Imre Nagy is using his position as CEO of the Regulatory Board of Auditors to build credibility in the accounting profession.
Years ago, Imre told his wife that he would one day work for the IRBA. That goal was realised in 2013, when he was appointed director of inspections. Eight years later, in 2021, the board appointed him Acting CEO, and he took on the role officially in September 2022.
He got his first taste of auditing while completing articles at a small firm (‘the benefit was being able to see audits through from the planning phase to reporting rather than fitting in as part of a large audit team’) and was then recruited as a manager by the then PricewaterhouseCoopers where he worked in an advisory capacity for the public sector. Two years later, he was offered a post at Gobodo Incorporated, which he accepted with alacrity – not only did it give him the chance to work in a local firm, but as it was headed by Nonkululeko Gobodo, South Africa’s first black female CEO, the appointment meant he was part of a firm leaving a significant mark. ‘It was a calling,’ he says. He started lecturing at North-West University around this time, too; answering another calling: ‘I’m passionate about education and getting young people into this industry.’
Then, 11 years ago, came the invitation to join the IRBA, first as director of inspections – and from there, ‘the opportunities exploded’. For instance, Nagy now sits on the board of the International Forum of International Audit Regulators (IFIAR). It’s a responsibility and a privilege he cherishes. ‘Even as a youngster, I couldn’t understand how people could do something wrong without being held accountable,’ he states. Leading South Africa’s regulator is therefore the answer to his ‘wildest dreams’.
Addressing perceptions
Nagy does not take the responsibility with which he has been entrusted lightly. Since taking up office, he has been working hard to address the tarnished perception of the industry, a result of a spate of corporate failures and the profession being implicated in instances of state capture.
Already struggling to restore the credibility of the profession and the public’s trust in auditors, Nagy’s task as the newly appointed Acting CEO was made more difficult by the turmoil created by the COVID-19 pandemic.
However, the IRBA rose to the challenge. The organisation’s image was bolstered with the launch of a refreshed brand, featuring a new logo and a corporate identity emphasising its three pillars: integrity, public interest and audit quality.
Trust was further restored when the organisation achieved a clean audit following a compliance issue in 2021, which was regularised in the next financial year by the board. This record was maintained for the next two years. ‘This is obviously important, as we are a role model for the industry,’ Nagy points out.
A third key development during his tenure has been the accreditation of the ACCA South Africa (the Association of Chartered Certified Accountants) as a second professional body, along with the signing of a memorandum of understanding with FASSET, the sector’s education and training authority, to fund small practices with a special focus on funding and training black trainees: a massive step towards industry transformation and empowerment. ‘We have also identified critical gaps in our legislative framework and moved to address them, with the introduction of conversations around regulation for accounting bodies. We are collaborating with National Treasury in this regard,’ Nagy says.
The IRBA also turned its focus inward, addressing a backlog of investigations and bringing an end to high-profile investigations into the auditors of organisations like VBS and other entities associated with state capture. Finally, the organisation has started publishing a series of reports – covering topics from public inspections to audit quality and enforcement – so that auditors can learn from its lessons.
Going forward, the focus is now on executing its mandate around setting quality standards, monitoring and disciplining auditors and ensuring quality audits. The IRBA is, moreover, working to increase innovation through the adoption of new technologies, and is striving to increase collaboration between various stakeholders to optimise impact and reduce industry fragmentation. Other areas which have Nagy’s attention include bringing capacity and transformation to the pipeline, along with developing skills around ESG reporting and sustainability to ensure the industry remains relevant. ‘We are also planning to conduct a comprehensive review of the Auditing Profession Act, which guides our industry, because it is now almost 20 years old – we need to ensure that it is still up to date, with modern advancements.’
Strengthening industry independence
While the IRBA has been hard at work to rebuild the integrity which has always been central to the profession’s image and success, Nagy is pleased to note that there have been several efforts with similar aims implemented at industry level. These include the introduction of specific amendments to the Auditing Profession Act in 2021, which helped to strengthen the IRBA’s regulatory powers and independence. ‘These amendments were necessary because South Africa introduced the Act in 2005, shortly after corporate failures like Enron saw the United States introducing the Sarbanes−Oxley Act,’ Nagy says, adding that meeting Senator Paul Sarbanes, who helped develop the legislation, prior to his passing in 2020, was a career highlight. The interim amendments further gave the IRBA greater enforcement power, along with search and seizure powers. ‘A lot of what happened during state capture took place under the radar, so it’s encouraging to note the emphasis on transparency,’ he comments.
