Freeman Nomvalo’s five-year term as CEO of SAICA came to an end in December 2023. He was appointed in 2019 after the accounting profession had suffered a series of scandals, including the collapse of VBS Bank and Steinhoff, as well as a clean audit of the Gupta family companies. In Nomvalo’s final town hall, he shared his insights into the challenges and achievements along the way.
In March 2020, then Finance Minister Tito Mboweni announced the appointment of an independent panel to review the practices of the auditing profession, the aim being to enhance audit quality and restore trust in the profession.
Locally and globally, high-profile corporate failures and alleged audit failures had weakened public trust and confidence in the profession and business at large, negatively impacting economies. Most jurisdictions were wrestling with the issue of audit quality and the integrity of capital markets. The recently appointed Nomvalo was about to undergo a baptism by fire.
The need for change
All changes were to be aligned across the financial reporting ecosystem through comprehensive regulation. At that stage, the Independent Regulatory Board for Auditors (IRBA) in South Africa had already introduced various measures to address some of the potential areas of improvement in the South African environment, including the introduction of audit quality indicators (AQIs) to assist firms and their clients to identify potential areas of risk. Other changes included amendments to the Auditing Profession Act, the Companies Act and several changes to the global codes of conduct for auditors issued by the International Ethics Standards Board for Accountants.
‘Restoring trust in such a climate was daunting. This led SAICA to embark on an audit reform project,’ Nomvalo recalled. ‘We conducted extensive consultations with various stakeholders, including auditing firms, regulators, oversight structures such as boards of directors and audit committees, government, business groups, and users of financial statements. We challenged the long-held belief that auditors should be watchdogs, not bloodhounds. We pondered whether the market, in light of numerous corporate failures and evolving regulatory landscapes, might be expecting something different from us. Recent regulatory changes by bodies like India’s National Financial Reporting Authority, and the introduction of stringent penalties for auditors, further fuelled this introspection. Despite some resistance, it was apparent that reevaluating the role of watchdogs in auditing was essential. My approach was to respect the established order, while gently challenging it to encourage positive change. I expected some resistance, but we succeeded in getting SAICA employees to build their belief in our collective success.’
Building trust and transparency
In recent years, SAICA has witnessed a remarkable increase in trust, both in the institution itself and in the accounting designation. This surge in trust is attributed to a strategic focus on transparency and public engagement. Efforts to demystify the operations of the accounting profession have been central to this strategy.
‘Discipline within the accounting profession is not just about penalising members for misconduct,’ Nomvalo said. ‘It’s a process that continues long after an offence has been committed. High-profile cases such as the Steinhoff scandal underscored the need for timely disciplinary action.’
Delayed disciplinary processes had weakened the public’s connection between the offence and its consequences. This necessitated a more proactive and immediate approach to addressing professional misconduct to maintain the integrity and credibility of the profession.
‘Suspending auditors immediately in cases of corporate malfeasance has significant risk implications,’ Nomvalo said. ‘Disrupting the audit process leads to delays in financial reporting and affects stakeholder confidence. Raising concerns among investors, creditors and regulators, can have an impact on the company’s market reputation and share value, and lead to legal and reputational risks.’
Bearing these factors in mind, Nomvalo engaged directly with SAICA employees, despite concerns voiced by their managers, to understand and address the underlying issues. His approach was geared towards reshaping SAICA’s reputation and credibility, and those of the profession. It worked.
‘SAICA has witnessed a significant increase in trust, both for the institution and the auditing profession. When I joined the organisation, trust in SAICA was at 78%; trust in the CA(SA) designation was at 81%. In 2021, trust in SAICA had risen to 86%, while trust in the designation had risen to 85%. This indicated that we were moving in the right direction. Today, at 6% ahead of the closest competitor, we are the envy of our global peers.’
SAICA has engaged with journalists and the public to share insights into its workings, enhancing understanding and confidence in its operations. Changes in by-laws, particularly concerning the publication of results of disciplinary cases, have further solidified this transparency. In the past, the discretion to publish disciplinary outcomes rested with the disciplinary committee, which sometimes opted not to publicise results to avoid further embarrassment to the involved parties.
‘This often led to perceptions of secrecy and concealment, even when none existed,’ Nomvalo said. ‘By adopting a policy of publishing all disciplinary outcomes, we have made strides in building trust through transparency and an environment of openness. I’m extremely proud of what we have achieved.’
