Employee training

Our training hours reduced this year, with employees spending on average nine hours less on training. We halted technical training for six months while the updated audit methodology for the ISQM 1 was being developed. We expect training hours to increase significantly with the updated methodology and the #cultureshift2030 strategy.

With a notable increase in the resignations of our state-owned enterprise auditors, our need for basic training in this area grew exponentially. In total, 549 employees attended 6 061 hours of state-owned enterprise training. Our plan over the next financial year is to develop initiatives that will ensure the sustainability of this capability.

Leader training

The executive and leadership development programmes (EDP and LDP) saw a steady stream of graduates with 27 executives graduating from the EDP and 114 leaders completing the LDP.

The first 10 students in the LDP train-the-trainer model have completed their training and will focus on facilitating the manager development programme inhouse. This will save money on external trainers, upskill our employees and lead to consistency in training.

Young professional development

The management of our trainee auditors’ path through their training is done against a well-considered tactical plan, which has been in place since 2021. Our support is for the chartered accounting, information system auditing and forensic auditing disciplines. The number of our young professionals decreased from 1 151 in the prior year as a decision was made to focus recruitment on trainee auditors with a CTA in 2023, which limited the annual intake.

We countered the lack of entrants with CTA by retaining a large number of those who had already completed their learnership. The numbers of auditors on the Certified Information Systems Auditor (Cisa) learnership decreased from 36 in 2021-22 due to a deliberate decision to pause while we take time to define our information systems audit strategy.

Young professionals in training at the AGSA

In the 2022 academic year, exco approved a special CTA study support programme for trainee auditors. We invested R4,9 million (excluding lost revenue) in the programme which resulted in a humble 30% success rate for our AGSA candidates. We are now working on a more appropriate offering for the existing trainee auditors who are studying towards CTA. At Unisa, from which we source candidates with CTA, only 53 candidates passed nationwide (15% were from the AGSA). We are reconsidering the continued use of this programme.

The Assessment of Professional Competence (APC) is the final test of competence in the chartered accountant journey and the penultimate exam. A total of 239 of our candidates succeeded, the third largest contributor to successful candidates in the country, i.e. 9% of successful CTA candidates come from our training programme. This proportion has increased steadily in the last four years.

*These candidates were in the AGSA’s employ as at 31 March 2023

Just at the end of the financial year, 31 March 2023, Saica released the Initial Test of Competence (ITC) results. Our candidates achieved a 53% pass rate (those writing for the first time achieved an 85% pass rate).

Currently, we employ a sizeable cohort of audit professionals:

Bursary scheme

The AGSA external bursary scheme provides financial assistance to potential AGSA employees who are keen to pursue a career in the accounting and auditing profession. The scheme enables us to have access to skilled professionals for the execution of our mandate and strategy, as well as to support the transformation objectives of the chartered accountancy profession.

During the 2022-23 financial year we distributed R5,4 million to 36 academically gifted young people and provided opportunities to persons with disabilities, candidates selected from our schools support programme, as well as AGSA employee family members.

The Thuthuka development fund administered by Saica provides all-round, holistic support to talented African and coloured students who want to become chartered accountants. The AGSA-Thuthuka partnership continues to highlight the importance of the AGSA as a formidable training institution in the public sector.

We contributed R11 497 125 to Thuthuka for the 2023 academic year. In return, 32 Thuthuka candidates began their articles with the AGSA in 2023.

Our transformation journey continues to evolve and, in support of our strategy, goes beyond compliance; we aim to contribute meaningfully towards building an inclusive society that is characterised by equitable opportunities for employment that embrace a diversity of skills, procurement processes that drive inclusive growth, strong partnerships with non-governmental organisations and community uplift programmes that reach the most vulnerable groups in society.

We have maintained a level 1 B-BBEE recognition status for the fifth year. Our success is attributed to ongoing commitment from our staff and leadership on this transformation agenda.

We continue to strengthen messages of diversity and inclusion through our employment equity forums. Webinars have become an important way of educating and empowering staff on matters such as prevention and elimination of harassment in the workplace, equity deviations and other difficult topics continue to be an area of focus.

In addition to building skills in the auditing and accounting professions, our trainee auditor scheme also aims to contribute positively to youth employment through our learnership programmes. We are accessing opportunities to partner with non-governmental organisations that support youth employment initiatives. Possible risks associated with such partnerships are actively managed.

Our contribution to socioeconomic development focuses on investing in educational programmes, social relevance and strategic relationships. Our school programme as well as our corporate social responsibility initiatives remained constant. Our donations to people affected by floods in the KwaZulu-Natal and Eastern Cape partnership with the Red Cross made a real difference.

