Top marks for SA auditing

Source: Wikipedia

Wilma den Hartigh

South Africa officially has one of the best auditing systems in the world. The World Economic Forum’s 2008-2009 Global Competitiveness Report recently ranked the country fourth in the world for auditing and reporting standards.

The forum ranked South Africa’s auditing systems as better than those of economic heavyweights such as the US and UK, while Hong Kong, Austria and Australia took the top three positions.

The main goal of the report is to evaluate countries’ economic environment and their ability to achieve sustained levels of prosperity and growth. South Africa came in at 48th place out of 137 countries in the report’s overall ranking, the second-highest place after Tunisia among African countries and ahead of large economies such as India and Russia.

Bernard Agulhas, CEO of the Independent Regulatory Board for Auditors, said the ranking should be reassuring for South African businesses, financial institutions and international investors.

The global financial crisis has increased the need for regulators and standard setters to provide peace of mind for investors and the general public. According to Agulhas, maintaining appropriate audit standards would ensure that investors and capital providers have access to reliable and credible information.

The high ranking was no surprise to Dr Azar Jammine, director and chief economist at Econometrix. “South Africa’s auditing has always been of a very good standard,” he said.

He agreed that good auditing and reporting standards are crucial to draw investors. “People often say South Africa is lacking in many things, but what it does have is that it is relatively easy to do business here. Investors will certainly feel confident to do business here,” he said. Jammine added that the country’s sound regulatory framework is also attractive to investors.

Professor Harvey Wainer from the School of Accountancy at the University of the Witwatersrand said South Africa has managed to attract more investors to the country in the past few decades.

“Investment has increased and these standards also help to eliminate risk for the investor,” he said. He added that South Africa also did well to be one of the first countries to adopt international standards for accounting and auditing.  “In doing this it enhanced our ability to attract foreign investment.”

He pointed out that South Africa should also be proud that its chartered accountants are in demand in countries such as the UK and Australia. “Our chartered accountants are very mobile because we offer such outstanding training,” he said.

Bill Lacey, an economic consultant for the South African Chamber of Business, explained that investors usually rank a country’s investment potential according to seven criteria: political stability, economic strength, government policy and bureaucracy, infrastructure, labour environment, strength of banking and the financial sector and the local business environment.

Lacey said South Africa is performing fairly well in all seven categories.

“Our infrastructure development is well above that of other African countries and, although we are going into an election, our politics are reasonably mature.”

But for South Africa to continue performing well in these categories, it must contain its inflation rate.

South Africa also performed well in other categories such as business sophistication, quality of air transport infrastructure, soundness of banks, availability of latest technologies and capacity of innovation.

The annual survey is considered the largest poll of its kind. The World Economic Forum has been conducting the survey for nearly 30 years. This year, 12 297 top management business leaders in 134 countries between January and May completed the survey. This represents an average of 91 respondents per country.