Article source: Accounting Weekly
Following the release of the World Bank Report on the Observance of Standards and Codes – Accounting and Auditing in 2013 professional bodies have been engaging with National Treasury to give input into how the new regulatory model will work. An update on the process so far is available here.
These discussions have highlighted that the key points underpinning any regulatory review should be a consideration of:
- International trends in regulatory reform,
- An assessment of the pro/cons of regulating professional services,
- The appropriate level of regulation
This approach provides a framework to evaluate and develop a regulatory model for South Africa.
A recent research paper conducted in the European Union considered the level of regulation of the accountancy profession in the EU. The paper found that high levels of regulation whether related to market entry or conduct are associated with less productivity and higher prices, and as a result tend to favour the professions and weaken consumer choice.
In the absence on any evidence of market failure or threats to consumer wellbeing in the South African market higher levels of regulation may actually be harmful and reduce net economic wealth for the state, consumers and producers.
In the SAIBA submission these points were considered and a 2 tier regulatory model proposed. This may consist of licensing auditors under a strict regulatory regime whilst allowing professional bodies to certify their member’s competency under the supervision and oversight of a regulator.
The SAIBA discussion paper and additional submission highlights the need to consider the following points prior to issuing new regulations:
- The role of the IRBA, the effect on the Auditing Professions Act, 2005,
- Licensing for auditors by a state agency,
- Certification for non-audit work by professional bodies,
- Representation of bodies within the new regulator,
- The balance of influence between the regulator and the bodies,
- The reservation of services to professionals such as statutory audits, Insolvency,
- Investment advice, Preparation of financial statements for the public for a fee,
- Compilation, Factual Findings, Review Engagements, Assurance engagements, Non statutory audits, Tax preparation, and Tax advisory services,
- The funding model,
- Limited liability for assurance work,
- Protected titles,
- Experience, Assessments, Mandatory membership, PI Insurance,
- Review of legislative landscape to ensure consistent and relevant financial reporting, and assurance and non assurance reporting requirements, and
- Review of legislative landscape to remove artificial and arbitrary barriers to access.