We are investing in strategic relationships on transformation matters with professional bodies, audit firms and some of our auditees.

Achieving targets for employing people with disabilities remains a challenge. The matter is receiving our highest attention. Similarly, cost containment measures impact the availability of funds for training.

Enterprise and supplier development (ESD)

The objective of our ESD programme is to accelerate growth and the sustainability of black owned enterprises in the auditing and accounting industry by providing financial and business support to help qualifying companies overcome obstacles and increase their market competitiveness, and ultimately to create jobs and become sustainable.

The ESD programme runs over a five-year cycle. In March every year, ESD beneficiaries are assessed to determine which will proceed with the programme. In 2022-23, 24 firms began the programme.

Pamag Inc. a black women-owned firm graduated to supplier development. The assessment for firms ready to graduate out of the programme is still in progress and will be finalised before the new tender cycle.

The overall budget for the ESD programme for 2022-23 was R3 million, and was used in full. The main support provided to the firms aimed to align their operational infrastructure with our specifications.

Employee relations

Our employee relations root cause analysis helps support business with proactive interventions for identified misconduct to avoid recurrences. Such interventions further drive an internal culture of transparency, care, trust, and accountability.

Working hard to address the identified triggers and prevent disputes, bolsters employee morale and ensures legal compliance.

Repositioned ICT function

Our ICT function underwent a series of changes in 2022-23 to form a sustainable technological foundation for our #cultureshift2030 strategy. The ICT function now forms part of the Digital and Technology Office (DTO) portfolio and delivers based on the approved novel DTO strategy, which aligns our technology investments with our strategic priorities.

The strategy reinforces our ability to adapt and thrive in the ever-evolving digital landscape, emphasises innovation, strengthens cybersecurity and promotes agile IT governance.

A new strategic enterprise architecture and a revised ICT operating model and structure drove the formation of a future-fit unit with the right mix of IT skills. We are delighted to reflect that by March 2023, the ICT unit had filled 98% of all vacancies and is fully responsible for our IT infrastructure, its operations and supporting processes.

Resolving IT audit findings

A new digital transformation unit

The objective of our new digital transformation unit is to transform the business by using fit-for-purpose technologies. This will result in automating business operations, insight and unlocking efficiencies to create a sustainable business model.

Ensure high quality of our audits

The quality of our audit work continues to be paramount as it ensures the credibility of our opinions and enhances our reputation. The work that we produce attracts significant attention, both from our auditees and from the public. We are mindful of the reality that our products and processes may be subject to increased scrutiny before the courts. We therefore make quality audits our priority.

System of quality management

The new ISQM standard came into effect on 15 December 2022. To comply with and adopt the standard within the prescribed timeline, we developed an effective system of quality management.
We used a project management approach to implement the ISQM to ensure that we were business ready to comply with the standard by the effective date. While we experienced challenges, we became ISQM compliant ahead of the 15 December 2022 deadline.

The ISQM 1 implementation required a mind shift in how we navigate from a perceived reactive and negative quality control space to new ways of managing quality that is proactive, preventative and ensures collaborative engagement and accountability.

We conducted a comprehensive and iterative change impact assessment and prepared for applying the ISQM by training staff on the principles to strengthen systems of quality management.

This training reached 3 414 participants who spent a collective 6 690,17 hours on our eLearning platforms on the learning management systems (LMS), with a pass rate of 89%.

The information systems audit reimagine project aimed to redesign the current operating model and structure by conducting a skills gap assessment to ensure that the unit has the relevant future-ready IT auditing skills to meet the emerging technology demands and business needs. This project will continue into the 2023-24 performance year.

This year we subjected 64 audit engagement files for 63 engagement managers to a post-issuance quality review. We are proud to announce that we achieved a rating of 84% compliance with engagement quality standards for the 2022-23 performance year.

While this is a decline of 2% from our rating in the previous year, it is within the targeted achievement of 80% or more. We intend to improve on this year on year as we mature in the SOQM.

Overall, there has been a gradual and sustained improvement in the quality outcomes over the past five years, which can be attributed to our investment in specific initiatives that have been implemented and embedded in the organisation over the years.

Strategic risks

The organisation’s risk management processes are an integral and a fundamental tool for enabling organisational objectives and delivering on our strategy. During 2022-23, and as a consequence of the introduction of the ISQM 1, we reviewed and enhanced some policies and procedures – including our risk management policy – primarily to ensure that organisational risk management processes remain robust and proactively responsive to emerging environmental factors.

In developing and implementing the culture shift strategy, we set out to proactively identify strategic risks and implement measures to mitigate against the potential threats to the achievement of strategic objectives. We identified six strategic risks, including at the audit committee level, which has the ultimate responsibility of approving the strategic risk profile.

