Jo says there’s a pervasive belief that as the finance function moves towards greater automation, jobs will be lost. But there is little focus on the jobs yet to be created. Automating routine tasks allows finance professionals to “step off the hamster wheel”, reflect more and spend time adding value by asking questions and gleaning insights from the data versus reporting on the past.

“We can ask ‘why, what if, or does it make sense?’ For example, if we leverage the automation of routine tasks,

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“I think Covid-19 allowed us to completely rewire how we think, thereby influencing how we operate.”

then our review and assessment processes allow us to move from reconciling to substantiation, and from reporting to insights. This changes the framework of what it is we look at and focus on as finance,” she says.

“We can run better scenarios around business planning, capital allocation, going concern and liquidity assessments, which are all key to closing out on the audit. This also impacts our capacity positively as finance partners, so that we can crunch the right numbers, validate our assumptions given the dynamic environment we are in and extrapolate a mediumterm view with options of what the trajectory of our business could look like. That helps us manage our business more proactively as opposed to reactively.

Agility has been particularly key under Covid-19.”

She says that automation allows for the better use of human capacity and capability. “Your greatest ideas

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generally come when you have enough time to really think.”

She adds that innovation does not have to be “the next big thing” like Uber or Amazon, but encompasses anything that improves user experience (UX). “It's about being stakeholder-centric and in our case, stakeholders include regulators, shareholders, revenue authorities, banking partners, suppliers and clients.

Auditors form part of this stakeholder group too, with audited financial statements still required as part of supplier onboarding processes, bid tenders and ensuring tax compliance.”

In conclusion, Jo believes that audit is an invaluable assurance function that will continually evolve as the profession continues to embrace and integrate digital automation. l

DIGITAL TRANSFORMATION

CAN BLOCKCHAIN REPLACE AUDIT? Doshex founder Alex de Bruyn believes that blockchain technology will begin to replace external audit.

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f transactions can be reconciled and verified in real-time, and be traceable, there will be no need for a third-party auditor. This is why blockchain technology will kill audit as we know it, says Alex de Bruyn, founder and CEO of Doshex, a South African company that was a Blockchain Trailblazer Award finalist at IBM Think 2020.

“Audit began with the mismanagement of trust,” Alex says. “People didn’t trust the books that one party held, so we then moved from a single accounting entry point of view to a double accounting entry point of view where both parties held a record of transactions. We then said we had to get independent people verify that those records were true. Basically, the more people we get to say something is correct, the more we can trust that it is true. The problem with that is we are still human and we’re still flawed and we’re still malleable to corruption, so, as recent history has shown us, there is still an element of mistrust with an auditor.”

Alex, who comes from a management accounting background, believes that with the evolution of technologies such as blockchain, mistrust between parties can be removed completely. “With blockchain, we no longer have to rely on third parties to either facilitate something or to confirm something,” he says.

“Simplistically, a blockchain is really just making sure that the records both parties hold are accurate and transactions are only confirmed to each other’s records if they do reconcile. Blockchain ensures everyone’s ledgers are in sync, accurate and valid – in real-time. A transaction cannot be completed unless it reconciles to everyone’s ledger and everyone agrees to that.”

Blockchain therefore replaces the need for an auditor, as verification happens in real-time. “With blockchain, we can inspect transactions independently. We don't need to trust third parties to get audited for us,” he says.

“Blockchain deals with the idea of data mistruth in realtime. We can understand what did or did not happen, as it happens. The consequences of that may still require a human opinion or judgment to be passed, but that’s the role of a judge rather than an auditor. What blockchain does is take the issue of inaccurate data off the table.”

There is a caveat, however, which is that many enterprise blockchain solutions cannot guarantee the quality of the inputs into the system. Yes, everyone might agree that a data entry is correct and so it will be logged, but what if everyone was wrong? There is still room for human error. Alex’s company, Doshex, provides a smart contract solution called Sherlock, and this seeks to remove human error at every point in the system by using technology like IoT and biometrics to verify data.

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A case for Sherlock Sherlock was born out of trying to remove the complexity and lack of transparency from enterprise contracts management in the construction sector.

“In construction, there are so many opportunities for mismanagement and a lack of trust between parties,” says Alex. “Nobody knows in real-time what’s actually happening in everyone’s systems. With Sherlock, we built three layers. The first one is what we call the blockchain event log. That takes any data point, whether it’s general telemetry, IoT devices, systemic inputs – anything that's happening in-field, across systems, across the processes – and it captures that to an object within the blockchain. That doesn't give us any sort of logic; it doesn't give us any sort of output.

