Audit Profession Amendment Bill: National Treasury & IRBA briefings; Status of Joint Meetings: Legal Opinion

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Finance Standing Committee

26 August 2020
Chairperson: Mr J Maswanganyi (ANC) and Co-chairperson: Mr Y Carrim (ANC, KwaZulu-Natal)
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Meeting Summary

Video: Joint Meeting: Standing Committee on Finance and Select Committee on Finance, 26 August 2020

The Standing Committee on Finance and Select Committee on Finance met virtually to receive a briefing on the Audit Profession Amendment Bill from National Treasury (NT) and the Independent Regulatory Board for Auditors (IRBA).

Prior to this briefing, Members were informed that both chairpersons had received complaints regarding the legality of the joint committee meetings and proceedings. Both had sought legal advice from Parliament’s Constitutional and Legal Services Office. The advice issued to the Standing Committee on Finance is that the National Assembly (NA) rules allow for an NA committee to schedule a meeting with a National Council of Provinces (NCOP) committee. This is in accordance with National Assembly rule 167 which covers the general powers of committees. The reason for the current forum arrangement between the two committees, is to use Parliament’s bandwidth effectively and also has beneficial consequences for stakeholders making submissions on bills. It comes from the programming committee and chief whip’s forum. Mr F Shivambu (EFF) disagreed with the legal advice and pointed out that the Chief Whip’s forum response to the matter was that “under no circumstances can the Standing Committee on Finance process any Bill with the participation of the NCOP”. Mr Shivambu stated that proceeding with the meeting in this form is unlawful and inappropriate and opted to leave. Mr D Ryder (DA, Gauteng) and Mr W Aucamp (DA, Northern Cape) requested to be excused from the meeting until the Select Committee on Finance received clarity on the matter from their separate opinion. The Committees proceeded on the understanding that the Chairperson of the Standing Committee on Finance would take the matter up with the chief whip’s forum and programming committee.

Members were informed that the amendments proposed were the same as those contained in the Financial Matters Amendment Bill (FMAB). During the public hearings, stakeholders raised concerns on whether the provision for search and seizure is legal and constitutional. Treasury is of the view that it is and is currently engaging with the relevant stakeholders on the formulation of the provision, to meet the expectations of both parties. The amendments in the APAB pertain to strengthening governance; enhancing disciplinary and enforcement committees; registration requirements of auditors; reporting of irregularities; enhancing investigating and disciplinary processes; sanctions following guilty findings; and offences, protection of information & transitional measures. Included in the provisions is the power to enter and search premises and to subpoena persons with information required for investigation or disciplinary process. Regarding the reporting of irregularities, it was proposed that the Bill prohibit removal of registered auditor before auditor completes process of reporting irregularities to IRBA (clause 9). Also, the enforcement committee may refer non-audit matters brought against auditor to relevant professional matter for investigation and disciplinary processes.

IRBA highlighted the current investigation process and disciplinary process, as well as the changes that the amendments would lead to in each process. Following the amendments, the investigations process would have an additional step of determining if a complaint is an audit or non-audit complaint before being processed further. Furthermore, the Enforcement Committee will proceed with the outcome of the matter after the Investigations Committee, instead of the Disciplinary Advisory Committee. The disciplinary process would now have the additional requirement that after the Registered Auditor pleads guilty to charges, the date of sanction hearing is to be set down within 30 days of the decision on guilt. Also, the sanction is to be issued by the Disciplinary Hearing Panel five days after the sanction hearing.
 

Meeting report

Co-Chairperson Maswanganyi welcomed everyone in attendance and noted an apology from Dr D George (DA), who will be leaving the meeting early.

He announced that both chairpersons of the Select Committee and Standing Committee on Finance had received complaints regarding the legality of the arrangement of joint committee meetings and the proceedings. They had sought separate legal advice from the Parliament’s Constitutional and Legal Services Office. The outcome of which is that the National Assembly (NA) rules allow for an NA committee to schedule a meeting with a National Council of Provinces (NCOP) committee. NA rule 167, which covers the general powers of committees, provides that for the purposes of performing its functions, a committee may, subject to the constitution, legislation, other provisions of this rule and resolutions of the Assembly, consult any Assembly, Council committee, sub-committee or joint committee”. NA and NCOP committees have regularly consulted on various matters such as section 75 Bills, public hearings and briefings, for reasons of efficacy and effectiveness under the COVID-19 situation. The arrangement aims to use Parliament’s bandwidth effectively and also has beneficial consequences for stakeholders making submissions on bills. This is a standing practice permitted by the rules of Parliament. When a written instrument is referred simultaneously, to more than one NA committee, NA rule 169, which allows joint reporting, applies. This has not been the case for this arrangement as it is not applicable. The current forum arrangement between the two committees comes from the programming committee and chief whip’s forum. If there is an issue with the current arrangement, it will have to be taken to the programming committee and chief whip’s forum.  

