CAPE TOWN - South Africa’s corporate fraud problem, which has led to shareholders being defrauded and losing significant shareholder value in recent years, may have been prevented if internal auditors had been held to accountability, industry experts said on Wednesday.
Kariem Hoosain, Partner at Mazars South Africa, an audit, tax and advisory firm, said the problem could have been entirely preventable if the internal auditors had been more empowered, protected and held to the same level of accountability as external auditors, via appropriate regulation of the internal audit industry.
“Considering the high profile scandals that have dominated news headlines in the last few years, from VBS Mutual Bank to Eskom, it does not seem unreasonable to say that South Africa may have a corporate fraud problem,” he said.
In recent years, Hoosain said, external auditing firms may have justifiably garnered significant public criticism for missing acts of corporate fraud and accounting irregularities at both listed companies and state-owned entities for extended periods.
“However, there has been little reflection or comment on the role of the internal auditors in these companies and entities. Internal auditors are meant to be an integral part of the ‘comprehensive assurance’ on the financial and operational affairs, which must be provided to shareholders, boards and audit committees of these entities.”