All it does is help us to understand what actually did happen. So, that's essentially our audit record.”

The layer on top of that is the “integrated rules engine”, which comprises the smart contract construction element or configuration elements. These plot all the likely scenarios that will occur and what will be required in terms of verification and actions at each point. “We look at the condition, the proof and the result,” says Alex. “We ask how many people we need to agree that that condition occurred, what proof we need to attach to that, and what the result is for the next flow.”

In the construction context, these are aligned to all existing standard contracts for capital project builds, as well as custom fit-for-purpose smart contracts. “We codify scenarios into conditions, proofs and results and look at what is required to self-execute based on certain events that happened,” Alex says. “Those are the two major parts of our system that can flow across any industry. We've modularised to cater for specific needs, for example time and attendance, occupational health and safety, activity monitoring or even vegan standards in agriculture and carbon credit issuance in manufacturing.”

The final layer comprises applications to manage either input or output of data. Alex notes that most enterprises have existing, well-defined systems, so Sherlock offers the means to take trusted data into their systems and pass that back to be tracked. “In the lower parts of the value chain, such as the ‘bakkie brigade’ guys who don’t have those systems, we give them the tools to manage the input data a lot better, to ensure its trustworthiness,” he says.

The benefits of implementing smart contracts extend beyond no longer needing to pay audit fees, Alex says.

They include real-time tracking of cash-flow and project progress (and therefore improved ability to manage risk), as well as a holistic, verified view across

“Blockchain deals with the idea of data mistruth in real-time. We can understand what did or did not happen, as it happens.”

all projects. “The whole point of this is that it has to be collectively beneficial so everyone gets the benefits of process improvements. Everyone gets the benefit of faster payment cycles. The process efficiency is distributed across all the participants in the value chain.”

Pace of change Alex admits that uptake has been slow from a payments tracking process, as construction firms remain wary of financial transparency. “There’s money in the mess,” he says. “But where we have seen interest is anywhere there’s a big risk (such as occupational health and safety) and where there’s need for independent verification (such as confirming that farming standard SOPs have been followed).”

However, Alex believes that the tipping point for

widespread adoption of blockchain will only be reached when big players in the risk space (banks, insurers and revenue authorities, for example) begin to enforce it. “When SARS says they will accept a record from a blockchain that’s captured every single transaction into SAP for a large corporate without an independent audit, that’s when the tipping point happens,” he says.

Of course, the risk in blockchain requires assurance too, and Alex says auditors might begin to explore the skills sets to offer auditing of blockchain code as a consulting service. “I think auditors need to admit that if they don’t evolve, they won’t have jobs,” he says. “The longer they resist change, the less agile they're going to be to be able to find a new place in the world. My advice would be to adopt the tools that are there that will replace them, and be on the leading edge of the change.” l

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DIGITAL TRANSFORMATION

PANDEMIC REVEALS NEW CAPABILITIES Disruption is key – so is governance, says the head of KPMG SA’s Emerging Tech Unit Shamit Govind.

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The pandemic has taught companies what they are capable of,” says Shamit Govind, Partner at KPMG South Africa and head of the firm’s Emerging Tech Unit. “Everything has been accelerated. What usually took five years was done in six months.”

He believes that the future of audit will centre around reinvention and disruption, but that it’s important for governance to keep pace. “Creating a new tech is not actually that hard, but embracing the governance within which it has to operate within the organisation is important,” he says. “To ensure that the culture and the governance are set up such that the technology can actually fit in and be used from a mainstream perspective and provide a return on investment – that’s critical.”

It’s also vital to differentiate between technology developments within audit (how audit takes place) and emerging technologies on the client side. Auditors need to have a grip on both. “Yes, auditors have evolved how we work, but we also need to be auditing these emerging technologies that clients are adopting,” he says.

This requires developing emerging technology risk frameworks in advance. “At KPMG, we've accelerated the pace at which our business does system implementations (SI) and our investment into the SI space,” he says. “These are the teams that we lean on to provide us with the technical experience around how to audit those fancy new technologies. Telcos, the banks and even mining houses have embraced new technologies and we've had to vastly adapt how we audit to accommodate actually auditing those technologies.”

Shamit believes securing the right skills is more critical than ever before. You’d rather ask someone who built the car to explain how it works than someone who’s only driven it, he says, on the subject of hiring more tech skills into audit teams.

Well on the way to digitisation Thankfully for KPMG, the firm had been prioritising digital transformation well before Covid-19 struck.

