The Department of Trade, Industry and Competition (dtic) has asked Saiba to participate in an independent Regulatory Impact Assessment of possible amendments to the Companies Act of 2008.
“We are very honoured to be invited to make input into this independent regulatory assessment and we will be asking members to add their voices and opinions,” says Saiba CEO Nicolaas van Wyk.
“As a professional body representing the interest of more than 8,000 accountants, we have strong opinions on certain aspects of the Companies Act that prefer one group of accountants over others – for example, the sections of the Act dealing with company audits. We will definitely be making our voices heard on this and other issues.”
The dtic has tasked Genesis Analytics to carry out the independent assessment. Some of the key provisions of the Act that will form the focus on the assessment include:
- The Public Interest Score (PIS)
- Business Rescue
- Companies Tribunal
- Social and Ethics Committee
- Objections against filing
- Directors’ misconduct
One issue that Saiba as a professional body would like to see amended is for an independent body, such as the Auditor General, to appoint auditors rather than allowing companies to make that selection. Auditors are paid by the companies they audit, and this creates often hidden and perverse incentives to overlook critical risk areas. Empowering a third party such as the AG to appoint auditors (and to remove that appointment on the basis of professional incompetence or lack of diligence) would help overcome these perverse incentives to look the other way when company directors want to hide something.
Another issue that Saiba feels needs amending is the use of the PIS score to determine whether the company requires an independent audit or an independent review
“We would like to see the audit de-coupled from the Companies Act and the PIS. The feedback we are getting from businesses is that audits are too costly in terms of time and money and they would much rather use far less costly Independent Reviews (IRs) of the kind that many Saiba members are able to provide,” says van Wyk.
“Also the threshold for whether and audit or an Independent Review is required is too unwieldy. A much simpler method of determining this threshold is to take a simple metric such as revenue. Above say R500 million revenue a year, you need an audit. Below that, an IR.”
As things stand, a company with a public interest score of 350 or more points in a financial year must have its annual financial statements for that financial year audited.
A company with a public interest score of between 100 and 349 points must have its annual financial statements audited only if they were internally compiled. Otherwise, an IR will suffice.
A deficiency in the Companies Act is the absence of any public disclosure of beneficial ownership. This became apparent when the Guptas were able to set up shell companies both in SA and abroad to hide their looting. The institutions implicated in state capture are often conflicted in performing their duties, and torn between their obligations under law and the need to protect their clients.
Many have argued that the Companies Act needs to be amended to provide a publicly accessible registry of beneficial ownership.
Make your voices heard at the highest level of government
Let’s improve the Companies Act 2008! We have a unique opportunity to do just that, but we need your help. Saiba has been asked by the DTIC to give input on the impact the Companies Act has on accountants and their clients.
You are invited to participate in Phase 1, which is a survey aimed at professionals that have a working, practical knowledge of eight specific topics of the Act.
The responses collected from the survey will be used as a basis to consult with experts in the field, as well as to identify accounting professionals with experience in specific matters who would be willing and able to add value to round-table solution-based discussions in Phase 2 of the project.
Join us today to inform change to build our community of successful accounting professionals – your first step is to participate in the short survey by 14:00 Wednesday, 30 September 2020.
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