Tackling racial disparities
One of the critical challenges that SAICA and the broader accounting profession in Africa have faced is addressing racial disparities, especially in examination pass rates. Historically, there has been a significant difference in the pass rates between African students and students of other races.
This disparity called for a comprehensive strategy to ensure fairness and equality in the competency tests. Under Nomvalo’s leadership, initiatives to bridge this gap included conducting cultural reviews of examination papers to ensure that they did not inadvertently disadvantage students from different cultural backgrounds.
‘We commissioned a comprehensive independent study to understand the root cause of the problems and reviewed the qualification process. This included a cultural review of examination papers, a focus on funding for students – particularly those who need to retake examinations – and the provision of academic, social and emotional support. We worked with the Association for the Advancement of Black Accountants of Southern Africa, African Women Chartered Accountants and other organisations to implement initiatives to support candidates, to close the inequality gap and ensure that no prospective CA(SA) was left behind.
‘These efforts have borne fruit,’ Nomvalo says. ‘There’s been a notable increase in the percentage of African, Coloured, and Indian (ACI) students passing exams. In 2019, ACI students constituted 53% of those who passed; this figure has risen to 63% and will continue to grow.’
The technology revolution
Navigating the profession through transformative times and embracing a mindset that values learning and adaptability over rigid expertise has been pivotal for Nomvalo.
‘The advent of the Fourth Industrial Revolution has introduced new challenges and opportunities,’ he says. ‘The accounting profession must adapt to these technological changes while maintaining the integrity of traditional accounting practices. We need to stay informed about emerging technologies such as AI, blockchain, and data analytics, and understand how to integrate these into established accounting methods. We continue to face regulatory challenges, as we navigate a complex landscape of laws and regulations related to technological advancements. This includes ensuring data security and compliance with international standards. Another significant hurdle is managing the internal resistance to change in a field with deep-rooted traditions.’
Nomvalo also touched on the need to address the skill gap created by new technologies, overseeing the reskilling of current professionals and recruiting new talent with specialised skills. In a global context, the profession has to consider different technological infrastructures and regulatory environments. In addition, the tech revolution has altered client expectations, demanding faster and more sophisticated services, which requires firms to adapt their service delivery while maintaining quality.
Transformation challenges and successes
The journey towards transforming the accounting profession has not been without its challenges. One of the most significant challenges has been breaking down silos within professional bodies and fostering a collaborative and open environment.
‘Overcoming these challenges requires a shift in mindset, where individuals take responsibility for their relationships with colleagues and approach interactions with a positive and open attitude,’ Nomvalo said. ‘It’s an approach that can help dismantle barriers and facilitate a more unified and effective professional body.’
Recognition and congratulations
Nomvalo praised SAICA’s finance team for making impressive strides with its new systems, and for developing both Android and iOS apps that will enable SAICA members to access services more efficiently. Although some of these services are still in development, this advancement was a milestone worth celebrating, he stressed.
He encouraged all members to appreciate and support each other’s contributions to the profession. A supportive culture is crucial for the professional growth of CAs. Learning from the varied experiences and expertise of peers is essential for staying abreast of the latest accounting standards, technologies and practices. Ongoing learning and development are crucial in a field that is constantly evolving due to regulatory changes and technological advancements. In a trust-based environment, we can engage in more constructive dialogues, improving decision-making and problem-solving. Supporting one another drives the overall success and credibility of the profession, ensuring high standards of practice and service to clients, he said.
Nomvalo extended his congratulations to all of SAICA’s Top 35-under-35 annual recognition programme award winners and nominees. ‘Recognition in our line of work is rare, and appreciating each other’s contributions builds a positive environment. Imagine a world where everyone is committed to each other’s success. This mindset reduces disputes and shifts focus to outcomes and accountability. I encourage everyone, especially during leadership transitions, to maintain this collaborative spirit.’
Nomvalo concluded by noting that the accounting profession, particularly in Africa, has made significant strides in transforming itself. By focusing on discipline, building trust, fostering transparency, and embracing growth and technological advancements, the profession has positioned itself strongly for the future. The journey, marked by challenges and successes, underscores the importance of adaptive leadership and a proactive approach to change.
‘Looking ahead, the accounting profession faces the ongoing task of adapting to an ever-changing world. We need to continue to push for diversity and inclusivity and maintain high standards of integrity and professionalism. The profession must remain vigilant in addressing any emerging challenges and seize opportunities for growth and improvement.’