“Whether it was remote auditing or auditing with a few members or teams on site, whether it was counting stock, using robotics and automation or drones, or using a lot of data analytics or process mining, to do substantive tests and procedures, I think we had all of these things in place, which had been quality tested in advance of the epidemic. It just took this major

catastrophe worldwide to test our investments, and make sure we actually generate return on investment, not only financially but supporting the faster adoption of key technologies in the conduct of audits. I do believe it will reset how we do things going forward.”

KPMG has been employing various technologies, such as supporting audit teams in digesting paper-based information using OCR technology, machine learning technology, robotic process automation and artificial intelligence, to get answers and accurate information, far more quickly and reliably than through traditional manual processes. “We’ve also used advanced process mining to support the audit teams to identify high risk areas, well in advance of actually starting audits,” Shamit says.

Other technologies on his radar include digital twinning and computer visioning. Digital twin technology essentially uses real-world data to create computer simulations that can predict how something will perform, often integrating IoT, AI and software analytics.

“Digital twinning is something that we are investing in where we can potentially replicate what an IFRS standard prescribes and then calculate those impacts far more regularly, at regular intervals during the financial year, for example month-to-month versus, at financial year-end or half year-end,” Shamit explains.

“We’re looking at investing in this tech more from an internal audit point of view, giving clients insights around those impacts to their financial statements, which helps them to prepare for external audit.”

Computer visioning, on the other hand, is a technology KPMG is exploring that uses AI training on computers to enable them to interpret and understand the visual world. “It’s using advanced camera technology to read a situation, whether it’s an actual device or an event or activity,” Shamit says. “What's so great about that is, for example, that the camera technology can read something, interpret it and project in a digital form. If you had to do an asset count, one could use something like that to support you in counting assets remotely, for example. It's going be interesting to see where all these technologies come out and the governance frameworks we’ll need to develop within which they will need to work. All of that also has to evolve, because the world is evolving at a rapid pace.”

The client journey Educating clients on these types of technologies and how they will be used and why is a critical step in

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“It just took this major catastrophe worldwide to test our investments, and make sure we actually generate return on investment.”

the journey, he says, especially when it comes to integrating with internal audit.

Many of the same or similar technologies that are being tested on external audits have been deployed on internal audits, for example technologies that enable continuous auditing.

“Continuous auditing is a familiar concept in the internal audit field, where we have many detective and monitoring mechanisms to continually help identify where there are key areas to focus on or control deficiencies, alerting both management and auditors as and when things happen, versus only picking it up after the event. That’s something that is being introduced at a staggered rate for external audit. The main reason is that we have to ensure we comply with the auditing standards,” he says.

“At KPMG, we've maintained a grounded view to help us balance the pace with which we accelerate with the pace at which each of our clients adapt to, including both the audit technology and the client’s technology journey. Our clients are generally progressive and eager to adapt to new audit technology advances and how you are going to be executing the audits differently, where are they going to get the efficiencies and how you're going to forward-load activities to provide insight well in advance.”

With regards to other technologies outside the assurance functions which KPMG offers to its nonaudit clients, the firm’s philosophy regarding digital transformation is to help “create the future” of various 50

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sectors through its advisory Connected Enterprise and Powered Enterprise offerings. “Your traditional approaches on how one would adopt reinvention, disruption or transformation, would be that you prepare a strategy around what the client would like to understand, define the “as is”, the “to be” and what needs to be captured and so on. But what we have done is accelerated all of that, and used all our insights from all the clients we have around the globe to ‘develop the future’ in various sectors as part of Connected Enterprise.”

Shamit explains that this includes breaking down each sector into core processes, such as back-office finance, HR or supply chain. “We've developed the “future of” in those particular processes, mapped them, and then we have prebuilt that into solutions like SAP, Oracle, Microsoft, etc. Any of our clients can adopt these frameworks, the Connected Enterprise and the Powered Enterprise, and use them to support the compliance and controls risk mitigation.”

He adds: "Because all of that's already been prebuilt, we are able to show them a future solution today, as well as supporting a relatively de-risked approach.”

This, in turn, helps organisations in their assurance, as compliance requirements, testing and controls are largely pre-built into new technologies as they are adopted, he continues. “It essentially helps to create an automated control self-assessment, making audit easier, as best-of-breed compliance processes are mostly embedded in the internal systems.” l

DIGITAL TRANSFORMATION

PUTTING PEOPLE FIRST Digital transformation needs to be people-led, says PwC partner Nicholas Ganz.

