Ruwayda Redfearn, who has been named the first female CEO of accounting firm Deloitte Africa, says the audit profession, which has been mired in scandal, is struggling to attract auditors.
“Because of scandals which have focused highly critical attention on the profession it is becoming increasingly pressurised and more stressful to be a registered auditor,” she says.
The work of auditors, not least at Deloitte, which was badly tarnished by its failures at African Bank, Steinhoff and Tongaat Hulett, is under scrutiny, which she describes as “intense and uncomfortable”.
“It's absolutely warranted, because in our world trust is the ultimate currency, and when that trust is threatened or diminished we need to act decisively.”
In our world trust is the ultimate currency, and when that trust is threatened or diminished we need to act decisively
— Deloitte Africa CEO Ruwayda Redfearn
But it has made the auditing space a very challenging one to be in, she says. And so, even though the number of chartered accountants in SA is increasing — including black and female CAs — the number of registered auditors is decreasing.
And those joining the profession are not staying. “We're not able to keep them in the profession and get them to the point where they can sign off on audited financial statements,” says Redfearn.
One of her biggest challenges will be to turn this around without relaxing processes that, “rightly, are becoming a lot more vigorous”.
“We need to be more deliberate about retaining people in the profession, and attracting them into the profession. Specifically, people of colour from disadvantaged backgrounds. It's something I am quite passionate about.”
She also intends to continue the reforms started under current CEO Lwazi Bam.
“Once it is reformed it will become more attractive for people to stay in the profession. This is top of mind for us at Deloitte.”
The firm recently invited Sir Donald Brydon, known as “the audit disrupter” for his highly critical report on the effectiveness and quality of the profession in the UK, to address it and its clients. “We need to have these conversations so that our profession becomes more attractive and we go back to the top five global ranking we had 10 years ago,” says Redfearn.
The entire financial reporting ecosystem needs to be reformed, she says, including the Independent Regulatory Board for Auditors (Irba), “a very important stakeholder”.
“We need a strong regulator that is adequately resourced and adequately skilled, and has the right capacity and the right clout.”
Ironically, Irba was sharply criticised for taking too long to act against Deloitte for its role in the African Bank disaster. It took four years to produce a report, which found that Deloitte had ignored red flags about the bank that it had raised itself. Irba is still investigating Deloitte's role in the Steinhoff and Tongaat scandals.
Meanwhile, the firm has set itself on a “self-correcting path”, says Redfearn. “We have done and will continue doing deep dives into corporate failures to really understand what we need to do as a firm.”
Have they done a deep dive into where they went wrong with Steinhoff and Tongaat? “We do deep dives into every corporate failure, not just our own clients.”
Improving audit quality is “an ongoing journey” and will be her top priority as CEO, she says.
Is she bracing herself for the long-awaited Irba report? “We're not waiting for Irba. We've made changes we believe are absolutely necessary for our business.”
The fact that Deloitte has been appointed by “a number of very high-visibility listed clients” suggests confidence in the brand and the changes it has made, she says.
A number of clients have been early adopters of the new requirement for audit firm rotation, which comes into force in 2023.
We need a strong regulator that is adequately resourced and adequately skilled, and has the right capacity and the right clout
— Deloitte Africa CEO Ruwayda Redfearn
Deloitte has been auditing Tongaat for 82 years, a relationship that will end next year.
Was this part of the problem, that the relationship was too cosy?
“We placed a high level of trust in the validity of information and on the authenticity of our engagements with the client's management,” says Redfearn, who was head of audit and managing partner for the KwaZulu-Natal region before becoming chair of Deloitte Africa in 2020.
She concedes they “could have been more professionally sceptical. This is something we have focused on as a firm going forward.”
She doesn't believe that rotation on its own will address the need for professional scepticism.
Changes the firm has begun making to use the opportunities new technology provides to enhance audit quality will address this and other issues, she says.
“I don't believe audit rotation is a silver bullet.”
She declines to talk about Deloitte's involvement in Steinhoff or Tongaat, where over a period of seven years from 2011 to 2018 it signed off on financials that Tongaat inflated by almost R12bn.
“Both matters are under investigation by Irba. I can't comment further than to say we are co-operating fully with the investigation.”
Tongaat, under pressure from shareholders who lost a fortune when the share price collapsed, has vowed to hold Deloitte accountable.
Is this something she's expecting to have to deal with?
“We're the auditors to Tongaat currently, and I'm unable to comment on that. Right now we're committed to making the changes we needed to make as a business and to showing improvement.”
It has rolled out an “accountability framework” that the partners in its audit business have signed up for, and which will hold them accountable for the audits they sign off on.
She says she doesn't see it as a problem that Deloitte performs an audit and consulting role for the same clients.
“We monitor that very closely, and where we are doing non-audit work for audit clients, it is only around 5%. We have strict protocols in place to ensure we maintain our independence and protect the integrity of our business.”
Isn't it time to end the dual role entirely, given what happened with Tongaat?
“We need to be very careful that we don't have knee-jerk reactions to what has been happening,” she says.
Redfearn matriculated at Orient Islamic Secondary School in Durban in 1992 and joined Deloitte as a trainee in 1997, after graduating from the University of KwaZulu-Natal and becoming a CA.
