Auditors still matter, says CEO of Mazars SA

The audit and accounting profession was once seen as the rite of passage into the upper echelons of corporate SA. However, with corporate scandals rocking the country in recent years, public perception of the profession is at a low point.

Anoop Ninan, CEO of Mazars SA, sat down with Business Day to discuss how the profession can restore its image and explain why the audit profession still matters.

Despite the profession’s brand damage, Ninan says SA chartered accountants and registered auditors are still in high demand overseas, making it increasingly difficult for firms to retain these skills.

South Africans are probably a bit more familiar with the big four audit firms Deloitte, — PwC, EY and KPMG. Tell us a bit about Mazars.

Mazars was founded in 1945 in France and has grown into an international integrated partnership comprising more than 47,000 employees in more than 95 countries. Our unique partnership allows us to work as a seamless integrated team across the world to service clients across multiple specialised sectors.

The auditing profession in SA is arguably at a historic low point in terms of its reputation thanks to the corporate scandals that have beset the country in recent years. What can it do to pick itself up?

From a global perspective, the profession has worked hard to restore the industry’s reputation. Firms have implemented the International Standards on Quality Management (ISQM1), which strengthens systems related to quality management within firms.

Other initiatives include embedding a culture of quality across all staff levels by continuously training employees on core values, and encouraging behaviours that are directly linked to quality.

Using quality as a measure to evaluate performance and linking that to the Independent Regulatory Board for Auditors (IRBA) Audit Quality Indicators helps entrench a culture of quality and encourages decisive action for non-compliance.

Audit firms must take a hard stance on any ethical breaches and have zero tolerance for any activity that could impair independence and objectivity. Audit engagements should be partner-led. It is critical that partners are present with engagement teams to train and develop, identify issues based on experience, and empower them to find solutions.

Partner rotation and the rule on Mandatory Audit Firm Rotation (MAFR) will have a strong effect on monitoring and maintaining the independence that should underpin the audit profession.

I also believe that auditing firms alongside regulatory and industry bodies such as the SA Institute of Chartered Accountants, IRBA and the JSE could increase awareness of the value that audit firms bring to the capital markets. There is a role to play by the industry to reduce the expectation gap between what auditors are responsible for and what the market and clients often expect.

Why do auditors keep missing large corporate accounting scandals like Steinhoff and Tongaat Hulett?

Those who perpetrate fraud deliberately use techniques to hide fraudulent activities from management, boards of directors, internal auditors, audit committees and external auditors. In many of the scandals it was the external auditors who eventually picked up that there was something wrong and requested further investigations. Auditors are the last line of defence but ultimately the entire system of controls put in place to prevent and detect instances of fraud or error needs to be functional and effective.

The CA (SA) designation has also been somewhat tarnished at least locally by the — — scandals. Is the professional designation still highly sought after?

Yes. We still see a huge amount of interest from the global market in local Chartered Accountants because of the highly skilled nature of this designation. Even in the local context, Chartered Accountants are highly sought after due to their well-rounded skills and experience, which is instrumental to successfully managing teams and companies.

Are you struggling to retain skills in SA due to push factors like load-shedding, crime and low economic growth?

Yes, the CA (SA) designation is globally sought after. The above factors, coupled with a shortage of global accounting and auditing skills has made it harder to retain skills in SA.

Auditors are under more intense regulatory scrutiny than ever before. What are the rigours an auditor faces in terms of compliance?

Auditors face increasing regulations, additional reporting requirements and significantly more oversight. ISQM 1 has raised the bar in terms of quality management systems and includes a strong component of root cause analysis and the execution of remedial action plans. There is a much stronger focus on monitoring compliance at a firm level, rather than an individual registered auditor or engagement level. We continue to invest in our quality team to support our engagement teams, and in processes and systems to continually monitor and improve quality. We are also rigorous in our deliberation process when considering which clients to work with.

How is the auditing profession evolving in response to digitisation, automation and technology?

The profession has embraced technology in the form of IT audits, data analytics and process automation to obtain additional assurance throughout the audit process.

At Mazars, we have developed a team of technology and data analytics specialists to support audit teams. The integrated specialist teams, together with the audit teams, receive training from both a technical audit and a technological perspective to ensure that the objectives of the integrated team clearly align, and that the information produced is valuable to support the audit opinion issued.

Data analytics requires different skills sets and to this end, in 2019 the Mazars data school was born from a vision to take unemployed graduates and train them to become data analysts and data scientists.

Will artificial intelligence (AI) like ChatGPT end up replacing the job of auditors in due course?

There are numerous aspects of an audit that will require experienced auditors to understand and assess certain transactions and balances to make informed judgments. AI will help provide the valuable information required to provide supporting evidence to these auditors. In my opinion, AI will support the audit role, not replace the auditor. I don’t believe AI can replace physical verifications and face-to-face interactions with management teams, and the professional scepticism that is so crucial in any audit engagement.