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n summarising how he feels business needs to manage digital transformation, Nicholas Ganz, partner at PwC South Africa, cites a quote from Lindsay Herbert’s book, Digital Transformation: Build Your Organization’s Future for the Innovation Age: “The truth is that digital transformation is actually not about adapting to new technology at all – it’s about directing an organisation to be more adaptive to change itself.”

People haven’t traditionally perceived audit firms as being adaptive to change, Nicholas admits, but he believes PwC has embraced the idea that being open to change is critical to the firm’s success. “We aim to deliver tomorrow’s audit today, and what we mean by that is what we call ‘the experience revolution’, which means that we need to deliver exceptional quality, save our clients time and give them deeper insights,” he explains.

Technology is part of this, he says, but it’s also about getting everyone in the organisation on the same page and reimagining audit together. This means balancing audit IQ with digital IQ. To address the audit side, PwC’s strategy encompasses driving continuous development and professional scepticism (building a culture focusing not just on independence and quality, but also a questioning mindset), as well as a range of firm-wide initiatives focused on helping people to access their potential, both personally and professionally.

“On the digital side, we have something called the digital fitness app,” Nicholas explains. “It’s a mobile app for self-guided training and evaluation at your own pace. Everyone is at a different place on their digital upskilling journey. You basically set your aspirations as to where you want to be from a digital fitness perspective. So, for instance, if somebody wants to upskill themselves in blockchain, there’s a course available for that, as well as news articles and information on the latest developments in blockchain.”

Boosting digital IQ PwC has been focusing on ensuring every single employee is upskilled through their digital academies in three key technologies: Alteryx, a workflow software; Microsoft Power BI, for interactive data visualisation; and UiPath, a robotic process automation (RPA) solution.

Tomorrow’ and to date we’ve put more than 5,000 people in audit through this,” Nicholas says. The firm has also established a digital lab, which is a “citizenled innovation platform for developing and mobilising digital assets”.

What does that mean? Nicholas explains that people within PwC are encouraged to develop workflows, automated processes and other digital assets, which are then tested and put through rigorous approval processes before being loaded to the digital lab for use throughout the firm.

While this investment in digital skills development is significant (globally, PwC spends US$500 million annually investing in people and tech), Nicholas says that it’s an investment in the future of the company, as well as its people. “We believe this is important in servicing our clients better, to increase our people’s value and to help make them and us future-proof.

Some of our people may not stay, but we believe that it is important to help them stay relevant in whatever career aspirations they have,” he explains. “We believe that if we don’t invest in this firm-led, people-powered approach, audit firms will become less relevant.”

In fact, all of PwC’s five platforms for delivering the audit are in the cloud: Extract (for sourcing data), Halo (data analysis), Aura (where the audit is documented), Connect (for collaboration) and Innovation (the PwC technology ecosystem). PwC has won three out of the five last Innovation of the Year awards for audit firms globally.

Nicholas says, “PwC needs to do better in sharing our digital story with the market, regulators, and other stakeholders, as we deliver the audit in a more tech enabled world.”

Digital paying dividends The fact that PwC has embraced digital transformation paid dividends when Covid-19 hit, as the firm was able to adapt to its people working from home – even the 300 people from its service delivery centre based in Gqeberha (formerly Port Elizabeth). “Our challenges were less about technology than about focusing on the softer skills and making sure our people were managing the change on a personal level,” says Nicholas.

For employees who want to take their digital skills to a higher level, PwC offers a digital accelerator programme, where individuals go through an intensive, hands-on, six-month training programme that includes a Udacity Nanodegree, fully funded by the firm.

One of the pluses has been that many clients who were previously sceptical about PwC’s cloud-based systems (and the online data-sharing they require) have seen the real benefits they offer, and undergone a complete 180-degree change in their attitude to digital innovation in audit.

“We call this digital upskilling programme ‘Our

For Nicholas, while it’s important for audit firms

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“We believe that if we don’t invest in this firm-led, people-powered approach, audit firms will become less relevant.”

to continue investing in upskilling people in new technologies, it’s equally important to retain the most important human element – the ability to make a good judgement call. “With all the data and all the information that we now have, we need to make sure we analyse it properly, and that the results of that analysis are looked at by people who can then make the right decisions as they deliver the audit,” he stresses. In fact, by ensuring that CAs and managers spend less time on sourcing data and more time applying their minds to analysis, he believes it’s possible to improve the quality of audit delivered, as well as the time it takes for an audit.