Co-chairperson Carrim stated that this is not something new. He recalled that at one time in the past, there were 76 bills before Parliament and the legislature was desperate to complete the legislation in joint meetings over 6 months. He proposed that the rules either be slightly adjusted to avoid this situation, or clear conditions for joint meetings be established. The DA has raised the issue of committee independence several times, and in following up on the matter, the feedback was that because of COVID and Parliament’s shortened bandwidth, the arrangement of joint meetings for briefings and hearings was made to avoid the repetition of briefings. The advantage of the NCOP being briefed on the original bill is that it can observe the original bill and what has changed and has been adopted. Some of the things adopted by the NA, the NCOP does not agree with. He pointed out that the committees are not producing joint reports like in the fiscal framework. Finally, he added that he did not have a vested interest in the arrangement. 

Mr F Shivambu (EFF) stated that this issue of a coup d'etat in the Standing Committee on Finance (SCOF) due to vested interests, was raised with the Chief Whip’s forum. The response was that under no circumstances can the Standing Committee on Finance process any Bill with the participation of the NCOP. The legal advice read earlier is unlawful as there is a process when it comes to how Bills are passed. He highlighted that there are joint meetings if it is not about legislation, such as briefings with the Minister, but not with meetings like the previous day and today. It is misleading to want to impose people with vested interest in this process, who are not elected members of the NA, to participate in this Committee’s process.  He added that it is unacceptable for non-elected members to threaten to evict elected NA members from participating in meetings such as Mr Carrim did yesterday.

Mr D Ryder (DA, Gauteng) stated that the Select Committee has not received a response on the legal advice it has sought. He requested that the Chairperson forward the advice the Standing Committee has received. He added that he would not participate further in the meeting until there is clarity on the legality of the proceedings.

Mr W Aucamp (DA, Northern Cape) agreed with Mr Ryder and requested to be excused from the meeting until the Select Committee has received a response from its legal advisors.

Co-Chairperson Maswanganyi responded that he would take the matter up with the chief whip’s forum and programming committee. He proposed proceeding with today’s meeting with the understanding that there are members who will not participate until further clarity has been received. The written legal advice has been forwarded to Mr G Hill-Lewis (DA).

Mr E Njadu (ANC, Western Cape) agreed with the Chairperson to proceed with today’s meeting whilst the matter is being clarified.

Mr Shivambu proposed that the chairperson take a 30 minute break to consult and seek legal advice before proceeding. Continuing with the meeting in the current format is inappropriate and creates legal challenges. He added that this is not a joint committee of people who are smuggling themselves as a result of not being elected in the NA.

Co-Chairperson Maswanganyi replied that members in the NA are not in the upper house. Whether elected or not, members are equal members of Parliament.

Mr Shivambu raised a point of order that it is a misinterpretation of the rule and undermines the legitimacy of processes. Members of the NA and NCOP do not have equal rights. No member of the NCOP is permitted to introduce legislation in the NA. The issue in this case is an opportunist who lost on being Chairperson of the Standing Committee and imposes themselves here.  

Co-chairperson Carrim replied that the statements are offensive. NCOP members are appointed by parties and did not ask for this arrangement. From 1998 onwards this has been happening, all legislation, such as the disaster relief, has been dealt with like this. That would mean that every legislation passed by a joint sitting on a section 75 Bill is illegal and would have to go back to all legislation passed since 1996. Claims of a vested interest are ridiculous. No one has evicted anybody and has no right to do so.

Mr Shivambu stated that Mr Carrim proposed he be evicted from the meeting yesterday.

Co-Chairperson Maswanganyi stated that the Committee will move to get further advice on Parliament’s position and proceeding with the current arrangement, which has a rationale behind it due to COVID circumstances. He pleaded with members to proceed with the briefing from Treasury and IRBA. A decision will be brought back and presented to the forum.

Ms A Abraham (ANC) and Mr Njadu agreed with the Chairperson.
 
Mr Shivambu disagreed.

Co-Chairperson Maswanganyi requested that the meeting proceed with the understanding that Issues regarding the arrangement have been raised by the EFF and DA.

Briefing by National Treasury (NT) on Audit Profession Amendment Bill
Ms Karen Maree, NT Acting Accountant-General and the Minister’s representative on the IRBA Board, thanked Parliament for the opportunity and introduced the presenters.

