Auditing firm PwC says it had no role in advising the Road Accident Fund (RAF) to change its accounting policy, a decision subsequently ruled invalid by the courts.
Appearing before the standing committee on public accounts (Scopa), PwC partner Johan van Huyssteen said the firm was engaged only after the RAF board had already resolved to adopt international public sector accounting standard (Ipsas) 42 in place of international financial reporting standard (IFRS) 4.
“PwC was actually not required at all in making that decision or in the decision to apply Ipsas 42,” he told MPs, adding that the firm’s mandate was limited to reviewing the implementation of the policy once adopted.
The RAF’s decision to apply Ipsas 42 allowed it to reduce its reported liabilities by excluding claims for which no settlement offer had yet been made.
Auditor-general Tsakani Maluleke objected to this treatment, and a full bench of the Pretoria high court upheld her office’s position.
The Supreme Court of Appeal later dismissed the RAF’s attempts to overturn that ruling. According to figures placed before the committee, the litigation has cost the fund more than R10m in legal fees.
Van Huyssteen told Scopa that PwC had been contracted in May 2021, following a request for quotation issued by the RAF in April that year. The RAF board resolved on April 28 2021 to adopt Ipsas 42, and PwC was appointed days later at a cost of R781,963.20. The firm delivered two technical reports in May and July 2021, reviewing the RAF’s accounting policy, disclosures and actuarial measurement of claims liabilities.
He emphasised that PwC’s engagement was not an audit or assurance assignment and that management remained responsible for the choice and application of accounting policies.
“We do actually undertake acceptance considerations prior to engaging in a specific piece of work,” he said, noting that at the time Ipsas 42 had not yet been explicitly excluded by the Accounting Standards Board from the Generally Recognised Accounting Practice (GRAP) reporting framework.
Committee chairperson Songezo Zibi questioned the sequence of events, expressing concern that PwC had not provided documentary evidence to show how it had ascertained that the RAF board had already approved the policy change before the firm was engaged.
Several MPs indicated that Van Huyssteen was not the appropriate witness to answer detailed questions, as he had not been directly involved in the initial engagement. The committee resolved to seek evidence from the former PwC partner who had dealt directly with the RAF but who has since retired.
The adoption of Ipsas 42 was later barred by the Accounting Standards Board in September 2021.
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