The implementation of Mandatory Audit Firm Rotation (MAFR) is another step that has helped to strengthen the independence of auditors, Nagy maintains. In South Africa, the practice has other implications, too, helping to foster industry transformation and increase industry competitiveness by ensuring that smaller firms and those besides the dominant players are given an opportunity to work alongside major corporates. ‘I’m pleased to see that in the five years since the rule was made effective, more than 90% of listed companies rotated audit firms.’
The work to strengthen independence and increase the profession’s credibility is taking place at an international level, too, with the establishment of the Public Interest Oversight Board to oversee international standard-setting boards. ‘There’s a general recognition that we need to safeguard the independence of the industry. The corporate failures across various jurisdictions that have taken place during the past few years have brought standards into focus, raising questions around whether we need more stringent standards and what is expected of auditors.’
The road ahead
Nagy believes that the industry has responded to such questions in an agile manner and is confident that it has turned a corner. But he is quick to add that much work still needs to be done if it is to regain full credibility.
For instance, he says, the fragmented nature of regulation in South Africa must be addressed, along with the lack of regulation governing the accounting profession.
‘We also need to develop a regulatory framework to govern ESG and sustainability reporting. This is gaining pace, as investors are no longer solely interested in financial reporting – non-financial factors are regarded as crucial, too. At present, though, reporting is at a disadvantage because the lack of a regulatory framework has led to inconsistencies.’
Nagy is also determined to enhance the attractiveness of the profession. ‘Auditing was always regarded as a noble field; it held a certain stature,’ he muses. A new social compact is required to return it to this standing, which means that industry players must build its profile in a way that makes it clear how the profession adds value to society. ‘I want to see this profession prosper – and to do that, we need the help everyone who is part of it. It’s a demanding career, but we need to place a stronger accent on work/life balance. I also want to bring attention to the fact that this is a profession that helps the country – clean audits build trust, which attracts foreign direct investment, and that builds the economy. But our work helps the general public, too. Think of government grants and pensions – they comes from the fiscus, but it’s our businesses that feed the fiscus through the taxes they are paying. And it’s auditors who help ensure that businesses are able to prosper and profit.’
Building balance
Given Nagy’s belief that working to help industry newcomers to achieve a work/life balance will help to improve the profession’s image, it’s not surprising that he is focused on attaining balance in his own life. He credits his team as a great help in this area: ‘They do a great job, with minimal intervention. It’s a privilege to work with great people like this – they make it possible for me to focus on strategic imperatives because I know that the day-to-day management of the organisation and its core functions is in good hands.’ In turn, Nagy works hard to build their existing skills by providing opportunities for growth and letting them develop their own milestones. ‘I focus a lot on stakeholder engagement and collaboration. My daily tasks are often about meeting with others in our ecosystem to work out how we can partner on initiatives that will make the profession prosper while benefiting the public and the economy.’ He relies heavily on technology to do this (‘my office is almost completely paperless – if you were to see my desk, you’d think I do nothing all day!’) and is excited by innovation.
When it’s time for a break, he enjoys playing classical violin. ‘Grappling with a difficult piece by Vivaldi that gets the creative part of my mind working is a great way to zone out.’ He’s also a fan of classic cars: as much as he relishes the changes that technology has ushered in, he equally enjoys seeing how things have evolved.
Above all, he loves spending time with his family and is especially proud that his oldest son has decided to follow him into the field. ‘I always tell him that this is an exciting time – but at the same time, he has to work hard to protect his mind. There’s so much information out there, it’s easy to burn out. You need to choose a career you love, balance it with family and friends who you see in real life and not just online, and put yourself out there. Make yourself visible – simply raising your hand to ask a question in a lecture helps. And always be sure to help others. Something as small as asking someone if they’re alright can make a huge difference in their lives.’
Author Lisa Witepski | Photographer Theana Breugem