Adv Empie Van Schoor,  Chief Director: Legislation, NT, stated that the amendments to the Auditing Profession Act pertain to strengthening governance; enhancing disciplinary and enforcement committees; registration requirements of auditors; reporting of irregularities; enhancing investigating and disciplinary processes; sanctions following guilty findings; and offences, protection of information & transitional measures.

Amendments proposed in the Bill are the same as those contained in Financial Matters Amendment Bill (FMAB). When the FMAB was presented to SCOF, certain stakeholders in public submissions raised concerns regarding the proposed search & seizure provisions. NT started to engage these stakeholders but did not conclude this since amendments to Auditing Profession Act were not proceeded with. Following public submissions & hearings on this Bill, NT will continue with this engagement should the Committees so direct.

Advocate Ailwei Mulaudzi, Director: Fiscal and Intergovernmental Legislation, NT, presented an overview of the amendments. The following amendments were proposed to strengthen governance and IRBA’s independence:


A requirement for IRBA to determine a defined policy framework with ministerial approval (clause 2);
the exclusion of registered auditors & candidate auditors from appointment as board members;
the prohibition of board members from sharing directly/indirectly in profits of registered auditors/ candidate auditors, and receiving payments from registered auditors/candidate auditors (clause 3);
allowance of a member to continue for a further period of up to three months when terms of Board members end, as it will allow filling of vacancies without affecting Board’s proper functioning (clause 4);
to relax the requirement for Board committee to meet four times a year to at least twice a year (clause 5);
that the Board comprise of persons of high integrity and therefore it is necessary that provision regulating their conduct is contained in Bill (clause 6).

Regarding the disciplinary and enforcement committees, it has been proposed that IRBA be enabled to appoint as many members of disciplinary committee as it considers appropriate and constituting a panel from these members to deal with disciplinary cases. It further proposes establishment of enforcement committee with powers to deal with certain categories of disciplinary matters of improper conduct (clause 7).

Regarding the reporting of irregularities, it was proposed that the Bill prohibit removal of registered auditor before auditor completes process of reporting irregularities to IRBA (clause 9). Also, the enforcement committee may refer non-audit matters brought against auditor to relevant professional matter for investigation and disciplinary processes.

The amendments related to enhancing investigating and disciplinary processes provide for:
power to enter and search premises and to subpoena persons with information required for investigation or disciplinary process;
power to issue warrant for purposes of entering and searching of premises
processes following investigations
the duty to disclose information
sanctions in admission of guilt process and following disciplinary hearing
criminal offences relating to investigation and disciplinary process
protection of personal information

(See presentation)

Briefing by the Independent Regulatory Board of Auditors (IRBA)
Ms Jenitha John, Chief Executive Officer (CEO),IRBA,  thanked the Committees and introduced the IRBA representatives present.

Ms Jillian Bailey, Investigations Director, IRBA, briefed Members on IRBA’s current investigation process and the changes that the amendments would lead to. The proposed amendments lead to the following changes in the investigations:


When IRBA receives a complaint of improper conduct, there is the additional step of determining if it is an audit or non-audit complaint before being processed further. If it is a non-audit complaint, then the matter may be referred to the relevant accredited professional body.
When the matter is tabled at the Investigating Committee for deliberation and recommendation, the outcome will be taken to the Enforcement Committee, instead of the Disciplinary Advisory Committee as is the case currently.
The matter is then tabled at the Enforcement Committee for deliberation and decision.
The outcomes of the above can either be the matter is dismissed, admission of guilt with a required fine or the matter is referred for Disciplinary Hearing.

Ms Bailey also elaborated on the current disciplinary process and the changes the amendments would lead to. The proposed amendments lead to the following changes in the investigations:
The matter would be referred for disciplinary hearing from the Enforcement Committee instead of the Disciplinary Advisory Committee.
If the Registered Auditor pleads guilty to the charges, then 30 days form the plea or the conclusion of hearings proceedings, the decision on guilt is to be issued by the Disciplinary Hearing Panel.
The date of sanction hearing is to be set down within 30 days of the decision on guilt
Five days after the Sanction hearing, the sanction is to be issued by the Disciplinary Hearing Panel

(See presentation)

Discussion
Co-chairperson Carrim asked whether the issues around the power to seize and search raised in the public hearings, were adequately addressed. He pointed out that that the same issue occurred with the Financial Intelligence Centre Amendment Bill. This Audit Profession Amendment Bill is very important given the global trend of auditors being paid to turn a blind eye to problems.
 
Mr Mulaudzi replied that NT’s view is that the provision is legal and constitutional. NT will engage further with the relevant stakeholders on how the provisions should be formulated. Treasury was still undergoing this process to meet both parties’ expectations. 

Closing remarks
Co-Chairperson Maswanganyi, in closing, thanked all Members, presenters and stakeholders.

The meeting was adjourned.

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