TIGHTER regulation and control over the auditing profession will mean additional costs for auditors, says Kariem Hoosain, CE of the new Independent Regulatory Board for Auditors.

The South African auditing profession’s rules were overhauled following the collapse of US energy giant Enron and recent local corporate disasters such as Regal Treasury Bank, MacMed, Saambou and Unifer.

A decade after it was first announced, the Auditing Profession Act was passed into law on April 1 and the new board is to replace the Public Accountants’ and Auditors’ Board.

It was feared that new rules and the infrastructure governing the auditing profession could drive up costs for big business.

Hoosain said on Tuesday that some of the costs would include accreditation and registration fees. They would also be tied up in the new disciplinary process.

He said auditing firms and auditors would be required to register with the board, which “could prove burdensome for the sole proprietor”.

He said firms could also be held accountable for the wrongdoing of an employee, whether or not the employee was an auditor.

A new funding model was to be developed that would see the board funded by government and the profession, with at least a 50% contribution from government.

Hoosain said the board had requested R14m in funds from Finance Minister Trevor Manuel.

The act would be phased in over nine months under a plan submitted to government. The plan set out timeframes for the various sections of the legislation to be phased in.

A significant change under the act was the broadening of the jurisdiction of the regulator from individual auditors to include auditing firms. This would allow the regulator to review the standards and behaviour of firms and not just of the registered auditors who worked for them, said Hoosain.

In anticipation of this provision, the Public Accountants’ and Auditors’ Board (the former regulator) established a programme of firm reviews and the new board recently commenced its first review of one of SA’s big four auditing firms.

The costs of the reviews of the “big four” are expected to be about R1m per firm and R50000-R60000 for smaller firms.