The South African Institute of Business Accountants (SAIBA) has urged accountants to market themselves in accordance with legislation that requires their services more than ever before.
Accountants must familiarise themselves with Section 90(2)(b) of the Companies Act 2008 which presents significant opportunities for accountants to acquire business, says SAIBA CEO, Nicolaas van Wyk. He explains that the Act prohibits auditors engaged to perform a statutory audit of a company or a close corporation from preparing financial statements for that same company, leaving the door open to accountants to do that work.
“Many accountants are unaware of or unclear on the advantages that this presents to them in the form of non-audit services that were handled by auditors previously,” says Van Wyk.
“Because auditors may no longer conduct both services for the same client, accountants should be actively looking to enter into agreements with auditors to prepare financial statements for that auditor’s clients.”
In line with the Act, it would make sense for auditors to outsource accountants to produce annual financial statements. In other cases, businesses themselves will have seen the need to restructure the way they work by outsourcing their preparation work to accountants or changing their audit function to independent review.
“Either way, the legislation is good news to accountants because companies are forced to accept that professionals who prepared their financial statements in the past, may no longer perform their audit as well. This brings accountants neatly into the loop.”
South Africa will reap the benefits already experienced in the United States as well as Europe where audit reforms announced last month strictly prohibit audit firms from providing non-audit services to their audit clients, including stringent limits on tax advice and services linked to the financial and investment strategy of their clients.
The European Parliament has also agreed that audit firms in EU member states will be required to rotate every 10 years. Public interest entities will only be able to extend the audit tenure once, upon tender, and auditors will not be allowed to perform tax work for public interest companies. Under this measure, joint audit will also be encouraged. Despite the extension of the rotation period, this principle will have a major impact in reducing excessive familiarity between the auditors and their clients and in enhancing professional scepticism.
Van Wyk believes consideration should be given to extending the South African legislation to other non-audit services in the interests of transparency and objectiveness around financial record keeping. “As in the case of European law, this would limit the risk of conflicts of interest which exists due to the fact that auditors are involved in decisions impacting the management of a company,” he pointed out. “It would also substantially reduce the “self-review’ risks for auditors”.
Besides the obvious advantage to accountants, there is the added societal benefit of increasing audit quality and investor confidence in financial information, an essential ingredient for economic growth.
“It is essential for accountants to understand their new role within the Companies Act. Accountants must use the opportunities presented to them by the Act. We should run our practices like any other business, actively marketing our services and forming long lasting relationships, not only with auditors and financial advisors. We should also strive to work alongside one another for support and advice and even for referrals, as the market for Accountants in Practice is still unsaturated.” says SAIBA member, Karen De Villiers of Bizzacc Accountants.
In the meantime, SAIBA encourages accountants to make their services available to auditors and companies. Networking and actively seeking business should be a top priority for accountants seeking to establish themselves,” says Van Wyk.
“It works in favour of clients too, who can shop around for lower fees in a more competitive environment.”