Audit firms can be fined up to R25 million

Minister of Finance Enoch Godongwana recently increased the maximum monetary fines that the Independent Regulatory Board for Auditors (IRBA) can impose on auditors.

These new fines will apply to auditors and auditing firms that have been charged with improper conduct and who admit guilt or who are found guilty following a disciplinary hearing, according to law firm Webber Wentzel. 

The maximum monetary fines the IRBA can now impose are as follows.

• 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 firm said these fines are significantly higher than the previous maximum of R200,000.

According to Webber Wentzel, there is some uncertainty around certain aspects of these new regulations.

The proposed increase was first published by the Finance Minister on 16 September 2022 for public comment, in compliance with the requirements of the Auditing Professions Act. 

However, the increases have been implemented as per the proposed increase published in September 2022, “begging the question of the effectiveness of any public comments”.

In addition, a criminal law principle states that a penalty cannot be increased against a wrongdoer after committing the offence without express wording or clear implication to the contrary.

Since fines are considered penalties, they must comply with this principle.

However, according to Webber Wentzel, there is no express wording or clear implication in the APA that suggests the increased maximum monetary fines should apply to alleged improper conduct committed before the publication of the Minister’s notice on 15 June 2023.

“The increased maximum fines are a major change that will likely have a significant impact on the auditing profession in South Africa,” the firm said. 

“It remains to be seen how the IRBA’s new powers will affect auditors who engage in improper conduct.”