With new regulation in the pipeline, the face of accounting in South Africa will no doubt change. We have a look at what SAIBA as an accounting body proposes.
The South African World Bank has recently released a second report, which analyses and compares the application of accounting and auditing standards with international best practice. They recommend that the regulation of the accounting profession should be reconsidered. They also propose that we use a certain UK model. This model will strictly regulate auditors, provide supervision over professional accountancy bodies, strengthen the processes by which we set accounting standards, and improve policing of compliance to standards.
The report touches on the dominance of a number of professional bodies in the local market, and suggests that government and universities should strengthen the emerging professional bodies to enable a more accessible environment. This would supposedly provide more choice and entry points to students, better skills development opportunities, and improved service delivery access to the small business community.
As the professional body that represents the emerging profession, SAIBA supports and agrees with this analysis provided by the World Bank.
The regulation of the profession can address its asymmetrical nature and the detrimental effects it has on economic development.
South Africa is characterised as being a developing nation. Similarly, SAIBA sees itself as a developing professional accountancy body. We focus on the development of the accounting profession by assisting persons with the necessary skills and education to become accountants –irrespective of their background. By necessity, the model requires intervention and support by policy makers.
The current system followed by the more established bodies, is based on a UK model that favours the development of high-end accountants that can serve a First World economy. Our whole education and training system is geared towards this model.
We do not advocate lowering of standards, but propose that standards should be developed to suit South Africa’s needs, and not those of the UK or other First World countries.
The current market structure is restrictive to the entry and growth of emerging and aspiring accountants. We therefore see the regulation of the accounting profession as an ideal opportunity for policy makers to intervene in the profession and provide opportunities and support to indigenous professional bodies like SAIBA.
South Africa has recently adopted a new policy of becoming a developmental state. The first person to seriously conceptualise the developmental state was Chalmers Johnson. Johnson defined the developmental state as a state that is focused on economic development and takes necessary policy measures to accomplish this objective. According to Johnson, Japan experienced economic development due to the direct intervention of bureaucrats promoting the growth of new industries.
SAIBA believes that the proposed regulation of the accounting profession should be measured as to how well it will achieve South Africa’s developmental aspirations.
These aspirations will only be achieved if we provide opportunities to local accountants – especially those that previously did not have access to or experience in a formalised and highly structured accounting profession.
We argue that economic development can and should be supported by the development of a strong and vibrant accounting profession. It is therefore an ideal opportunity to rethink the structure of the profession.
Our response to the proposed regulations will be based on the following key principles:
- Government should ensure the establishment of an indigenous accountancy profession.
- The current regulation of the accountancy profession should be strengthened with an emphasis on emerging accountants.
- Representation of emerging accountants should be ensured on all forums.
- Proposed regulation of the accounting profession should ensure that it remains self-regulated but with improved oversight.
- This will require that the term “account” be legally protected with regards to persons preparing financial statements for a fee.
- Established professional bodies should be obligated to support the development of the emerging bodies.
- The new regulatory model should ensure that South Africa’s needs are placed before the needs of those who set standards internationally.
- The adoption and monitoring of financial reporting standards should be streamlined under a new single regulator.
- South Africa should develop its own financial reporting standard for small owner managed companies.