Home Accounting and Auditing Startling rise in chartered accountancy failure rates

Startling rise in chartered accountancy failure rates

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The embattled South African Institute of Chartered Accountants (Saica) – already under unprecedented professional criticism for the role CAs played in corporate scandals at Steinhoff, VBS Bank, KPMG and elsewhere – is now under attack for flunking nearly a third of candidates who sat the board exams late last year, according to Moneyweb.

Some 32% of candidates failed the exams last year, a big increase on the 20% and 11% who failed in each of the previous two years.

The clear aim is to clean up the profession’s image after CAs were found at the centre of a string of corporate scandals. Several aspiring CAs who flunked the exams seem mystified by the outcome, particularly as they had aced all previous exams – both at Saica board and university levels.

One candidate, who asked not to be named, says the results are suspect for a number of reasons. “My real gripe is the lack of transparency in marking. No percentages are given, just letters such as C (Competent) and BC (Below competent). So we never quite know what was expected of us.”

Candidates in the dark

Candidates also complain that they have no idea what weighting is attached to these different markings, nor how they should prepare for the repeat exams.

What has alarmed some is the 48% pass rate for African candidates in 2018, as opposed to 86% for whites, 78% for Indians and 73% for coloureds. This compares with a pass rate in 2017 of 69% for Africans, 89% for whites, 84% for Indians and 80% for coloureds.

A letter from several dozen affected candidates from each of the Big Four accounting firms – EY, PwC, Deloitte and KPMG – challenges Saica on steps taken to address the “unique and complex” issue of the high African failure rate, and argues against generalised solutions to remedy the specific socio-economic factors behind this failure rate.

The candidates also question Saica’s motive for reducing the pass rate, given the deluge of recent corporate scandals, often enabled by CAs. The clear aim is to raise the bar to professional entry, but candidates who failed see it differently: a far higher percentage of candidates who took their study course through University of Johannesburg (UJ) failed than did those who studied at University of Cape Town, the two universities where most CA candidates prepare for the exam. “We were told at UJ to answer questions with less technical language, and communicate as if we were speaking to someone on the street – which we did. Then we failed,” says one. “Those of us who failed have to sit the exam again at the end of the year, but we don’t know what is expected of us.”

This fear appears grounded in fact: 45% of repeat candidates who sat the exam in 2018 failed, while 71% of first-time candidates passed.

Marking strategy ‘allows for manipulation’

The candidates who wrote to Saica claim the accounting body has been less than responsive and forthcoming to opinions and inputs from various stakeholders, and has instead blamed the candidates for the high failure rate. They claim Saica has not adopted a transparent marking strategy, and that this allows for manipulation by individual exam markers.

In reply to questions from Moneyweb, Saica’s head of communications and marketing, Willi Coates, says the body’s training and examination processes are “rigorous, robust and fair and are in line with international best practice”, as outlined by the education and training standards of the International Federation of Accountants (IFAC).

“These processes are also reviewed by our peer institutes for reciprocity purposes to ensure these standards are being met and maintained. In addition, Saica is recognised by the Independent Regulatory Board for Auditors (Irba), which undertakes regular and detailed reviews of the Saica qualification process.

Many checks and balances, says Saica

“In particular, there is significant emphasis on processes governing the Saica examinations, with many checks and balances in place. This includes evaluating the standard of the paper year on year. There is, therefore, no substance in your stated ‘reasonable conclusion’ that Saica might have taken a decision to raise the academic bar in light of the CA designation being somewhat tarnished by recent corporate scandals.”

The Saica examination is written electronically and marked using an electronic tool, which provides real-time and granular information throughout the marking processes, in line with worldwide CA Institute best practices. This tool has many benefits for the marking process including identification of inconsistencies in marking during the process.

Adds Coates: “Importantly, all candidates’ scripts are anonymous, thereby removing any assumed prejudice, as markers do not know which candidate’s script they are marking, from which training office they emanate, or which professional programme they have completed.

“All markers are appointed by Saica and are required to have marking experience. The process starts with extensive training for all markers and all markers are required to mark a benchmark examination script before they are eligible to start marking.

Saica provides the following responses to questions from Moneyweb:

Question 1: Can you explain the reason for the lower pass rate this year?

There is no single reason for the lower pass rate in the November 2018 APC [Assessment of Professional Competence]. The explanations are complex, interrelated and currently being carefully analysed. Preliminary findings are set out below. Declines in pass rates should be assessed against the background of the following subsets of the exam-writing population where there was an:

1. Increased number of repeat candidates (previously unsuccessful) writing the November 2018 APC. Consider that repeat candidates generally receive reduced support from their employers in terms of (a) being given less time off for study leave as well as (b) no longer paying for candidates’ examination fees/professional programmes;

2. Increased proportion of candidates writing the APC who completed their Saica-accredited postgraduate degree through a distance learning institution;

3. Increased number of repeat candidates who wrote the APC November examination (a practical examination assessing professional competence). They did so three months after writing and passing the theoretical June Initial Test of Competence (ITC) examination. As such, these candidates may not have been adequately prepared for dealing with the APC, which by its very nature is different to the ITC, as it assesses professional competence; and

4. Appreciable number of trainees who may not yet have received sufficient practical experience (depth and breadth) to enable them to fully prepare themselves for this APC.

Further, please note that in order to obtain an in-depth understanding of all the underlying factors that could have contributed to the declining pass rate, Saica is undertaking a number of initiatives to explore and better understand the challenges faced by the failed 2018 APC candidates – initiatives that include a survey of failed candidates as well as meetings with Saica accredited training offices and professional programme providers. The outcomes of these engagements should help Saica provide candidates a better opportunity to achieve success when they next attempt the APC. 

Question 2: How is Saica endeavouring to achieve uniformity among markers where no percentage scores accompany the pass grades (HC, BC etc)?

Please refer to the introductory part of this response, which sets out Saica’s rigorous examination and marking process.

Question 3: Are there any avenues for candidates to appeal where they have failed?

Due to the rigorous marking process already followed, Saica’s examination regulations do not enable candidates to appeal the outcome of their APC result. However, candidates can, for a fee of R230 (including Vat), request a copy of their script and mark plan, which reveals their level of competence by task. A more detailed report, providing detailed reasons for that candidate’s failure, can be compiled at an additional fee of R2 875 (including Vat). This fee covers the cost of having one of the senior markers drafting a comprehensive report on the individual candidate’s script by task. 

Question 4: In light of (Comair CEO) Erik Venter’s public resignation from Saica, can you give some indication of how many others have resigned or failed to renew their membership over the last 12 months?

Our membership resignations over the past 12 months are in line with the number of resignations in previous years and are, therefore, insignificant. Indeed, our 2019 resignation statistics indicate that only 109 resignations during this period can be directly attributed to members’ unhappiness or discomfort as to the state of the chartered accountancy profession and/or the value of their Saica membership. The other resignations, small in number, stem from reasons such as death, ill health and disciplinary matters. Saica’s membership continues to grow by, on average, 4% per annum. We can also confirm that, to date, Mr Erik Venter has not resigned as a Saica member. Taking a line through the several factors above discussed, we can categorically state that no individual or group can influence the percentage pass rate. Your objective assessment of our analysis will surely persuade you to the same conclusion.

Willi Coates Saica Senior Executive: Brand, Communications & Marketing DivisionRead: Saica, where justice isn’t seen to be done