FINANCE: SA Needs Steady Flow Of Registered Auditors to Maintain Global Number One Position for Auditing and Reporting Standards
Recent Gauteng Business News
South Africa has once again, for the seventh year in a row, maintained its number one position for its strength of auditing and reporting standards. That’s according to the latest World Economic Forum’s (WEF) Global Competitiveness Report (GCR) 2016-2017 released yesterday.
The nation is also ranked tops for its “protection of minority shareholders’ interests”; and “financing through local equity market” in the new GCR survey. South Africa came second for “financial services meeting business needs” and “soundness of banks”; and it was ranked third this year for “efficacy of corporate boards”; and “regulation of securities exchange” out of all 138 economies worldwide.
But Grant Thornton Johannesburg’s CEO, Paul Badrick, warns that maintaining a steady flow of registered auditors is imperative to ensure this top position in the years ahead.
“Despite the country leading the WEF’s Auditing and Reporting Standards table for the past seven years, it appears that the number of registered auditors in South Africa has been on the decline or virtually stagnant for more than half a decade, since 2010,” warns Badrick.
According to the Independent Regulatory Board for Auditors’ (IRBA) annual report for 2015, the total number of registered auditors recorded last year is lower now than the total number of registered auditors recorded in 2010, with 4311 registered auditors recorded in 2015, compared to 4398 at the end of 2010.
But Badrick also adds that the IRBA is clearly aware of the issue and has been working very hard to turn the downward trend around.
“The 2015 Annual Report from the IRBA reveals a gradual improvement in the number of registered auditors since 2014 (4281) and 2013 (4306), although only marginally,” notes Badrick. “No doubt it will take time to bolster the profession properly. After all, these numbers have been on the decline for quite some time.”
Badrick applauded the IRBA for the changes the Board has made in the past year. In particular, he noted that there had been a considerable effort from the Board to increase the total number of trainee accountants.
“IRBA has recorded a 100% increase in the number of trainee accountants since 2014 with 5440 trainee accountants registered during 2015, compared to just 2722 registered in the 2014 year,” he says. “In order to maintain our leading position globally for Auditing and Reporting Standards, we really do need to ensure we have a steady stream of Registered Auditors entering the profession.
“It is very well known worldwide that South Africa’s legal, financial reporting and corporate governance standards are of a superior standard. It is imperative that we maintain these top levels of quality going forward.”
According to the 2016-2017 WEF GCR rankings South Africa improved its overall competitiveness ranking, by two places to 47th place overall out of 138 economies, for the second year in a row (South Africa was ranked 49th in the 2015-2016 Report).
This improvement comes after four consecutive years previously where South Africa’s rankings steadily declined. In 2011-2012, it was ranked 50th ; in the 2012-2013 report the nation was placed in 52nd position; during 2013-2014 South Africa ranked in 53rd position; and 2014-2015, it was in 56th place.
The 2016-7 WEF Report’s competitiveness ranking is based on the Global Competitiveness Index (GCI), which was introduced by the WEF in 2004. Defining competitiveness as the set of institutions, policies and factors that determine the level of productivity of a country, GCI scores are calculated by drawing together country-level data covering 12 categories – the pillars of competitiveness – that collectively make up a comprehensive picture of a country’s competitiveness.
The WEF Report states that South Africa is ranked as the second most competitive economy in the region at 47th in this year’s survey, just behind Mauritius which is ranked 45th. Most significant areas of progress for South Africa, according to this year’s report, include enhanced competition, both locally (up 13 places) and internationally (up 16 places); better use of talent in terms of how pay reflects productivity (98th, up 29 places); and a small but important upgrade in the quality of education (up five places), with primary school enrolment also now passing 97 percent.
The 2016-7 report also warns that a number of shortcomings may limit South African competitiveness going forward. In particular, the survey highlights that infrastructure development has stalled, both in transport and electricity, institutional quality has diminished with less transparency and some security concerns. According to the report, business leaders have far less trust in politicians and this ranking is down a significant 11 places since last year’s report to 109 out of 138 economies this year.
SA Quality of Maths and Science Education now stone last out of 138 economies
Badrick believes that while South Africa’s improvement to 47th position is to be applauded, the country’s dismal ranking in its education is a far greater cause for concern.
The WEF Report ranks the quality of South Africa’s quality of maths and science education as dismally poor (138th) – last position in this year’s survey.
“We all know that to qualify as a registered auditor, you need to have an excellent understanding of mathematics” says Badrick. “We really need to do everything in our power as business and government, to work together, in order to turn this under performance around.”
But Badrick notes a small, but vital improvement in the education rankings in this year’s WEF GCR survey, and that is in the quality of the education system.
“It’s an important upgrade to note because South Africa improved by five places in the quality of the education system,” he says. “Even more important is that primary school enrolment is also now passing 97 percent.
“Improving a country’s entire education system is a process that’s going to take a very long time. Even the slightest improvement at primary school level means we’re moving in the right direction. Getting our education system right from the primary school stages is vital to overall improvements right through our system,” Badrick concludes.
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