Sanchia Temkin
22 August 2008
Johannesburg — AUDITORS are up in arms over new JSE requirements compelling them to have registered specialists in International Financial Reporting Standards (IFRS) if they are to audit listed companies.
"We really fail to see why it must be auditors who must be IFRS specialists and not listed companies themselves," Garth Coppin, an audit partner at Ernst & Young, said yesterday.
Under the new JSE requirements for financial directors and auditors of listed companies that were recently released, auditing firms are required to have registered IFRS specialists.
Any audit firm that wishes to audit listed companies must be registered by the JSE.
To be included on the register, an auditor will have to show that they have 800 hours of working knowledge of IFRS.
Alternatively, members of an audit team must show that they have 500 hours of working knowledge of IFRS. The combined knowledge must be equivalent to that of a single individual with 800 hours.
Coppin said listed companies were responsible for complying with IFRS. Therefore they should employ a specialist .
Coppin said the firm made representations to the JSE when the requirements were released for comment.
Ewald Müller, senior executive at the South African Institute of Chartered Accountants, said that one of the biggest concerns for auditing firms was meeting the requirements of the IFRS specialist.
It would be "cumbersome" for some of firms, Müller said . However, it should not prohibit smaller firms from meeting the requirements. "They can do so as an advisory group," he said.
Grant Thornton, head of audit Clifford Amoils, said in light of the stringent requirements, many smaller audit firms may choose not to audit listed companies in the future.
"Firms that decide to continue will have to remain vigilant to ensure they maintain the highest professional standards," Amoils said .
To show skills in IFRS, time spent on other reporting frameworks such as IFRS for small and medium sized enterprises, may not be included .
Geoff Pinnock, head of audit at Deloitte, said the new requirement would be onerous, even for many of the large firms.
It would be even more difficult for smaller firms to demonstrate they have a working knowledge of the financial reporting framework, he said .
According to the Generally Accepted Accounting Practice monitoring panel, there was a need for IFRS specialists.
This was evident from a number of cases referred to the panel. Several companies had to revise or republish their financial statements.
Müller said the difficulty with this process was that it could be long and drawn out.
"By the time a correction is published, it is usually long after the fact."
Ultimately IFRS is the responsibility of the company and not the auditor, he said .
However, there was a difficulty in imposing the regulation on the company, he said .
The JSE will require audit firms and their auditors to have passed quality control reviews by the Independent Regulatory Board for Auditors (Irba) to remain on its register.
Coppin said there was a danger of duplicating Irba’s duties. "Surely a confirmation of the quality review annually from Irba would suffice ?" he asked . "This is resulting in more red tape and no doubt auditors will have to bear some of the costs."
Müller said queries had been raised with the JSE in the consultation process as to the duplication of auditing regulator's role.
However, the latest version of the requirements suggested it was more a matter of bolstering regulation to be more specific than stepping into the regulator's space, he said.
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