We are pleased to note that across the organisation and its various structures, there is an established culture of risk consciousness and intelligence. We believe that our collective attitude to risk management will safeguard the organisation and ensure its sustainability into the future. As depicted below, when the strategic risk profile was revised, a deliberate effort was made to ensure that there was an alignment between the strategic risk profile and the #cultureshift2030 strategy and its pillars or elements.

While the strategic risk profile has not significantly changed from last year, the average exposure associated with the six risks has increased, with none of the risks rated as low.

We continuously identify, evaluate, mitigate and report on risks as an important element of the overall risk management approach. We also continuously review and monitor the mitigations. The table below outlines the key responses attached to the strategic risks. Some key responses are initiatives to the #cultureshift2030 strategy.

In view of the above, and other mitigations on the strategic risk profile, we are satisfied that when implemented, the initiatives will enable the organisation to achieve its strategic objectives.

Managing ethical and independence risks

Our approach to building a strong ethical environment and influencing ethical behaviour in the auditing profession and in the environment in which we operate is guided by our dedicated ethics strategic programme. Through it we strengthen our leadership’s ability to deal with ethical issues and create mechanisms by which we will make our employees feel more valued and ensure that all AGSA employees, stakeholders, auditees and contractors adhere to and are held to the same standard of ethical conduct that is beyond reproach, in fact and in perception.

We proactively identify and respond to ethics risks by creating and sustaining an organisational environment with a common understanding and application of the AGSA’s ethical principles, with the specific goal of strengthening the character and ethical resolve of our employees to be steadfast against temptation and undue influence.

The International Ethics Standards Board for Accountants (IESBA) and the International Standard for Supreme Audit Institutions (ISSAI) 130 inform our ethical stance and are the foundation of our ethics management programme.

Our employees’ personal interests are captured and managed through our declarations system and are monitored quarterly via exception dashboards.

The compliance rate for the 2022-23 financial year is 99,7%. The declarations outstanding as at 31 March 2023 relate to employees on maternity, sick and unpaid leave, who are expected to comply upon their return to duty. One outstanding declaration relates to a new member of staff whose details had not yet been captured on the system.

We had two confirmed ethical breaches for the year:

The ethics programme also included ethics engagements with the firms contracted to perform audits on behalf of the AGSA and will be continued to ensure adherence, with the relevant provisions included as contractual obligations.

Organisation’s risk culture

In response to the organisational risk culture survey conducted in quarter 2 and 3, we have drafted a training and change plan that will be rolled out over the 2023-24 performance period.

Status of audit findings resolutions

Of the 39 findings from internal and external auditors issued in the 2022-23 financial year, 28 (72%) were issued to the ICT function, mostly as a result of issues identified during the IT security review, undertaken by the internal auditors. The other 11 (28%) were issued to the Finance and Risk and Ethics units.

Of the 39 findings, 27 (69%) have been resolved and 12 (31%) are in progress. It should be noted that one finding emanating from the IT security review, which has previously been closed, has since been reopened given that a vulnerability scan indicated that the finding was not resolved sustainably. The team is investigating a sustainable remediation action.

Adequacy and effectiveness of our internal controls

With the internal controls monitoring process, we have a notable reduction in the level of reported exceptions, at 406 (40%), demonstrating a significant improvement in adherence to defined internal controls, policies and procedures.

Although this gives us a level of comfort, we remain conscious of all identified issues and their related root causes. Most of the issues are because of late approvals (time) and movements of assets. It should be noted that the identified issues are usually resolved within 30 days.

We are therefore reasonably comfortable that exceptions are generally detected early and resolved timeously. In line with the organisation’s digital transformation and automation efforts, the internal controls monitoring function is looking forward to implementing and embracing a new robot and a digital form to assist with improving efficiencies.

Status of compliance with the laws and regulations (mandatory or elective)

Our regulatory universe has no significant changes. We do not have legislation, standards or codes rated either critical or high; implying that our process on compliance management remains adequate and effective to mitigate against regulatory compliance risks.

Complaints statistics and trends

During 2022-23 we received 98 complaints. These were assessed and broken down as follows:

The majority of complaints are still reported through the AGSA’s website (58). However, most of these are classified as out of scope and are reported on this platform due to the accessibility of the website or the public’s misconception of the AGSA’s role.

The remaining 34 complaints were in scope. These were broken down as follows:

Changes to the complaints policy

On 1 November 2022, the new dispute resolution policy came into effect to address audit-related complaints. The scope of the dispute resolution policy is to address disagreements between the audit teams and those they audit, where these disputes are not successfully resolved by audit business unit leaders. These complaints will be resolved by the complainant escalating the matter to the head of portfolio of the respective audit team for efficient resolution.

