The South African Institute of Chartered Accountants (SAICA) held its Annual Dinner in Cape Town last night. Mr Hassen Kajie of the Western Cape was appointed as the new SAICA Board chairman earlier in the day at the Institutes' Annual General Meeting.

Enclosed, please find a short release as well as the speeches delivered by Mr Ignatius Sehoole, the executive president of SAICA, Hassen Kajie, the newly appointed chairman of SAICA and Colin Beggs, the outgoing chairman of SAICA. The guest speaker at the dinner was Minister of Finance, Mr Trevor Manual.

SPEECH

IGNATIUS SEHOOLE - SAICA EXECUTIVE PRESIDENT

8 MAY 2002

Chairman, Minister Manuel, honoured guests, members and associates, ladies and gentlemen

WELCOME

It is my pleasure to welcome you all here tonight. It is fantastic to see so many people, but I think it demonstrates in a very powerful way the spirit of the members in the Southern Region. Over the past year we have seen a new energy and a rebirth of the profession in this region. It is therefore fitting that our new Chairman for 2002/3 should hail from Cape Town. (When I talk about the profession, I mean not only auditors, but all members and associates in whatever sphere you operate in.)

I know that in past years we have tended to have entertainment at these dinners. Tonight the speeches are focussed more on the business of our profession and I don't apologise for that. There are important issues facing our profession and we need to use all opportunities to discuss them.

NEGATIVE PUBLICITY

Over the past year we have seen a lot of negative publicity about the accountancy profession, both in South Africa and overseas, flowing chiefly from the string of corporate collapses. These collapses have occurred for a variety of reasons and frequently acting in combination. Many stakeholders, including investors, employees, customers and creditors, lost a great deal as a result. In virtually every case, the auditors have been severely criticised, sometimes we believe unfairly. However, the authorities cannot allow these failures to continue.

OPPORTUNITY TO REPOSITION THE PROFESSION

I know that many auditors are pessimistic about the future of the profession, given all the pressures and responsibilities facing them. I do not share their gloom. Indeed, I believe we have a fantastic opportunity to deal with the problems and demonstrate that the accountancy profession is the leading profession in the country. In the same way that we are seeing a revitalisation of the profession in the Cape, we need to focus our energies on solving the problems.

I can tell you that the Institute has been addressing this issue for some time. It has conducted considerable research and it has looked at a number of models.

INVESTOR PROTECTION

We believe that the accountancy profession has to make some significant changes in the future, but if we are to truly deal with investor protection, then action is needed across a broad front. I will come back to this later. First, let me deal with the accountancy profession.

We believe that significant changes need to be made to governance and oversight of the profession. Some of the changes include:

• Creation of an independent oversight body.
• Tightening of the code of professional conduct to deal more effectively with auditor independence.
• Enhancement of the profession's ability to deal with delinquent members, especially those in commerce and industry.
• Enhancement of the profession's quality procedures with greater focus on high-risk areas.

EXPECTATION GAP

The profession has tried for years to narrow the so-called 'expectation gap'. It has always said that the public needed to be educated about the role of the auditor.

We were wrong!

We cannot tell the market what service it should have. The market must tell us what service it needs and then it is up to us to choose whether or not to supply it. It is clear that auditors have not met the public's expectation. We need to address key issues such as detection of fraud and going-concern, otherwise we are undermining the value of our service.

On the other hand, we also need to address the issue of who the auditor interacts with in the company. The audit is carried out on behalf of shareholders, yet management is the key negotiator. It even agrees the fees. This is out of step with modern business thinking. It would be far better if these issues were dealt with by the audit committee.

INDEPENDENCE

The profession has to, as a matter of urgency, address the issue of independence. It is clear that existing independence requirements do not go far enough. Auditors need to be independent and they need to be seen to be independent. In particular, we need to explore the extent to which auditors may in the future supply non-audit services to their audit clients.

If we take up these challenges, I believe auditors will provide more valuable services and they will have a better chance of receiving fair compensation.