This will reflect in the skills that the profession needs to attract too, as well as in accounting curricula. Aside from technology skills, Nicholas believes there needs to be more room for creativity. “Where we have highvolume repetitive work performed by our people, we

will rather standardise and eventually automate it,” he says.

“We want our people to use their time to think differently and have an element of creativity when solving problems. If we give everyone a hammer, then every problem looks like a nail. We want our people to use their digital IQ and audit IQ to look at things differently and ask ‘Could we come up with a better solution or a better approach?’ And that needs creativity.”

Fostering this will also require collaboration and knowledge sharing within the industry. “I think there is an opportunity for us to work together with various stakeholders within the capital markets and the profession. If we spend time together and share with one another what good looks like, we can go much further.” l

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THE AUDIT ECOSYSTEM

CREATING COMPETITION Measures must be implemented to open up the sector, says the former head of ACCA Southern Africa Pat Semenya.

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mall and medium practices (SMPs) face numerous barriers to growth in the audit space. If the industry is to encourage diversity and inclusion, reduce the monopoly of the Big Four firms and maximise employment opportunities, steps need to be taken to overcome these barriers. This, says Pat Semenya, who until recently headed up the Association of Chartered Certified Accountants (ACCA) for Southern Africa, is key to achieving genuine transformation within the sector.

creation potential of SMPs, steps should be taken to prioritise their growth.

Under Pat’s leadership, ACCA saw a growth in membership, accredited universities and approved employers.

“A lot of the time, clients want SMPs to demonstrate experience in their sector, but it’s hard to develop that experience,” she says. “Perhaps we need to return to the model of joint audits, where a Big Four firm is appointed for 60 or 70 percent of the audit, and an SMP for the remaining percentage. What that does is ensure that knowledge sharing and capacity building are taking place, and that SMPs are getting exposure in the market. Otherwise, we’re only going to have four big firms continuing to take space in this sector, and the economy cannot afford that.”

“Right now, the reality is that while we talk a lot about SMPs in the audit sector, they can’t really hold space among the Big Four, especially when it comes to multinationals that appoint an auditor based on where they’re headquartered, and then expect subsidiaries around the world to use the same firm,” she says.

She notes that it’s widely recognised that small businesses can be the lifeblood of South Africa’s economy and says that if we truly believe that to be the case, we – from regulators to industry bodies and business at large – should be doing more to prioritise SMP growth.

Pat believes that as the digitisation of the profession (and of business in general) continues, small firms won’t have the capital available to compete with larger players, which are investing significantly in technologies like data analytics and proprietary AI systems. “Once again, the gap widens,” she says. “The question then becomes what to do about this.”

“This ties into the desire to re-instil trust in the profession too,” she says. “We need to bring in diverse opinions for better balance, which means ensuring the sector allows new entrants.”

Opening up the market to smaller players With the industry starting to feel the effects of Covid-19, Pat says there are many organisations that previously insisted on using Big Four audit firms who can no longer afford them, which is an opportunity SMPs need to pursue. She also says that given the job-

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Balancing the roles of people and tech While she believes there’s currently not a level playing field for SMPs when it comes to investing in technology, Pat points to successful up-and-coming SMPs that have developed out of the Big Four as examples of companies doing good work when it comes to creating jobs.

She underscores that there is also room for job creation in the advisory services divisions within

“We need to bring in diverse opinions for better balance, which means ensuring the sector allows new entrants.” these businesses, and this provides another growth avenue and an opportunity to complement work done by the Big Four, such as finance and tax consulting opportunities.

adequate capacity-building initiatives to ensure learners are digitally savvy or have the right skills to take up a finance qualification at tertiary education level,” she says.

Pat also cautions against relying too heavily on technology. “I still see accountants and finance people playing an important role in working together with data analytics software to actually improve and make decisions in organisations. There are some clearcut things a computer can do, but when it comes to decision-making, it’s important not to lose the human element. We’re seeing a lot of accountants who might otherwise have been in the auditing or pure accounting industries moving into consulting in other finance streams, where they’re doing things like interpreting data analysis and giving strategic advice.”

Lockdown showed that while some schools are equipped for a digital future, the vast majority of South African schools still lack basic technology infrastructure and connectivity. Pat believes fixing this is an urgent issue.

Transformation of the sector starts with education While it’s all fair and well to paint a picture of the future of audit based on current market trends and technology forecasts, Pat says it’s important to bear in mind that this future is underpinned by education.

