Finance Minister Enoch Godongwana has quietly increased the maximum monetary fines for errant auditors and auditing firms. The new fines are significantly higher, with the maximum fine now at R25-million – 125 times the previous maximum of R200,000. The Auditing Professions Act of 2005 (APA) empowered the Independent Regulatory Board for Auditors (Irba) to investigate complaints of improper conduct where registered auditors are alleged to have acted contrary to the Irba code of professional conduct or failed to correctly apply auditing standards. A 2021 amendment to the Act was intended to introduce more effective monetary sanctions after public criticism that the previous fines were too low to have any real impact. The new maximum monetary fines which the Irba may impose are: Admission of guilt: R5-million per charge for an individual auditor; R15-million per charge for a firm of auditors; Found guilty following a disciplinary hearing: R10-million per charge for an individual auditor; R25-million per charge for a firm of auditors.
The proposed increases to the maximum monetary fines for alleged improper conduct committed before the publication of the Minister’s notice on 15 June 2023 have now been implemented. Webber Wentzel's view is that there is no express wording or clear implication in the APA which suggests that the increased maximum monetary fines should apply to alleged improper conduct committed before the publication of the Minister’s notice on 15 June 2023. However, Irba has a different view, saying the fines apply to all improper conduct after the date of promulgation of the amended Act or 26 April 2021. Imre Nagy, chief executive of Irba, says it is important to note that these are maximum fine limits and not fixed. Irba will now embark on the process of finalising the implementation framework to ensure that relevant considerations (including proportionality) are considered before determining an appropriate fine.
The increased maximum fines are a major change that will likely have a significant impact on the auditing profession in South Africa. It remains to be seen how Irba’s new powers will affect auditors who engage in improper conduct.