Promote the whistleblowing channel

Our whistleblowing platform remains an effective channel to report complaints relating to the conduct of AGSA employees and the office administration. This is enabled by the whistleblowing platform being completely anonymous.

Effectiveness of reporting channels

Fraud prevention framework

The fraud prevention implementation plan was approved in July 2022 to support our Fraud Prevention Framework. The plan contains specific activities that were rolled out to the organisation to prevent the occurrence of occupation fraud. The majority of these activities have already been completed with the remaining activities being carried over into the new financial period.

Management of legal risk

Our ability to sustainably impact the lives of South Africans relies to a great extent on our independence. Attacks on our independence manifest in various forms. One is to disrupt our work and bring the credibility of our products into question. Our legal team is tasked with the responsibility to predict, prevent, identify and mitigate all legal risks that threaten our independence. Once a threat has materialised, the legal team defends our cases before the courts.

A change in legislation, court rulings that alter the law as we knew it, complex commercial transactions and employee concerns all create some form of legal risk or threat for the organisation. The most prominent, and possibly the most harmful are legal attacks on our audits.

During the 2022-23 financial year, our legal team identified jurisprudence and changes in legislation that affected our operations and the manner in which we execute our mandate. Our approach to these developments is one of proactive analysis and early preparation of the environment to ensure minimum risk of non-compliance when the changes in law take effect.

When considering legal risk in the context of our audits, we have sharpened our ability to resolve disputes as soon as they arise, or as early as possible thereafter.

Judicial review proceedings against our audit products not only compromise our ability to meet our legislated deadlines, but also threaten the institution’s guaranteed independent role in ensuring accountability, transparency and timely oversight by those charged with that responsibility. In 2022-23, the AGSA did not face any commercial legal attacks. We experienced legal challenges in the employment relations discipline and a handful of audits came under legal scrutiny.

The chief people officer (CPO) case

In June 2022, the former chief people officer (CPO) threatened the auditor-general with exposure of alleged ‘wrongdoings’ in exchange for financial rewards in a material ethical breach. The deputy auditor-general ordered an independent investigation by a prominent law firm, Bowman Gilfillan, into the threat and allegations. During the course of the investigation, the CPO’s former employer shared information that indicated several acts of impropriety by the former CPO, acts that he never declared to the AGSA during or after his appointment. The CPO was charged in a formal disciplinary hearing with gross misconduct, breach of his suspension conditions and gross dishonesty. He was subsequently dismissed and his services at the AGSA terminated on 28 September 2022.

The Road Accident Fund (RAF) case

We highlighted in last year’s integrated annual report the Road Accident Fund’s (RAF) judicial review of our 2020-21 audit report. The RAF has subsequently withdrawn its appeal against the high court order allowing publication of the report. However, the RAF persists in challenging the auditor-general’s decision to issue a disclaimer of opinion for the 2020-21 audit. The judicial review is set down for argument before the high court, and there is still no sign of withdrawal of the case.

The RAF’s continued use of its accounting policy, based on an inappropriate standard, led to another judicial attack on an urgent basis to prohibit the auditor-general from publishing the 2021-22 audit report.

Legal challenges against the AGSA don’t always originate from disagreement with the way we work or the results of our work. During the current reporting period, Sakeliga NPC brought an application in terms of the Promotion of Access to Information Act, 2000 (PAIA) to gain access to the management reports of 154 municipalities for the financial years 2015 to 2022. Sakeliga also applied for an order to instruct the AGSA to make all management reports public going forward. We opposed this application on a number of grounds, including the impact that such orders would have on the ability and appetite of auditees to share information freely with the auditors. The high court ruled in our favour and confirmed that the Constitution did not require us to make our management reports public.

We encourage the users of our reports to engage in the rich information we report in our general reports. Our general reports contain auditee-specific insights that are adequate for the exercising of the rights of groups and individuals.

Conclusion and looking ahead

Our chief risk officer and his legal team identified and mitigated the legal risk that the institution faced, and safeguarded our ability to exercise our calling independently and without fear, favour or prejudice. We remain focused on closing the RAF review proceedings in respect of the 2020-21 and 2021-22 financial years and to keep our stakeholders informed. We similarly hope to close the review proceedings brought by the member of the executive council of the Department of Small Business Development, Tourism and Environmental Affairs (Destea).

We plan to review our litigation strategy during the course of 2023-24. The aim of this initiative is to ensure integration of our legal processes with the new audit dispute resolution process. The overarching aspiration is to eventually be free of any court challenges against our audits. This is not a pipe dream, if all relevant roleplayers in the ecosystem guide our auditees, support them, monitor their actions and use their enforcement powers in deserving cases.