Tom Seidenstein, the chairperson of the IAASB, recently visited South Africa and shared his thoughts on the country’s audit scandal crisis and ESG.

Tom Seidenstein seems drawn to challenges. Before becoming chairperson of the International Auditing and Assurance Standards Board (IAASB) he worked at Fannie Mae. An institution at the heart of the global financial crisis.   

“A key theme from IAASB, to Fannie Mae, to the role I played at the IFRS Foundation from its founding to 2011 - is this idea of efficient markets. They require high-quality reporting supported by assurance and audit so that capital is allocated efficiently and increasingly with the eye towards greater sustainability.”

Seidenstein recently visited South Africa and expanded his views on areas of the profession that aren’t as efficient as they could be. 

South Africa’s audit meltdowns

Major audit firms in South Africa have faced serious questions and reputational damage for their role in State Capture and corporate scandals such as Steinhoff and Tongaat Hulett .

 “I don’t view South Africa as a particularly unique example of a country with concerns about audit performance,” said Seidenstein. “But from my standpoint, it's really important to get the standards right and then important for the auditors to fulfill the public interest function and discharge those standards.”

In reaction to the State Capture crisis and the lack of punitive measures faced by those auditors and firms implicated, IRBA saw its investigative and disciplinary powers increase last year, including search and seizure and the ability to issue larger fines. 

Seidenstein reacted, “I’m always careful about comments on jurisdictional developments for obvious reasons. All I would say is that having a strong regulator to go along with standards is a key to providing trust to the marketplace.”

“I view South Africa, maybe because of where you stand in the world and Africa, as understanding the value of international solutions and also having a very high quality. profession. Historically it's been able to provide that thought leadership.”

What ESG means for auditing standards

The interview with Seidenstein took place a week before COP27 started, which would include discussions around the role of corporates in reducing emissions and the issue of greenwashing. 

Large companies and institutions in South Africa are scrambling to get ESG reporting measures in place. Industry bodies are also increasingly focused on ESG, with Accounting Weekly’s publisher, CIBA, offering a license on climate and sustainability reporting. 

“ESG is very much part of our agenda right now. A lot is happening on the reporting side as well as this movement towards a global baseline standard housed under the International Sustainability Standards Board, under the IFRS Foundation, which is a positive development,” said Seidenstein.

Seidenstein believes that having common global assurance standards on ESG makes a lot of sense and notes the work IAASB has already done on greenhouse gas statements.  

“We’re building a sustainability-specific suite of standards, beginning with an overarching standard. Our hope is that it should be out for comment as a proposal next year and finalised by the end of 2024. 

We see audits and assurance standards as moving in tandem with the reporting side, which will jointly form the basis for comparison across borders.”