“Currently, at high school level, we’re not seeing

“Beyond the fact that it shrinks the numbers that we can feed into the education system from a finance degree perspective, it also increases the economic and social divide,” she says. While children in schools that aren’t digitally equipped will still pass matric, their employability is likely to be compromised as digital skills are prioritised.

Rolling out free or subsidised internet connectivity and providing technology infrastructure and hardware for learning purposes should be a priority for South Africa if the country wants to ensure its economy is competitive into the future, Pat stresses. Along with this, she says there needs to be better recognition of prior learning and less accreditation red tape, which will ensure that there are more learning and career paths available for the professionals of the future. l

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GLOBAL REFORM

ON THE RISE According to Sir Donald Brydon, author of the Brydon Report on audit quality and effectiveness, it's time to move beyond criticism to start embracing reform.

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Where was the auditor?” This is the question that has been asked in the wake of corporate failures such as Carillion in the UK, Wirecard in Germany and Steinhoff in South Africa. It is also the question Sir Donald Brydon CBE sought to answer when he embarked upon a report to review the quality and effectiveness of audit in the United Kingdom.

Sir Donald says audit criticisms have been unchanging for the past 25 years or more. There’s a need to move beyond criticism to implementing reform measures.

His 2019 report, The quality and effectiveness of audit: independent review, lays out various recommendations for reform, which may have application outside of the UK, in countries including South Africa.

In preparing the report, Sir Donald, chairman of Sage Group, received 120 submissions (including submissions from various international jurisdictions) and held more than 150 meetings with regulators, auditors, investors, companies, and professional services firms. Most of his recommendations have since been included in the UK Government’s consultation document regarding governance, regulatory and audit reform.

In June, Sir Donald spoke to Lwazi Bam, chief executive, Deloitte Africa, and Bonga Nyembe, managing partner, responsible business and public policy, Deloitte Africa (who has sadly since passed away), in a “fireside chat” focused on UK audit reform and the ripple effect internationally.

Audit not fulfilling its intended role “The problem we were covering was companies going bust, without any significant warning,” Sir Donald explained. “Looking back at audit reports, we were finding nothing there, which was a clue to the probable outcome that came about subsequently. That said that the audit wasn't informing those who most needed the information, and who were indeed paying for it for that very purpose.”

He added that the knock-on effect is a sense of anxiety and disquiet about the running of companies, which causes an increasing cost of capital for everyone. “What we needed to do was to try to restore trust in the system as a whole,” he explained, adding that it’s important to understand that it’s not only auditors who are involved, but a complex ecosystem incorporating management, boards, regulators and governments, among others.

Audit is a universal concept, but not technically a profession “I didn't set out to change the entire world. But it was clear to me that there are a series of principles underlying audit, which are really common everywhere,”

Sir Donald said. “Some things are not precisely applicable in different jurisdictions, but the essence of audit is the same.”

He believes that stakeholders want audits to answer two fundamental questions: is the company being honestly run, and has it got a reasonable chance of still being around in five or 10 years’ time? Auditors are in a privileged position in terms of being able to access all the information they want to see to provide assurance on these points. “But I’ll give you a tiny example of where I think things have gone wrong. A number of auditor changes took place during the time of my review, and several of them said that the auditor had resigned for commercial reasons, and that was it,” he said.

No further information was given on the reason for the change in auditor, and the assumption might be that it was due to simple economics on the audit firm’s side.

However, Sir Donald suggested, often this might not have been the case. An auditor might resign because of a lack of confidence in the management of the company being audited, or because the required information was not being made available. “If that’s the case, they should say so because that is really valuable information for all the stakeholders who are paying for the audit and the audit process,” Sir Donald said. “It's a very small example, but auditors should start with the mindset of informing.”

Bonga pointed out that there is no regulation preventing auditors from sharing this type of information, but it might be a case of not wanting to ruffle feathers.

He asked Sir Donald how to overcome the “human constraint” that seems to impede transparency in the profession.

Sir Donald responded by saying he had been surprised in undertaking his review to discover that there is no such thing as an audit profession. “The phrase ‘audit profession’ is used everywhere. And people talk about themselves being members of the audit profession.

What I actually found you had was members of the accountancy profession, some of whom had done some work with audit and become specialists as auditors within their accountancy firms. As a result, other than the very broad generic background to the profession of accounting, there was no precise set of principles or governance of the way auditors behave. One of the conclusions I reached was that, in addition to an accounting qualification, it would be sensible to have an auditing profession – properly established and properly monitored, with its own set of principles and rules.”

