Home Accounting and Auditing Why is the government promoting CAs to the detriment of the accounting...

Why is the government promoting CAs to the detriment of the accounting profession?

6480
2

By Nicolaas van Wyk, CEO of the SA Institute of Business Accountants (Saiba)

The CA “profession” is now officially recognised as the voice of the accounting sector.

If you’re an accountant and not a CA you should be outraged.

No prizes for guessing who drafted this piece of self-serving regulation called Codes Of Good Practice On Broad Based Black Economic Empowerment: Publication And Invitation For Public Comment On The Draft Chartered Accountancy (CA) Code.

The Code and its convoluted title is designed to knock you unconscious in three seconds flat so you don’t read it. That’s how awful bits of legislation make it through the corridors of power.

But it is being sold to us under the guise of promoting broader black economic empowerment in the profession. What it’s doing, though, is pushing the agenda and the financial interests of just one segment of the accounting profession, the SA Institute of Chartered Accountants (Saica), with an annual budget of roughly R800 million.

Saica certainly needs transformation. Some 70% of its 45,000 members are white. Black Africans account for 13%, Indians 12% and Coloureds 4%.

When it comes to gender, 37,7% of CAs are women.

There are many competitor professional bodies that are miles ahead of Saica in terms of transformation. In fact there are at least 13 other bodies catering to the accounting profession that are disregarded in these Codes, and their combined membership exceeds that of Saica. The SA Institute of Business Accountants (Saiba), whose members are mainly in business or accounting practices, has 8,000 members of which 60% are black. Also excluded from the Code are Associate General Accountants (AGAs), a designation created by Saica itself for those who don’t pass the CA Board exams. They, too, are getting the cold shoulder.

Time to end the monopoly

So why is Saica getting all this love from the Department of Trade and Industry, that published this Code for comment earlier this year? We are inundated with stories about dodgy CAs and their corrupt dealings at state-owned and private sector companies. We should be looking to an entirely different model for the accounting profession, not entrenching a rusty monopoly.

We say it’s time to end this monopoly.

It’s not that CAs are lacking in statutory muscle. They have their own CA designation act that prohibits the use the CA title by people who are not a member of the body. This transgression used to carry a R500 fine, but that is being hiked commensurate with the severity of the perceived infringement.

Then there is the Auditing Profession Act which governs auditors. To be an auditor, you must first be a CA, but once a member of the Independent Regulatory Board for Auditors (IRBA), you no longer have to be a member of Saica. The Code makes no mention of this fact. So auditors registered with IRBA are then free to align themselves with any other professional body of their choosing.

Saica is the largest accounting body in the country and as such constitutes a dominant firm as defined by the Competition Act. This dominance is reinforced by the statutory monopoly granted it under the Chartered Accountants Designation (Private) Act of 1993. Some legal commentators have pointed out the existence of this private act violates the principle of general application – where laws apply to everyone in the country, not just to select groups. Eskom and Sanral have their own dedicated acts, but they are state-owned. Saica is not. How long before a constitutional challenge is launched against this unwarranted privilege?

This Code is for the benefit of CAs only

This CA Code is written by and for the benefit of CAs to the exclusion of all accountants not part of Saica.

In Saiba’s response to the Code, we point out that Section 12 of the Broad-Based Black Economic Empowerment Act provides that the minister must be satisfied that a transformation charter for a particular sector of the economy has been developed by major stakeholders in that sector and advances the objects of the act.

The Saiba response states: “The Draft Code does not constitute a transformation charter for a ‘particular sector of the economy’ but, at the very best, a sub-sector of the profession, chartered accountants, which (in its entirety) is administered by a single private professional body, Saica, for its own benefit.

“A Sector Code is intended to be for a ‘sector of the economy’. An economic sector is a sector of the economy in which businesses share the same or a related product or service, in other words a market which shares common operating characteristics.

There’s no indication what stakeholders were consulted in the drafting of this code. There’s no indication the drafters went outside the narrow bubble of CAs. The law requires the ministry of Trade and Industry to demonstrate it was part of the drafting (to prevent special interests pushing their narrow agendas).

For this reason, we say the draft code does not meet the requirements for a sector code. CAs form just one sub-sector of the economy.

“The draft code does not seek to promote meaningful participation of black people, women and entrepreneurs in the economy but seeks to advance the objects of Saica, namely to ‘grow the number of Black People in the CA profession’ with the ‘ultimate aim that membership of the CA profession will reflect the demographics of South Africa,” says the Saiba response to the Code.

“Simply put, Saica predominantly derives its income from the membership fees charged to its members (CA professionals). Accordingly, the greater the number of CA professionals, the greater Sacia’s revenue stream.”

Rather than promoting the overall wellbeing of the accountancy profession, this Code will promote the interests of one segment of the profession to the detriment of the rest. It will likewise work to the detriment of other professional bodies.

Doing harm

Here’s where the Code will do actual harm:

  • It grants exclusive recognition to CAs and binds organs of state and private entities to the Code. It means companies and state-owned enterprises will have to employ CAs and ignore accountants from other professional bodies.
  • The interests of CAs (and not only black ones) must be advanced in terms of management control, skills development, enterprise and supplier development, and socio-economic development. Black accountants from other professional bodies will get left behind.
  • Higher education institutions will be bound by this Code, and will be tasked with developing a pipeline of black CAs – eventually becoming accredited by Saica. This means universities will be forced to push their students to join Saica and no other body. Imagine if the engineering faculty at Wits University were to push their students to join the South African Institution of Mechanical Engineering, to the exclusion of all other professional bodies. This is precisely what is being mandated here for accounting students.
  • Saica gets another self-serving benefit from this Code which forces companies to direct their skills development budgets through Thuthuka, which is a Saica skills development body. The preference of Thuthuka over skill development funds provided by Saica’s competitors will consolidate its dominance in the accounting profession.

The inherent problem in having a draft Code for the CA profession, as opposed to the broader accounting profession, is best illustrated by the appointment of a professional body which polices, oversees and financially benefits from the CA designation as the administrator and custodian of the draft Code.

Conflicts of interest

This poses two inherent conflicts for Saica.

  1. Can it be trusted to advance the objectives of the B-BBEE Act while still representing the interests of its members? It is both player and referee in this game. Clearly, the answer to this question is: No, it cannot and must not be trusted in this role.
  2. Saica must also report its compliance with the Code to the so-called Charter Council, of which it is in effective control. Can Saica be trusted to advance the objectives of the B-BBEE Act while overseeing its own compliance with the draft Code? Again, the answer is no.

What is required in place of this is a Sector Code for the accounting profession as a whole, in which all major stakeholders in the economic sector come together and participate and agree.

Nicolaas van Wyk

CEO, Saiba

2 COMMENTS

  1. This is another way of excluding other professional body. SAIBA has demonstrated an alternative path for those who are in the accounting profession. i believe we need a serious indaba regarding this new code.

  2. Very well written, Nicolaas. Not quite on the same theme, but close is my never ending battle with ACCA to fight legally to end Saica’s monopoly on audit. ACCA was a founding member of the IRBA, left during apartheid, and now cant get back in because its members don’t have audit experience. That’s somewhat like banning the ANC from government after democracy because it didn’t have experience in governing a country. I know the possible retorts to that, but the principle stands. And its not as if Saica members have a clean and saintly record in audit here or anywhere else. The arrogance at Saica is amazing, and should be brought down.

Comments are closed.