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August 12, 2013

UK FRC could inspire South Africa’s accounting regulation

The regulation of South Africa’s accounting profession could follow the British model of the Financial Reporting Council (FRC), The Accountant has learnt.

The chief executive of the Independent Regulatory Board for Auditors (IRBA), Bernard Agulhas, told The Accountant that he met with FRC representatives in early August to discuss how a future regulation of the accounting profession could be articulated in South Africa, should such regulation go ahead.

Agulhas said the meeting gave him the opportunity to understand the FRC model and share the model of the UK regulator with the South African Treasury, which will make recommendations to the Minister of Finance, who is to decide whether or not to regulate the accounting profession in the country.

It is expected that the government will decide in August whether it extends the regulation of auditors to the greater South African profession formed by approximately 50,000 professionals from various accounting bodies. Currently only 4,500 IRBA registered auditors are subject to regulatory oversight.

The World Bank is set to publish a Report on the Observance of Standards and Codes (ROSC), where it allegedly recommends regulating South Africa’s accounting profession as a whole. It is understood the minister could still suggest amendments to the ROSC, and therefore the date when it will be published hasn’t been confirmed as yet.

Should the UK model be adopted, the IRBA will be the equivalent body to the FRC, in which case it will need to extend its mandate to become the sole regulator of the accounting profession in South Africa. Only the Minister of Finance can approve such an extension.

"We are not lobbying for that. As one of the stakeholders mentioned in the ROSC, we should not influence the minister’s decision. We have just given examples of how it works in the FRC and how it could work in South Africa, because the FRC is mentioned in the World Bank’s report. But we are a regulator with 50 years of experience, especially in the audit profession, and we understand regulation, so we are best placed to [regulate the accounting profession]," Agulhas told The Accountant.

The FRC confirmed the meetings in London between Agulhas and some of its members and said it will follow the developments in South Africa.

The spokesperson for the South African Minister of Finance and the World Bank were unavailable to comment at the time of writing this report.

Related links

The Independent Regulatory Board for Auditors

The Financial Reporting Council

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