Establishing a profession, Sir Donald said, would have an additional benefit. Where reporting and assurance work would be required for variables other than just financial ones, the same framework of principles and

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“I wanted to try to get across that it’s actually for the auditors themselves to lead this change.” behavioural constraints could be used. This would ensure that that work was done to the same quality standards as financial audits.

“I wanted to try to get across that it’s actually for the auditors themselves to lead this change,” Sir Donald said. “They should want to, because being under the pressure they have been under for the last few years is not healthy. We're seeing the rate shrink in terms of providers. It makes it harder to recruit the very brightest and best into auditing. A clear audit profession that had clear standards, clear principles, and began with this whole concept of ‘We're here to inform’ would mean that anybody behaving according to those standards would answer the question of why they resigned as an auditor in a way that was much more helpful.”

The subtleties of audit and the issue of fraud Sir Donald said that regulation needs to be managed in such a way that the way standards and rules are met by an audit does not outweigh whether the end user has been fully and satisfactorily informed by the audit.

“You’re dealing with quite subtle information. It's not always black and white, and it helps people to have a framework of guidance as to how they should behave to work out how to report on something sensitively.”

He believes the idea of “best practice” sometimes gets in the way of this. “I get really cross when I hear about best practice, because I think the practice for any one company is what is good for that company, at that moment, with these particular characters and these

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particular pressures. There isn’t a one-size-fits-all approach.”

If we become obsessed with best practice, we risk losing sight of the objective. This is apparent in the reasoning by some that fraud has nothing to do with the auditor.

“Fraud starts with the directors. My recommendation was that the directors should have an obligation to report on what actions they've taken to ensure, as far as they can, that there is no fraud in the company.

And then the auditors will have an obligation to use all reasonable endeavours to satisfy themselves that the steps taken by the directors were appropriate, and appropriately reported upon, and then add to that information around what steps they've taken to satisfy themselves that there is no fraud in the company,” Sir Donald explained.

He noted it’s impossible to expect a zero-failure approach – there will be fraud that is too clever and too difficult to detect. “We have to all understand that. But what is possible, with hindsight, is to go back and say, ‘What actions did you take to attempt to ensure that there was no fraud in the reporting?’.”

Sir Donald stressed that the audit committee has a critical role to play in ensuring trusted decisionmaking through the appointment of the auditor and in overseeing the audit and assurance policy statement (setting out the scope of the audit). He added that it is the responsibility of shareholders – not the auditor – to hold directors accountable. However, the information provided by the auditor should ensure they are able to do so. l

THE AUDIT ECOSYSTEM

W I D E N I N G THE ACCOUNTABILITY NET Accountability needs to encompass all role players – not just auditors, says SNG Grant Thornton CEO Victor Sekese.

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echnology is transforming the audit profession, and while everyone in the value chain will need to confront accelerated digitisation, it’s also important to focus on broadening the accountability frameworks within which organisations operate. This is something that Victor Sekese, CEO of SNG Grant Thornton, is passionate about. In fact, he’s recently completed his master’s dissertation on audit regulation.

One of the recommendations it contains is to widen the net of accountability beyond audit firms. Victor points out that management should be the first line of defence against accounting scandals and that mechanisms like the JSE's amended listing requirements and the internal controls responsibility statements now required from CEOs and CFOs are steps in the right direction. Beyond this, he believes the level of accountability needs to be raised at the level of the board of directors.

“Currently, there are no prescribed requirements that you need to meet to be a board member,” he says. “My submission was that we need to start putting minimum requirements in place from a regulatory point of view for someone to be considered to be a board member.

I'm arguing that you should need to be a member of a professional industry body, for example, the Institute of Directors, which is a body that is dedicated to directors, looking after the needs of directors, and capacitating directors to be able to meet their duties.”

Victor believes that these minimum requirements should apply to all public companies and that organisations like the Institute of Directors would then need to be given the requisite regulatory powers to effectively govern their members. He cites SAICA as an example of a professional body that has the necessary disciplinary powers to take action against errant members. Its ethical code and requirements for continual professional development should be something that can be transposed to a body like the Institute of Directors to help ensure the people leading listed entities are held accountable.

“Currently, that part of the financial reporting ecosystem is a little bit weak,” he says. “What we need is to professionalise all stakeholders in the ecosystem.

This is not insurance that things will not go wrong, but it is a way to minimise the risk of things going wrong.

Auditors are not working in isolation. We need to look at

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everybody involved, which is what King IV was intended to achieve through the concept of combined assurance.”

Opening to smaller players While Victor notes IRBA has always been clear that the primary objective of mandatory audit firm rotation (MAFR) is to improve auditor independence and thereby audit quality, a secondary objective was to open up the market, particularly to non-Big-Four firms.

