B1
B1.1 The Finance Minister's proposed change is driven by the deceptive and improper actions of
auditors and auditing firms in South Africa. This is particularly evident in cases where they have failed to
meet their responsibilities and have been implicated in prominent scandals and fraudulent activities,
such as the Steinhoff International collapse and involvement in the state capture project.
B1.2 In the article, two methods of implementing the actions mentioned in B1.1 (increasing fines for
auditors and auditing firms) are as follows:
1. Finance Minister Enoch Godongwana introduced amendments to the Auditing Professions Act of
2005, which raised the maximum fines that the Independent Regulatory Board of Auditors
(IRBA) can impose on individuals (auditors) and firms.
2. The IRBA accepted the Finance Minister's proposals, enabling the enforcement of these
increased fines while retaining the authority to impose various other penalties for improper
conduct, including non-monetary sanctions.
B1.3 The crucial connection between the case in Study unit 4.5.3 and the actions in B1.2 lies in their
common goal of promoting accountability and ethical conduct in professional services. In both
instances, there is an emphasis on raising penalties and fines for misconduct with the intention of
deterring improper behavior and enhancing the integrity of their respective professions, whether in
legal practice (as in Study unit 4.5.3) or auditing (as in B1.2).
B1.4 The Finance Minister proposed changes to the fines for auditors and auditing firms because the
existing penalties, with a fixed maximum fine of R200,000, were considered insufficient by the
Independent Regulatory Board of Auditors (IRBA) and the government to effectively discourage
misconduct in the auditing profession. This profession has witnessed several scandals and instances of
negligence in recent years, such as the Steinhoff International collapse and the state capture project.
B1.5 A tangible outcome of the impacts mentioned in B1.5 (the substantial increases in fines for auditors
and auditing firms) could be an elevated level of accountability and integrity within the auditing
profession in South Africa. Auditors and firms may be more inclined to adhere to professional standards
and ethical conduct to avoid these substantial fines.
, B1.6 A real-world consequence of the impacts discussed in B1.5, involving significant increases in fines
for auditors and auditing firms in South Africa to promote ethical practices and accountability, could be
a reduction in the frequency and severity of financial scandals and fraudulent activities within the
country's business and financial sectors. This would result in increased confidence in financial reporting,
improved investor trust, and potentially greater economic stability and growth.
B1.7
Independent Regulatory Board of Auditors (IRBA)
Finance Ministry (led by Finance Minister Enoch Godongwana)
KPMG (an auditing firm)
Webber Wentzel (a law firm)
B1.8 One probable underlying motive behind the actions in B1.1, which involve significantly increasing
fines for auditors and auditing firms in South Africa, could be to discourage unethical behavior and
misconduct in the auditing profession by creating a strong financial disincentive. This, in turn, aims to
promote higher ethical standards and greater accountability within the industry.
B1.9 The actions in B1.1, which involve significantly increasing fines for auditors and auditing firms,
impact the role described in Study unit 2.2.1.1 in two significant ways:
1. Enhanced Regulatory Oversight: This strengthens the regulatory oversight of the auditing
profession by providing a more substantial deterrent against unethical behavior, encouraging
auditors to adhere to higher standards. This may lead to a more robust and trustworthy audit
process.
2. Promotion of Accountability: The increased fines promote greater accountability among
auditors and auditing firms, aligning with the role of maintaining integrity and ethical conduct
within the profession. This potentially reduces the likelihood of financial scandals and
misconduct.
B1.10 One key attitude from Study unit 1.3.4.4 that does not align with the actions in B1.1 is
Complacency. The actions in B1.1 aim to increase fines as a deterrent to unethical behavior and
misconduct among auditors and auditing firms, which is contrary to a complacent attitude that may
overlook the need for stricter penalties and accountability.
B1.1 The Finance Minister's proposed change is driven by the deceptive and improper actions of
auditors and auditing firms in South Africa. This is particularly evident in cases where they have failed to
meet their responsibilities and have been implicated in prominent scandals and fraudulent activities,
such as the Steinhoff International collapse and involvement in the state capture project.
B1.2 In the article, two methods of implementing the actions mentioned in B1.1 (increasing fines for
auditors and auditing firms) are as follows:
1. Finance Minister Enoch Godongwana introduced amendments to the Auditing Professions Act of
2005, which raised the maximum fines that the Independent Regulatory Board of Auditors
(IRBA) can impose on individuals (auditors) and firms.
2. The IRBA accepted the Finance Minister's proposals, enabling the enforcement of these
increased fines while retaining the authority to impose various other penalties for improper
conduct, including non-monetary sanctions.
B1.3 The crucial connection between the case in Study unit 4.5.3 and the actions in B1.2 lies in their
common goal of promoting accountability and ethical conduct in professional services. In both
instances, there is an emphasis on raising penalties and fines for misconduct with the intention of
deterring improper behavior and enhancing the integrity of their respective professions, whether in
legal practice (as in Study unit 4.5.3) or auditing (as in B1.2).
B1.4 The Finance Minister proposed changes to the fines for auditors and auditing firms because the
existing penalties, with a fixed maximum fine of R200,000, were considered insufficient by the
Independent Regulatory Board of Auditors (IRBA) and the government to effectively discourage
misconduct in the auditing profession. This profession has witnessed several scandals and instances of
negligence in recent years, such as the Steinhoff International collapse and the state capture project.
B1.5 A tangible outcome of the impacts mentioned in B1.5 (the substantial increases in fines for auditors
and auditing firms) could be an elevated level of accountability and integrity within the auditing
profession in South Africa. Auditors and firms may be more inclined to adhere to professional standards
and ethical conduct to avoid these substantial fines.
, B1.6 A real-world consequence of the impacts discussed in B1.5, involving significant increases in fines
for auditors and auditing firms in South Africa to promote ethical practices and accountability, could be
a reduction in the frequency and severity of financial scandals and fraudulent activities within the
country's business and financial sectors. This would result in increased confidence in financial reporting,
improved investor trust, and potentially greater economic stability and growth.
B1.7
Independent Regulatory Board of Auditors (IRBA)
Finance Ministry (led by Finance Minister Enoch Godongwana)
KPMG (an auditing firm)
Webber Wentzel (a law firm)
B1.8 One probable underlying motive behind the actions in B1.1, which involve significantly increasing
fines for auditors and auditing firms in South Africa, could be to discourage unethical behavior and
misconduct in the auditing profession by creating a strong financial disincentive. This, in turn, aims to
promote higher ethical standards and greater accountability within the industry.
B1.9 The actions in B1.1, which involve significantly increasing fines for auditors and auditing firms,
impact the role described in Study unit 2.2.1.1 in two significant ways:
1. Enhanced Regulatory Oversight: This strengthens the regulatory oversight of the auditing
profession by providing a more substantial deterrent against unethical behavior, encouraging
auditors to adhere to higher standards. This may lead to a more robust and trustworthy audit
process.
2. Promotion of Accountability: The increased fines promote greater accountability among
auditors and auditing firms, aligning with the role of maintaining integrity and ethical conduct
within the profession. This potentially reduces the likelihood of financial scandals and
misconduct.
B1.10 One key attitude from Study unit 1.3.4.4 that does not align with the actions in B1.1 is
Complacency. The actions in B1.1 aim to increase fines as a deterrent to unethical behavior and
misconduct among auditors and auditing firms, which is contrary to a complacent attitude that may
overlook the need for stricter penalties and accountability.