As many companies have already begun to implement the policy, Victor says that it’s becoming clear that many will rotate firms within the Big Four, but that there is at least an opportunity for second-tier firms to engage with potential clients.

“Previously, that door was closed because they’d say, ‘No, we have our auditors. They’ve been doing our audits for the last eight years and we're not going to change that.’ You could talk about the weather or rugby or cricket or anything else, but you couldn't talk about changing auditors. Now, what MAFR has done is opened up an opportunity to talk about the possibility of new auditors. Yes, we're not always appointed, but at least we can have a conversation and that means we're able to put ourselves out there and people know our capabilities, and hopefully we are able to work with the client in some other way.”

Victor says that technology development is one potential avenue that may level the playing field. “I think the biggest obstacle large clients see in choosing a second-tier firm is that there's still an issue of capacity.

They say, ‘Look, we’re a large company: we need hundreds of people to be able to make the audit work.”

But, as technology automates many of the previously tedious manual audit processes, smaller firms will be under less pressure to supply hundreds of “warm bodies” on an assignment.

Victor also thinks there are lessons South Africa can take from its auditing history and from what other regions, notably the UK, are doing. “In the UK, they are really shaking things up by that saying that the market is not self-correcting and it’s not going to develop another firm to the size of the Big Four, so they are going to force this onto the market. They are coming up with rules to say, that clients must appoint a non-Big-

“We're able to put ourselves out there and people know our capabilities, and hopefully we are able to work with the client in some other way.”

Four firm to work with a Big Four firm and that over time, this firm must be given opportunity to grow.”

This type of joint audit is something that used to happen in South Africa, particularly in the public sector, and Victor believes it’s set to return. “To manage that systemic risk, regulators are saying we need to grow the number of players. And South Africa is watching closely what other global regulators are doing.”

Immense disruption Victor says that technology has become a driving force in culture and one day soon, blockchain will be as embedded in our lives as email currently is. In the days of the telegram and then the fax, it was not something we imagined would be possible, and we’re likely to find technologies like AI becoming the norm as quickly as email did in everyday business.

As technology evolves, so will the audit product, but Victor says this is out of a need to meet changing user demands. “Already, the audit product we offer is outdated because it’s not meeting the expectations of people that use it,” he says.

“It’s a product that only addresses the past. People want to get an idea about what's going to happen in the future. Users don’t want to be stunned about a situation where an organisation goes bust a few months after the audit report has been signed. They’re asking, ‘Couldn’t the auditors anticipate this? What's wrong?’ And it doesn't matter how much we auditors explain to the public and the users of the product to say that that is not what we do, there seem to be different user expectations, a different need. And so, we need to find a way of bridging that expectation gap somehow. Users want some assurance about the sustainability of the organisation that we are auditing.

We have to transform ourselves as a profession to come closer to meeting that market demand.”l

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I

FINAL WORD

t is important that we are mindful of the intrinsic value of auditing and the auditing profession.

These should be boldly protected as they are critical for a well-functioning government and private sector, and any economy at large.

External audit provides stakeholders, which are not limited to the shareholder alone, with the confidence that the reported performance and financial position of the organisation is accurate, complete and reliable. External audit also ensures an organisation’s compliance with relevant laws and speaks to the strength of its internal control systems.

These are essential information pieces for any stakeholder, as a shareholder or financier, and as an employee, client or service provider.

The auditing professional, however, is not alone in ensuring that reporting financial information is reliable. All the parties involved in the financial reporting ecosystem have important roles to play. These include board members, audit committee members, management and accountants.

All stakeholders and players in the financial reporting ecosystem must advocate for and demand ethical conduct

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from our auditors, and from the company directors and the accountants and everyone else in the system.

At the same time, new technology is creating many new opportunities for organisations, as well as new risks. These will, and are already, challenging the auditing profession, requiring new skills and new approaches to remain the providers of assurance to us – the stakeholders. Being skilled in technologies such as blockchain and AI will be part of the skill set of the modern auditor, underpinned with unwavering ethics.

ACCA is one of the world's largest and most forward-thinking professional accountant body and we are therefore deeply invested in the future of audit.

As we continue to explore the topic, the discussions we have had with top finance professionals in South Africa have offered valuable insights into what issues the audit profession is currently facing and how it may have to evolve to remain relevant.

Nico Esterhuizen Chief Financial Officer: JAM International and Chairperson: ACCA South Africa

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